Bold Idea No. 4 – Do-it-yourself lending

Beverly, Mass.
Brands sold: Suzuki, Yamaha, KYMCO, KTM, Honda
Massachusetts dealership Cycles! 128 has taken consumer financing into its own hands, which has resulted in more sales, especially with the financial institutions tightening their lending the past few years.
The dealership received a banking license and incorporated a second company, Recreational Finance Co. The bank handles customers with less than ideal credit scores who can’t get financing from their local bank or the manufacturers’ financing.
“It’s specifically designed for people with credit issues,” said John Rice, Cycles! 128 owner.
With banks changing lending requirements, Rice says the dealership has had people come in with 680 credit scores and not get approved.
As a result, in the past year or two, the dealership’s finance business has increased significantly.
The in-house financing institution does a few things to make sure they’re not getting burned on these deals.
“We look for 30 percent down,” said Rice. “It’s a lot. If they really want to buy that product and they can’t get financing elsewhere, they come up with that down payment.”
The bank also looks for stronger equity positions, co-signers, local references and a higher sell rate, usually around 18 percent.
“The down payment is bigger, but then the payments are less. It doesn’t change the price of the vehicle,” commented Rice. “The APR is higher than 10 percent. I get that too. Most of these amounts financed are $5,000 or less. A difference of 10 points over 2-3 years is not that much more in interest.”
To also make sure the bank doesn’t get burned, Rice says they have an in-house collection and repossession agency.
“We’re very persistent and consistent with our possessions,” he said. “We find our lost portfolio to be very small.”
About 50 percent of the dealership’s business is financed and of that amount, about half is financed through the in-house bank.
“It’s a large part of our business,” said Rice. “It’s not a moneymaker for the dealership. It’s not the first choice for the dealer, but it certainly is the last choice.”
To make the bank more user-friendly, they extended the hours. If a customer comes in and he or she qualifies, the bank can do pre-approvals on nights and weekends – during the dealership’s busier times.
The bank also offers financing on private party sales.
“If you have bad credit and you want to buy your neighbor’s Jet Ski, but you don’t have the cash and your bank turned you down, come to me,” said Rice. “We’ll buy the vehicle from your neighbor, turn around and sell it to you and do the financing.”

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