How Have Things Changed in the Retail Finance Market?

Consumer Retail Finance is the lifeblood of so many industries. The auto industry was built on the ability to provide affordable financing to its customers. You can't open a newspaper or watch TV without being flooded with ads for affordable financing. But is retail financing really as accessible as it was? Read more.

The Motorsport and Marine industry was somewhat late getting into the consumer retail finance game, at least to the level and sophistication of the auto industry. Many of you will remember the training seminars I did across Canada when we introduced the first in-house dealer consumer loan and lease origination system in 1996. We had tremendous success throughout the programs variations up to 2008.

It was very difficult to watch what was such an important part of my career be destroyed by the financial meltdown in 2008. Lenders ran for cover, approval ratios dropped from 60% to 30% and incentive fees were rolled back while dealers struggled to keep alive what seemed to be such a promising asset to their business. The last straw was when HSBC finance decided to exit the consumer lending business about a year ago.

For many dealers it was like rolling the clock back 15 years. Those of you who have the financial ability to retain your own F & I expert on staff have continued to be successful with this revenue producing department. It is not unusual for me to see dealers in this situation earning 3% to 4% of gross sales in their F & I department. For a dealer grossing $5,000,000 in sales, that represents between $150,000 and $200,000 in annual income.

However, owners and sales people who dual purpose this responsibility have struggled. When you had your own tailor made program that was serviced by your manufacturer, you could get away with this situation. But for many dealers the programs have change and the rules are different. It is hard enough closing sales without the added responsibility of arranging financing. You also have to consider that when the attention is drawn to customer financing, your sales staff are diverted from their primary function - SELLING!

I must admit that in the past I have always been an advocate of operating your own in-house financing to maximize your income, but times have changed and we need to adapt. One very viable solution is contracting a Broker to facilitate your customers financing needs. It's as easy as dialing the Broker and handing the phone to your customer once you have closed the sale. They do everything from sourcing multiple lenders, selling insurance and extended warranty, generating the documents and arranging funding direct to your account.

Yes, you have to share the revenue. But if your ability to finance your customers has been significantly eroded, this is your opportunity to replace that income to your bottom line.

One such Broker that I have known since their launch in 2002 is LMG Finance Inc. They managed to survive the financial meltdown and effectively grow their business through very difficult times. They have a full service business that is supported by sophisticated systems and proven experts in the retail finance business. Their fill rate on application approvals, life and disability insurance and extended warranties, in my opinion, is very impressive.

If you are no longer satisfied with your retail finance revenue and would like to know more about LMG Finance, contact me so we can discuss your goals. It's free!

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