Editor’s Note: This article was written by Lorraine Mariotti and Laura Smith and provided by Priority One Financial Services.
Many dealers are skeptical about using non-prime lenders to finance their customers’ boats and RVs, but if you don’t offer non-prime financing, you are leaving money on the table. For those who don’t qualify for traditional loans, non-prime loans might be the answer for those customers with lower credit scores, insufficient or comparable credit, bankruptcy and other unique credit situations.
The very definition of a non-prime lender is a financial institution that specializes in making loans to lesser-qualified borrowers at a higher rate due to the higher risk of default. Just as it is with most businesses, the higher the risk, the higher the cost. Critics contend that high rates and greedy lending practices are common in the non-prime market, but there are laws in place to protect consumers from these practices and there are many reputable non-prime lenders committed to taking a risk on the credit-challenged to help them rebuild their credit scores.
There are significant advantages to using non-prime lenders that cannot be overlooked. One out of three consumers in the U.S. has had credit problems in the past. The main benefits to funding loans with non-prime lenders are:
- Increased sales. Many dealers have seen gains of up to 30% in retail sales.
- Additional F&I profits through reserve participation and backend product sales.
- Improved customer relationships and increased customer loyalty. Customers will appreciate your extra care and effort on their behalf and will likely return to your dealership for future purchases.
Now that you realize how important non-prime financing can be to your dealership, it’s time to choose which non-prime lenders to use. When choosing a non-prime lender, follow these tips:
- Compare programs among at least three prospective non-prime lenders.
- Understand each lender’s prepayment terms.
- Clarify if the lender offers fixed rates or variable rates.
- Determine how easy it will be to work with the lender; are they flexible, are they concerned with funding ratios, is their funding process easy and do they seem dealer- and customer-oriented?
Once you’ve established a non-prime relationship, the next step is ensuring your F&I manager is able to sell these types of loans to your customers. All too often, inexperienced F&I managers assume the customer will not accept a non-prime loan and lose the sale. To successfully set up your customer for a non-prime loan, it’s essential to follow these simple steps:
- A qualified dealership employee or F&I manager should explain the credit criteria lenders require on recreational loans and why your customer did not qualify. Remember, customers typically do not understand banking and credit guidelines needed to finance a new boat or RV, so it is important to make sure you do not use F&I jargon and acronyms.
- Listen to your customer. At this point, it’s important to lend a sympathetic ear and offer your understanding of their specific credit situation. The worst thing you can do is to not listen to their stories or speak in a condescending tone.
- Now it’s time to provide them with hope of a possible alternative. Explain to them your dealership has lenders who specialize in situations like these who may be able to help them.
- Gain your customer’s commitment to non-prime financing by asking your customer if they would like to explore this option. If no, explain that receiving an approval doesn’t obligate them to accept the financing terms and work to overcome any specific objections. If yes, explain what the lender will require to secure an approval such as proof of income and give a specific time line as to when additional information will be forthcoming.
The ever-growing numbers of credit-challenged customers in this country make non-prime lending more important than ever to your dealership’s financial growth. Knowing what you gain from funding with non-prime lenders, how to choose the right one and selling this option to your customers may be just what is needed to exceed your goals now and keep your doors open well into the future.
Priority One Financial Services, the recreational industry’s oldest and largest F&I outsourcing provider, announced on Tuesday (Feb. 9) an exclusive partnership with VertiSEL, a leading solutions provider for credit denials.
This venture will make credit-repair solutions available to marine and RV dealers and their customers that are seeking to secure financing for the purchase of a boat or RV, according to a news release.
Since 2007, auto dealers, including the nation’s No. 1 Chrysler dealer have utilized VertiSEL’s credit-solution program and have seen significant increases in sales revenue and customer satisfaction. Over 30% of the customers who enroll in the 90-day program return to purchase a unit from the dealership.
“With this exclusive partnership, Priority One can take a program that has had proven success in the auto industry and make it available to marine and RV dealers immediately.” said Gary Rademaker, strategic alliance director for Priority One, which was acquired in 2007 by Forest River Inc., a Berkshire Hathaway company.
Priority One will identify customers who do not currently qualify to finance a recreational purchase due to derogatory credit and refer them to VertiSEL’s 90-day credit improvement program. The service has proven to provide substantial increases in the credit score of clients who enroll and participate in the exclusive course. Priority One will monitor the customer’s progress and upon completion, qualified customers will be referred back to the dealership for purchase. This will ensure the customer has a pleasant and satisfying experience, and the dealership retains a customer and a sale, without any additional work for the dealership or their staff.
“This program can be the difference between making the sale or not and that’s the type of competitive advantage we are committed to bringing our dealers.” said Rademaker.
Priority One has been serving the marine and RV industry since 1987 and serves as the F&I managed services provider for hundreds of dealers nationwide. For more information, visit www.P1FS.com.
Founded in 2007, VertiSEL’s proprietary software and comprehensive tools put denied applicants back into dealerships ready and qualified to purchase. VertiSEL’s exclusive partnerships provide best-of-breed solutions to clients which are unobtainable outside of the VertiSEL solution. For more information call Sean McCoy, president, at (866) 634-5855 or email firstname.lastname@example.org.
Priority One Financial Services, a finance and insurance managed services provider serving the marine and RV industry, experienced the largest growth of its new dealer partners in the history of the company during the first half of 2009. The St. Petersburg, Fla.-based company which represents over 500 marine and RV dealers nationwide signed four times more new dealer partners compared to the same period last year, according to a news release.
“In today’s industry we are seeing more dealers recognize the importance of having trained F&I professionals serving their customers,” said Heather Mariscal, president. “We look forward to utilizing our leverage and experience to help all of our dealer partners thrive during these challenging economic times.”
The company also attributes the dealer growth to dealers seeking ways to lower expenses and increase profits. “We have seen many dealers looking to cut costs by outsourcing their F&I services,” said Nicole Armstrong, national sales director. “It’s a win-win situation for our dealers because they not only lower their overhead; they also increase their deliveries and profits.”
Additionally, Priority One’s focus has shifted to serving both cash and finance customers. Working as an unpaid extension of a dealership’s sales team, Priority One guides each customer from deposit through delivery, thus limiting outside influences that may jeopardize the sale. This helps dealers maximize their F&I profits by identifying additional revenue opportunities. It also ensures that every customer, regardless of their method of payment, has the same experience and access to products that will protect their recreational purchase.
This growth comes at a time when many dealers are struggling to secure financing and deliver units. Utilizing over a billion dollars of retail sales volume, Priority One has the leverage to obtain competitive finance packages despite current economic challenges. “Many dealers have expressed concerns regarding the lack of retail financing in our industry and its effect on their ability to deliver units,” Mariscal said. “With fewer customers walking onto their lots, it’s more important than ever that dealers have a reliable source for retail financing. That’s where we come in. We ensure that the customers who are in the market are able to secure financing and in most cases be on the road that weekend.”
Priority One has been serving the marine and RV industry since 1987. Acquired in 2007 by Forest River Inc., a Berkshire Hathaway company, Priority One serves as the F&I managed services provider for hundreds of dealerships nationwide.