customer signing paperwork

Bolster Your Finance Department to Withstand Disruption & Uncertainty

5 Key Areas to Tighten Up to Help Your F&I Department Find Future Success

By Jared Zimlin, Director of Business Development, Elite Recreational Finance

We are in a time of big changes. Some are positive. Some are negative. Some, well, we just don’t know.  Customer expectations of how they purchase big ticket items are changing. Inventories are not quite stabilized. Pricing of new boats is still being affected by surcharges. Rates are increasing. Add to all this, there are new finance rules either about to go in effect or being proposed. One thing is for certain, these changes have a major impact on your finance department.

So, with all this uncertainty, what are five key areas you can focus on this off season to tighten up your finance department and set it up for future success?

5 Areas to Focus on & Shore Up This Off Season

Improve Your Digital Credit Application – Consumers are used to applying for credit for all things now online. From cars to tennis shoes, your customer can go online, find what they want then apply to pay over terms. Yet, many dealer’s online credit application is still a printable PDF or worse, non-existent. Think about it. A customer can spread the payment over terms for a pair of joggers via a company like Affirm or Klarna from their phone, yet dealers expect customers to print a document, fill it out, email or fax it in for a big-ticket purchase? So Tip No.1, meet with your web provider to create a digital credit application that you can place on each listing. By doing this, you will make it easier for the customer, capture valuable data for your CRM and keep them moving towards the sale vs. creating a friction point where they decide to “wait until spring.”

Take Advantage of Soft Credit Pulls – Just because the customer pulled up in a nice truck, has a slick watch and a cool pair of shoes does not mean they will qualify for your boat. Even if the customer tells you they have “excellent credit” because their score is in fact over 740, does not mean they will get approved. Most credit bureau providers now offer Soft Pulls. This allows you to see the customer’s credit without adding an inquiry which could hinder their credit score. By doing the Soft Pull, you can now get a glimpse into the customer’s ability to afford the boat and likelihood of being approved regardless of their vehicle or how much bling they are showcasing.

Learn to Read Credit – Have you ever been to a restaurant with unfamiliar cuisine so you ordered by number? Then, when the dish arrives it’s not what you thought it was. Well, this experience is similar to how many people view credit. There are customers and dealer that think because the score is a 700 or 750 (or insert number here), that they have good credit. If you don’t know what the lenders look at to approve a boat loan, you may think that as well.

Here are the main ingredients you need to look at aside from the credit score:

  • Debt to income – What do they earn each month and what are their bills each month?
  • Time in bureau – How long have they been paying their bills?
  • Number of installment trade lines – Most lenders look for five or more installment loans
  • Highest installment credit line – Have you paid on a similar or higher installment loan?
  • Any negatives like late payments, bankruptcies, charge-offs?

Once you understand this information, you can then compare it to my next tip.

Understand Your Lenders – There is no “one lender” for every customer. Each lender has a different appetite for loans. Some like smaller loans. A few only want bigger transactions. Some lenders like to buy 800 credit up. Others like the mid-tier and sub-prime deals. Since you cannot control the credit of who walks through the door, it’s best to have a portfolio of lenders that will meet the needs of as many customer’s profiles as you will encounter. So how do you know who to add?

You can visit the National Marine Lenders Association website for a list of lenders who cater to the marine industry. Then, make a few calls and see if you can get a copy of the rate sheets and program details. By looking at this, you will see:

  • The preferred credit scores for each
  • The Debt-to-Income limits they have in place
  • How far back will they finance on a pre-owned unit
  • A company’s Loan-to-Value guidelines
  • More information that can help you build a proper portfolio

Note, most indirect lenders will not finance a consignment unit unless you transfer the title through the dealership. So be sure to research partners that can help with consignments you want to help sell but do not want to take on trade.

Keep Up With Compliance – In December 2022, a new Safeguards Rule is going into effect regarding how you protect and store customers’ sensitive information. Your dealership is also required to have a written Red Flags policy on hand with set officers to administer, and a training plan. You also need to consider how your actual operation is set up. Are files left on desks? Is the finance office separate with a limited set of separate keys to restrict who has access to files?

There is proposed legislation regarding fees, aftermarket products and disclosures that could have a major impact on when you review terms with a customer, how you advertise your fees and the cost of aftermarket products and what you will need to document a customer’s acceptance or declination of proposed terms — prior to the delivery date! All of these areas are of major concern with large fines for violating any of the federal or state laws.

You’ll notice there’s nothing in here about backend profits; reserve, service contracts, GAP and other profit centers. That is for a reason. These are extremely important, especially with rates rising, however, this can be a subject all to itself.

So, before you tackle that, remember, there is no service contract to be sold on a boat that does not deliver because the customer could get you an application, you couldn’t get them qualified, you did not know how to get them qualified; you didn’t have the lenders or you get them qualified; or you get them delivered, then have to pay it all back and more because you violated one of the many finance laws.

Here is the Great News!

MRAA has most of these tools from “How to Read Credit,” to a full Compliance Guide on its website. They even have a link to the Safeguards Rule and proposed rules on Junk Fees. You can also visit NMLA to find lenders.

Even better, you can visit the lenders in person this December at Dealer Week in Austin, Texas!

Jared Zimlin Elite Recreational Finance

About the Author
Jared Zimlin is the Director of Business Development, Elite Recreational Finance, Education Champions with MRAA. Zimlin draws upon his two decades of business development experience solving problems for manufacturers, distributors and dealers across multiple industries with comprehensive retail finance, equipment finance and inventory finance solutions. A University of Florida alum, Zimlin is an avid cyclist and Club President of Gearlink Racing Inc.