THE DAILY RANT!

Today’s Automotive News features an article entitled “Longer loans, rising leases may come at a price” The teaser under the headline reads: “What's driving the gains in U.S. auto sales this year? That's simple: Easy credit, in the form of subprime lending and longer loan terms, plus a rise in leases -- the exact same trends that have a growing number of executives and analysts now raising red flags about whether the current sales boom is sustainable”: Let me start off by saying that anyone who thinks credit is “easy” hasn’t sat in the F&I seat lately. Yes there are some lenders that are loosening up their wallets, and maybe buying some loans they shouldn’t. I just transferred from a store where the new created captive lender was buying subprime customers at lower than expected rates, without any stips! When they started up, I told my other lenders I was going to ride that horse until it broke all four legs, fell apart in the back stretch and they served it up as filet mignon! Well, the race was over around September, and suddenly, those 75 month terms with a LOWER rate that 72 months (they claimed it was a computer error) and no POI loans were gone. No more exceptions, no more over advances, no more outrageous approvals. Yes, they accomplished their goal of capturing a large percentage of loans from the dealer base, but let’s see how the portfolio performs. I think it’s safe to say that most of the players left in the subprime arena learned their lessons the hard way a few years ago. Many of the players left the field bruised and battered (HSBC, Triad, Centrex) never to return. Those that came back re-evaluated their positions (AmeriCredit, Capital One, Santander) and have survived with a smart business model that seems to be working. Customers once again are returning to our showrooms, although lately many are concerned about whether our government will join the ranks of subprime buyers! Many of our customers once had great credit, only to be hammered by declining home values along with declining paychecks or no paycheck at all. I am amazed on a daily basis by some of the hard luck stories I hear. But to think that we are in the midst of “easy credit” is unrealistic at best. I only wish that were the case, because I would have three times the number of vehicles delivered this month! I always say that I can get almost any customer approved for a loan. I think most of us can say that. But the caveat that goes with it is that the customer has to be willing to meet the terms and conditions of that approval. Just because the customer wants no money down, or extended terms on a high mileage unit (maybe it’s the sales desk and not the customer who came up with that idea) doesn’t mean they will get it. If it were easy, anybody could do our job SUCCESSFULLY and PROFITABLY. It ain’t easy by any stretch of the imagination, but let the pundits keep saying it is. They keep bringing customers in and give us the chance to make it happen. Man, it’s good to be where I belong! .

I'M BACK!!!!!!!!!!!!

So, here we are in 2013, and some of you (I hope) have been wondering "What the heck ever happened to this guy?" Well, to make a long story short, I am back in Florida again, and doing what I do best. I am setting up a dedicated Special Finance department in a Nissan/Kia dealership in the West Palm Beach area. I had returned to Florida a few years ago to do something similar for a friend and former boss of mine who became the GM/Partner in a major import dealership, and we had a great run, until the group we worked for decided he was the guy they wanted for a partner.I managed to last a few more months and then, as the saying goes, a new broom sweeps clean. As I was the last person hired by the former GM, I was the first to go. After taking a few months off to lick my wounds, I started looking around again. After all, the $275 a week that Florida unemployment pays can only go so far! I was fortunate enough to find a finance managers position with the Napleton Group at their Chrysler Jeep Dodge store in North Palm Beach, and became the finance director after a week! After burning through two partners, I finally found someone who fit the place perfectly, and together we turned the dealership around. Month after month, our PVR and penetrations rose, from the bottom to being in the top 5 for the company. Recently, the company decided to embrace the sub prime market start up a dedicated department at the Nissan and Kia dealership. They offered me the opportunity and I've been here a week. I've already delivered 14 units from floor traffic alone,so the potential is definitely here. I'll be doing some marketing to bring clients directly to me, and the GM figures there are conservatively 60 deals a month to be done. (I think he's being a little conservative, but that's another story.) So keep tuned for my progress reports. I salute those of you who managed to ride out the storms of the last 5 years. It hasn't been easy for many, and many of my contemporaries here have left the auto business to pursue other interests. Some went to insurance, some back to sales, some just disappeared. But I'm back where i belong, back to my "roots" so to speak. ANd I'm looking forward to another long, profitable, and enjoyable adventure!

The Sins of a No-Sale

It’s a bit slow today, so I had a few minutes to read the latest issue of Automotive News. I was almost finished when I saw an article on the last page of the December 14th edition that read “Power study finds 6 no-sale sins”. Needless to say, with business being a little slow this week, I was intrigued by the headline.

