I prepared the analysis and while motorcycle inventory was high, snowmobiles and ATV’s were spot on.  This allowed the salesman to tailor the company’s order in keeping with the objective to provide more turns on the inventory and less carryover which would free up the company’s wholesale credit line and reduce interest expense.

While preparing the analysis I investigated the dealer’s customer retail finance loan originations.  It was apparent that the dealer was using the manufacturer’s retail finance program but the income to the business office was minimal.  When we met with the owner I asked who in the company processes their retail finance for the customers, to which he replied, he did.  He said he was happy with the program and it helped close a number of deals.

I responded that he should be making considerably more profit on his financing so I asked how he entered loan applications.  The problem was loan applications were entered at the lowest incentive fee, no extended warranty and no Life & Disability Insurance.

My advice was to always start at the top and work down.  That is, enter your quote for the customer with your extended warranty product, L & D Insurance and the best incentive fee rate for the company.  If the customer feels the payment per month is too high you can always remove some of the additions to the loan application, however often the customer will be very satisfied with the quote and extra protection you have offered.  It is a lot easier to come down but almost impossible to add on after the first quote when doing an application.

Not only did the owner achieve his objective of reducing his inventory and interest expense while freeing up his credit line for faster moving product, he changed his approach to providing retail financing.  Six months later his profits were up substantially and the company was showing a much improved bottom line.

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