Indirect lending programs thrive when relationships between the credit union and the dealership are good. In this interview, Bradd Hile shares his thoughts on how creative and competitive lenders capture his business.
Hile is the business manager at Burnworth-Zollars in Ligonier, IN. His dealership usually averages 65 to 70 vehicles in sales per month. June was a record month for the dealership as it hit the 100-vehicle mark for the first time, and that is expected to be the dealership’s new monthly standard. Hile is the dealership’s only finance and insurance manager, which means he handles all of the paperwork and oversees both the Chevrolet and Ford sides of the business.
Q: How many new lenders have you signed this year, and how many lenders do you like to have at your disposal?
BH: We have signed two new lenders over the past 12 months due to the niches they offered in year and model as well as the terms they offered. I probably still have about 16 lenders at my disposal. But for the number that I’m comfortable dealing with, it’s generally six or seven different lenders. I’ve got a couple of prime lenders, a couple of middle-tier lenders, and a couple more that are sub-prime lenders. It’s very tough to spread everything around to all 16, so I try to deal on a regular basis with a comfortable number of them that can accommodate varying customer needs.
Q: What would entice you to send one lender more business than another?
BH: Something that occasionally pops up in my email that really gets my attention are promotions that lenders run, whether it’s a full month or even just a weekend or a week on short-term rate reductions. Sometimes it has to do with incentives for sending a certain number of deals their way, such as an extra $200 or additional percentage in reserves.
Little contests also seem to stand out, and they don’t even have to be something necessarily just for our dealership. Those incentives, even if it’s a chance to enter a prize drawing, seem to stay in the back of my mind and remind me to check with those certain lenders as deals come across my desk. Sometimes I can get very comfortable dealing with a smaller group of lenders, so these efforts can really help my customers out because they remind me that better deals are sometimes available outside my comfort zone.
Q: Was there one particularly creative strategy a lender has shown this year to capture more of your business?
BH: One local credit union’s offer coincided with rate reduction strategy. During March when the college basketball tournament was going on, this lender structured its rate sheet into tiers so it resembled a bracket like the ones most of us fill out for our office pools. This lender offered things as low as half a point lower than its normal rates and even had 1.49% for up to 66 months, which right now is unheard of in most places. Tying in those great rates for new and used cars with a national event that so many people recognize was just very timely. It really made it stand out from normal promotions.
Q: Following the idea of things that allow lenders to stand out, do in-person visits really have more of an effect than just being another voice over the phone or an additional item in your inbox?
BH: It does if it does not come across as constant badgering. If done right, those personal relationships make a big difference. I tend to prefer a good mix of visits and occasional phone calls if we’re just catching up on things besides pending deals. I have some places where I couldn’t even tell you who my rep is if I needed to call that credit union. I never get a call just to see how things are going or if there’s a deal that I can help with. The only time I see someone is maybe around Christmas to drop off a card, and that tells me that they’re not doing it because they want to, more that they have to make the rounds to all of their dealers.
I have a few lenders that make it a point to stop by once a month to chat — and not just about deals. After that, they try to call me about once every couple of weeks just to make sure I don’t have any questions or to update me on their programs or specials. On the other hand, I have some places that constantly call me, so finding the right balance for each dealer is very important. So if I communicate with you often and we’ve got a good relationship, then it’s going to make me want to do more business with you than another place with similar rates.
Q: Do you prefer rate participation or flat reserve programs? Are there benefits to both?
BH: I prefer flats. There are definitely benefits to both, and it seems like there are so many more different ways of doing it than there were when I first started almost three years ago. Flats are nice if the flat is halfway decent because I know what I’m going to get, and I know I can be competitive with my rate. Rate participation gets a little shaky because consumers are being a lot more sensitive about their rates. They know rates are low, they know they’re going to increase, and a lot of them will shop with their own credit union. So, many lenders who don’t deal with indirect lending will do a lot of advertising at their branches to make us the bad guy with rates that are so much higher and keep people from financing at a dealership.
Overall, it’s tough to do rate participation because I generally see that the approval I get is the same rate customers could get for themselves at the branch. In order to then get any extra participation, I have to mark the rate up from there, and that’s going to make me look a little sleazy. On the other hand, if I have a lender giving me discounts on the rates a member can get at the branch, then it can be much more beneficial for both of us.
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