What struck a chord with me was that we are all guilty, at one time or another, of these no-sale sins. Jon Osborn, JD Power and Associates media/marketing research director listed these sins in his study.

Dealership personnel:
1. Were rude
2. Not knowledgeable
3. Pressed the customers too hard
4. Ignored a customer
5. Wouldn’t give the customer a firm price.

Well, maybe I forgot to take my happy pills today, but I’ll bet many of us are thinking that this couldn’t possibly describe our dealership or sales staff. We sell cars despite what customers who didn’t buy from us think, and we do a pretty good job at it. We make sales, we make money, and after all, isn’t that what it’s all about?

Many years ago, my dad, who I thoroughly believe was one of the greatest salesmen to ever live, told me the number one reason sales people don’t make a sale is because they never ask for it. Many sales people are so afraid of the customer saying “No” that they avoid asking for a sale to avoid hearing that dreaded word. Treat a potential customer well in the beginning and you’ll earn a be-back and a sale.

Trust me; I used to be the be-back king! I had one sales manager who called me a vampire. I couldn’t close a deal during the day, but when my customers came back that night, I was unstoppable. It got to the point where he thought about letting me come in after 5PM, since I was worthless during daylight hours.

We spend too much time telling a customer why they can’t buy a car or get approved for a loan, instead of telling them what they need for an approval. I tell my sales people all the time that we get the customer approved for a loan, but it’s up to them to meet the term and conditions of that approval. Even though they wanted to put no money down, they’re approved with $3000 down. It’s up to them to come up with the required down payment. But we don’t have to be rude when we tell them that. Explain what the lender approved, and if you take the time to explain why, it may make sense to them. We’ve done our job; now it’s up to the customer to do theirs.

I seen sales managers tell first time buyers that they can’t get approved for a loan. How many of us deal with sales managers who think they know finance? I have several lenders who will approve FTB’s ON THE RIGHT UNIT! If sales managers would just do their jobs and let us do ours, it would be so much easier. I spend way to much time dancing around someone else’s ignorance when I get a deal done.

Take your time with your customers. We used to call this step “Qualifying”, but I think a more appropriate name for this step in the sales process is “Discovery”. Once you know your customers need, you can address their wants without becoming overbearing or obnoxious. It isn’t hard to find out about a customer. Ask questions; people love to talk about themselves. Remember, selling requires a transfer of enthusiasm from you to your customer. If you get a customer that doesn’t want to talk, ask them if perhaps they’ve had a bad experience somewhere else. I’ll bet that they’ll have a horror story or two to tell you. Maybe they ran into a “shark” or a “badger” down the road. (If you want a laugh, Google “auto badger” and watch the You Tube videos.)

The worst sin you can ever make is to ignore a customer. Second to that is to turn your attention to something else while you’re with a customer. Put you cell phone in your pocket and forget about it. Ignore your pages; they’ll take a message or call back. I like to think I’m the center of someone’s universe when I’m spending my money. Don’t you think your customers feel the same way?

If you can’t give your customers a firm price, what the hell are you doing selling cars? Wait a minute, let’s stop and consider this…what exactly is a “firm” price? Is it the lowest possible price you’ll take for that car? Is it the advertised price your competitor has that you have to match? Actually, it’s a price that’s fair to both you and the customer, one that gives your dealership a profitable deal and your customer a fair value. Remember, a deal has to be good for everyone involved – the dealership gets a fair profit, the lender gets a loan they can collect on, and the customer gets a vehicle and a payment that they can live with.

5 Ways to Kill Your Credit Scores

The curtain has parted, albeit slightly, on the mystery of how your credit rating is calculated. Find out what these common credit problems can do to your standing.

By Liz Pulliam Weston, MSN Money

One of the questions I'm asked most often about credit scores is exactly how much certain actions affect people's scores.

Until now, the best I could do was say, "It depends." That's because the company that created the leading credit score, the FICO, has been wary about releasing specifics.

Fortunately, that just changed. At my request and for the first time, the company (also known as FICO) has released details about how specific actions, from maxing out a credit card to filing for bankruptcy, can affect people with different credit scores.

I asked the company to compute the results of those actions for two examples: a person with a 780 score, which is an excellent score on the 300-to-850 FICO scale, and someone with a 680 score. The results:.

