Wanted: Retail lending assist

Dealers still not high on consumer financing availability

Depending on who you ask, the current retail financing picture could look anywhere from “terrible” to “slightly improved,” but most dealers agree that they would like their lenders to loosen up, take more risks and give more customers the option to finance.

The Powersports Business Q2 Dealer Survey of more than 214 dealerships in the U.S. and Canada also showed that retail financing success was varied. Only 5 percent of respondents selected “very strong” when considering the F&I department performance for the quarter, while 19 percent said “somewhat strong” was an appropriate description. Instead, “average” was picked by 39 percent of respondents, and another 37 percent selected either “somewhat weak” or “very weak” as the best description of F&I in the second quarter.

Cambridge Motorsports in Cambridge, Md., sits in an area that was largely affected by the economic collapse, with many manufacturing facilities and other employers shutting down.

“I’m off over 70 percent in new unit sales,” owner Jonny Johnston said. “It’s largely because of financing, and in today’s world, there’s not that many cash buyers, so financing is a forum for people to buy.”

On the other hand, J.L. Smith of YPK Motorsports in Jackson, Ky., said, “Financing seems to still be readily available.” He credited Sheffield Financial for leading the way.

Perk Bearden, president of Texas Motor Sports in Killeen, Texas, said he’s seen somewhat of an improvement in the lending environment.

“The national lenders — though we’re just Yamaha — those guys are slightly better than they have been, and they’ve loosened up a little bit,” he reported.

But, being close to Fort Hood, more than half of Bearden’s customers are military, and he’s had great luck with the Navy Federal Credit Union.

“They have been our godsend,” Bearden said. “In April, they did 70 percent of our financing for the whole month, and they’re still probably doing 50 percent of what we’re doing right now. Without them, it would be scary.”

Source: Powersports Business/RBC Capital Markets Q2 Survey

Many dealers go to outside lenders when those recommended by the OEMs turn down a customer’s application, but that doesn’t always help, either. Johnston said while the manufacturers’ lenders might be offering rates of 3.9-5.9 percent, outside lenders are offering loans at 18-20 percent.

“That’s really hard to offset with the customer, and there’s very few in between,” he reported, adding that State Farm usually offers acceptable rates.


Credit scores and employment history seem to be what lenders focus on the most.

“Scores above 600 but below 660, 680 — those are the difficult people [to get financed],” Bearden reported.

His dealership also struggles with getting approval for those applicants who pay their bills — but not always on time.

“We have the military life, which tends to lead people into having late pays because they get shipped from one place to another, and they’ll miss a bill, they’ll get behind, and then they’ll get caught up,” he said. “Some of those, in 2008 we could get them financed, but now we can’t.”

Johnston has the same issue with those in his area who were laid off when factories closed, but now have solid jobs again.
“There have been people, yes, that have been affected by the economy, but those people were strong before the economy hit them, and they’re still concerned about paying their debts,” he said.

Very challenging
Ric Maready, general sales manager at Britt Motorsports in Wilmington, N.C., who said he has found retail financing “very challenging,” is puzzled by some approval practices.

“There are a lot of people that are not being approved that when we look at their credit report or we look at their credit score, we can’t figure out why they’re not being approved,” he said.

Some loans at Britt Motorsports haven’t been approved because a customer is trying to buy a certain bike, or they’re looking at a certain price point. Some are even told they’re putting too much money down.

“I feel like the lenders could loosen up just a little bit,” Maready said.

Money down seems to be playing less of a factor when it comes to retail lending. Though some lenders will reconsider financing an unapproved borrower if they return with more money down, others will not.

“I would like to see more options on down payments,” Bearden said. “In other words, if a person’s score isn’t quite what it should be, but if they save enough to make a down payment, technically they’re making a payment out of their budget.”

He admits that retail lending may have gotten too lenient in the mid-2000s, but he would still like to see lenders take on more risks than they’re current approach.

“I did an analysis of our financing in 2008 versus 2011, and 50 percent of the people we financed in 2008 didn’t qualify in 2011 under the standards,” Bearden said.

Johnston wishes lenders would look further into a customer’s past and consider their pre-recession spending habits. He would also like lenders to borrow deeper into the pool of applicants.

“I’ve been harping on them for years to simply raise the rates and finance more people,” he said. “In my opinion, they’re way, way, way too cautious in their lending practices.”

See sidebar within this article: Floorplanning a tough sell outside industry

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