Effect on a 680 score
Maxed-out card = 10 to 30 drop in points
30-day late payment = 60 to 80 drop in points
Debt settlement = 45 to 65 drop in points
Foreclosure = 85 to 105 drop in points
Bankruptcy = 130 to -150 drop in points

Effect on a 780 score
Maxed-out card = 25 to 45 drop in points
30-day late payment = 90 to 110 drop in points
Debt settlement = 105 to 125 drop in points
Foreclosure = 140 to 160 drop in points
Bankruptcy = 220 to 240 drop in points

Source: FICO

The results are given in a range because FICO is still a little nervous about revealing too much about its proprietary scoring. But the range is fairly tight, and we can clearly see the disparate impacts of the different actions.

A guide, not a guarantee
Before we go further, I have to make this clear: Your mileage may vary.

People with the same credit score can have very different credit profiles more or fewer accounts, a different mix of accounts, a longer or shorter credit history, use of more or less of their available credit, etc.

Because of those differences, the same action -- maxing out a card, say -- can have different effects on people with the same score, depending on the details of their individual credit profiles.

For the sake of this exercise, FICO assumed both people had several active major credit cards as well as a mortgage, a car loan and student loans.

The person with the 780 score:
-Has at least 10 credit accounts in total and a 15-year credit history.
-Uses 15% to 25% of her credit card limits.
-Has no late payments on her credit reports.
-Has no collection accounts or other major negatives.

The person with the 680 score:
-Has six credit accounts and an eight-year credit history.
-Uses 40% to 50% of her credit card limits.
-Was 90 days late on an account two years ago.
-Was 30 days late on another account one year ago.

Here's what you need to know about each action and the effect it had:
Maxing out a credit card
Using 100% of your limit on any credit card puts you at risk of over-limit fees. It also takes a bite out of your credit score.

Our person with the 680 score might lose 10 to 30 points from this one action, while the 780 scorer could shed 25 to 45 points.

The difference points up an important fact: The higher your score, the more points you tend to lose from "bad" actions. That's because the scoring formula is sensitive to any sign you're getting in over your head. Maxing out a credit card is considered one of those signs.

You also should know that it typically doesn't matter to the formula if you carry a balance or pay off that maxed-out card as soon as you get your statement. What's usually reported to the credit bureaus is the balance on your last statement. Even if you pay the debt in full before the due date, the maxed-out card will hurt your score.

Skipping a payment
Mailing a payment a few days late normally won't hurt your score, although you may incur late fees and trigger higher interest rates. The big hurt comes when you miss a payment cycle entirely.

A 30-day-late report would shave 60 to 80 points from our lower-scoring person and 90 to 110 points from our higher scorer. In other words, one lapse of attention could plunge the 680-scorer into subprime credit territory, and our 780-scorer could find credit much harder to get and more expensive.

This is why it's so important to set up automatic payments to ensure your bills get paid on time, all the time. With credit cards, you can set up automatic payments that take the minimum payment out of your checking account to ward against a late payment. You can always make a second payment that reduces your debt or pays it off entirely. You can sign up for automatic payments on the Web site of your card issuer.

Settling a credit card debt
All the advertisements about "settling your debt for pennies on the dollar" make debt settlement sound like a great solution. But failing to pay what you owe a creditor will take a serious toll on your score.

The 680 scorer would lose 45 to 65 points with this maneuver, while the 780 scorer would shed 105 to 125 points.

Our scenario assumed that our borrowers would miss one payment before settling the debt with their credit card companies. In reality, debt settlement negotiations can drag on much longer, with each missed payment taking another chunk out of your score.

Settling a debt with a collection agency would hurt less, probably much less, because the FICO formula is set up to weigh more heavily what the original creditor says about you than what a collection agency reports. But if our borrowers were settling with a collection agency instead, their scores would be lower to begin with, because they would have collection accounts on their records.

Also, you should know that the amount of debt your creditor "forgives" in a debt settlement solution is typically added to your taxable income. So you may save some money by settling a debt, but you'll give some of it back to Uncle Sam in higher taxes.

Losing a property to foreclosure
Foreclosure deals a severe blow to your credit score: 85 to 105 points for our person with the 680 score and 140 to 160 points for the one with the 780 score.

Foreclosures have implications for your future ability to get a mortgage as well. Although your score may start to improve as soon as the house is gone, mortgage lenders may not be willing to extend you another home loan until two to four years have elapsed.

In an attempt to protect their credit, many people attempt short sales, selling their houses for less than what's owed, with the lenders' permission. Unfortunately, these transactions, even if successful, are often reported as settlements. And a settlement, as you've seen, is pretty bad for credit scores. To lenders, a short sale isn’t quite as bad as a foreclosure, though, and it may be easier to get another mortgage once you’ve rebuilt your credit.

Filing for bankruptcy
FICO spokesman Craig Watts once called bankruptcy the nuclear bomb of credit actions. Filing for bankruptcy would shave 130 to 150 points from the 680 score and 220 to 240 points from the 780 score.

This is different from the other black marks, where the higher scorer was still left with better numbers than the lower scorer. In this case, both would wind up near the bottom of the credit barrel. Getting new credit, particularly in the current credit-crunch environment, would be extremely tough.

Sometimes, of course, bankruptcy is the best of bad options. But if you can't pay your bills, you should at least explore the other possibilities: forbearance, credit counseling or even debt settlement.

Finally, if you have any of these five black marks on your record, remember two things: The impact on your score may differ from what's shown above, and regardless of how many points you lost, you can rebuild your FICO score over time.

You can start by using a free FICO score estimator, such as this one at Bankrate.com, or MSN Money's credit score estimator, which similarly models a score on Experian's 330-to-830 range, to see where you stand.

Or you can sign up for free credit scores from sites such as Quizzle, Credit.com and Credit Karma, which use the actual information on file about you with the credit bureaus. But the scores you get still may not be the ones lenders actually see.

Or you can buy your Equifax or TransUnion FICO score from MyFICO.com. (Experian no longer sells FICO scores to consumers, although it continues to sell the scores to lenders.) With paid scores, you'll get specific advice about how to improve your numbers. In general, when you're trying to build a credit score, you should:
-Pay your bills on time, all the time.
-Reduce your credit utilization; below 30% is good, below 10% is better.
-Have a mix of credit on your reports, including installment loans (mortgages, auto loans and personal loans) and revolving accounts (credit cards and lines of credit).
-Refrain from closing accounts.
-Apply for new credit sparingly.

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board and helps middle-class families cope at Building a Brighter Future
Published Nov. 11, 2009

A New Way to Look at Debt

I heard this gentleman the other day on XM Comedy while I was driving and nearly drove off the road! Have a laugh on me.

http://www.youtube.com/watch?v=I5bbvMR8Ee4

Riding the Waves

Last year, I said that the waive of credit defaults was just beginning. First to go were those subprime loans which should never have been done in the first place, many a result of fraud and/or greed in the mortgage and real estate business. It was obvious that these loans would default. Debt and payment ratios were out of whack, in both mortgages and auto loans, and it was inevitable that these loans would go bad sooner or later.

The second waves of defaults were people who initially could afford their loans, but severe income reductions or unemployment left them unable to pay their bills. No one expected the economy to turn around so badly or abruptly, and people making good money suddenly found themselves in the situation where their payments exceeded their income. This group probably includes those newbie investors, who bought investment properties with little or no down payments, and found themselves unable to pay the mortgage or sell the property. Buyers were scarce, and mortgage money dried up. Values crashed, and many of these folks walked away from their investment properties, trying to save their primary homes.

Now we come to the third wave - folks who can still pay their mortgages or car payments, but owed so much more than the collateral is worth that they are simply walking away. Credit scores are getting trashed, but what's worse is that these folks don't understand how to deal with their newly damaged credit. People with 700+ credit scores are finding themselves faced with the prospect of trying to secure credit with a score, in some cases in the low 50o's or even lower.

For the most part, the customers care little about the consequences of their actions. Many are still under the assumption that, because “everyone is doing it”, defaulting on their loans shouldn’t matter, and they should still be entitled to low interest rates and no stip loans. They balked at providing proof of income, or phone bills and references, figuring the lender shouldn’t require and documentation for their loan. However, lenders I deal with are now asking even good credit customers for POI and POR.

Many dealers I talk to have cut back their subprime departments, finding it too difficult to do these deals anymore. Prime deals are getting tougher, and F&I profits are shrinking. But faced with the new waive of subprime customers; maybe dealerships shouldn’t completely abandon special finance. Now is the time to put your ace in the game, the special finance expert you hired to help get through these tough times. Lender relationships, knowing what deals to send to what lenders, will help dealers sell more cars, make more money, and earn new customers who appreciate a true professional, who can guide them through this newly uncharted territory they face.

I’d like to think we’re starting to see the light at the end of the credit tunnel. I just hope it’s not the headlight from the oncoming train!

Auto Loan Applicants Face Tougher Scrutiny

Dealers Must Heed Lenders’ Demands for Proof of Income, Residency, Phone Bill

By Donna Harris
dharris@crain.com
Automotive News 10/12/09

Dealer consultant Frank Martin has come to expect auto lenders to call a customer's cell phone to confirm the customer's credit information – right in the middle of the finance transaction. It is just a sign of the times.

“Even customers with high Beacon scores get calls," says Martin, who works in Boca Raton, Fla., and sometimes fills in for absent F&I managers in the stores he serves in the Southeast.

In many markets, major lenders are requiring proof of income and sometimes proof of residence even from customers with excellent credit.

Although lenders have stepped up standards during the credit crisis, finance experts also attribute this intense scrutiny to additional factors:
- Some banks report an increase in fraudulent credit applications related to the credit squeeze,
- Identity theft continues to rise.
- Lenders are subject to greater government regulation requiring them to confirm the accuracy of customer information.

Like A Mortgage
"We have seen credit restrictions the rise in each of our regions throughout the last eight to nine months even on high-prime customers," says Jeff Dyke, executive vice president of Sonic Automotive Inc., the nation's fourth-largest dealership group based on new-vehicle unit sales last year. "That includes both proof of income and proof of residence."

Chuck Butler, owner of Butler Automotive Group, says that over the past year, applying for a car loan has become almost as complicated as applying for a home mortgage.

Butler says lenders require that total debt be no more than 50 percent of income, giving them a huge cushion, "They used to allow as high as 70 percent debt," says Butler, whose dealership group encompasses four import and domestic stores in Medford and Astrland, Ore.

Julie Westermann, a spokeswoman for Bank of America, says the bank has adjusted its underwriting model to require proof of income but typically just for customers with credit scores at the lower end of prime. Experian defines prime customers as those having credit scores between 680 and 739.

Gil Rabani, finance manager for Vacaville Pontiac-Buick-GMC in Vacaville, Calif., says the lenders he works with are focusing on customers' phone numbers. "If the name and number don't match with the name, phone number and address listed in their records, customers not only have to prove income but provide a phone bill," Rabani says.

Ken Basdeo, finance manager for Star Auto Group in Queens Village, N.Y., says some major lenders are requiring proof of income on customers with A+ rating. "For 75 to B0 percent of the deals, we're required to provide proof of income and proof of residence," Basdeo says.
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Some banks report an increase in fraudulent credit applications. Dealership employees and their customers are sometimes inflating income on the credit application to boost the chances of obtaining financing.

Identity Theft Rises
Identity theft also is rising. Such theft affected almost l0 million victims in the United States in 2008, the latest data available from the Javelin Strategy and Research Center, up 22 percent from 2007.

"Fraud has been increasing as the economy continued to sour," said Nicholas Stanutz, senior executive vice president of dealer sales for Huntington National Bank. Stanutz estimates credit fraud is up l0 to 15 percent.

Martin's firm provides temporary help to dealerships when the F&I manager is out sick or on vacation. The Florida consultant says lately, dealers have called on his firm to fill the job because they fired the finance manager.

"Many dealerships have become more seriously proactive in preventing fraud," Martin says. "What used to be a slap on the wrist has now become cause for termination."

Red Flags
All financial institutions must comply with the federal Red Flags rules requiring them to create a written plan to protect consumers from identity theft. Although enforcement of the rules was postponed a year to Nov. 1, many lenders already have stepped up their efforts to confirm customers' identities.

"No one wants to be the clerk that overlooked inconsistent proof of income or the credit manager that approved a deal with something missing," says Charles Ognibene, a Boston attorney who represents major banks and finance companies.

While Ognibene says regulation has prompted closer scrutiny of every deal, competition also comes into play: "Before the credit crisis hit, if a finance company pushed back an application because something was inconsistent and asked for more information, the dealer might have gone to another finance source. Now, with limited finance buyers, the dealer must heed when his finance buyer demands that i's be dotted and t's be crossed."

Consultant Martin agrees: "No one can afford to be cut off by a lender who is actively buying their paper. "