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in the beginning viewpoints What Recent Changes Have You Seen in Your Finance Company Programs That Have Impacted Your Subprime Department? Ted Heater Owner CarSmart Kansas City, Mo. Our lead count and traffic are great. The biggest issue has been from advances. With the volatility in the used car market, it's been difficult to close deals because of low advance and higher fees. I believe the competiveness for business has really heated up. However, each month, advances seem to get a bit higher while fees become a bit lower. Payment-to-in- come (PTI) seems to be the only variable to remain constant amongst our finance sources. Nobody wants to push the 15 percent PTI mark, which makes sense. We all would like to see more up-front ad- vance, particularly in back-end products. It helps the dealer but it also protects the customer and finance company. I'm also hoping that rate sheets will change back to how they were a few years ago. It's maddening to work a customer on an import or domestic vehicle and have the deal change so much just because of collateral. It would be nice to have max advance and payment on each callback. I see the finance company side of the rationale, but it makes selling a car very tough when you have to call in each vehi- cle to get the exact rate and advance. Scott W. Elder President Dream Cars Austin Cedar Park, Texas We have seen many of the subprime companies becoming more aggressive and flexible in their terms. They are definitely trying to find reasons to do deals instead of finding reasons to turn them down. But one of the trends I have noticed since the downturn is that the finance companies' internal scorecards 8 are becoming much more sophisticated and complex. They really aren't looking at FICO scores like they used to. In the cur- rent environment, we dealers can't really predict what they will approve and won't approve. This is making most of the finance companies less sensitive to look- to-book ratios as they realize we can't predict what they will approve. So we are now into a mode of structuring a deal on a vehicle that makes sense in terms of DTI (debt-to-income)/PTI (payment-to- income), then sending it to almost all our finance sources to see who will buy it at the best terms. In the old days, we could say, "This is a Cap One deal," or "This is an AmeriCredit deal," and selectively send it to be bought. But that is not as much the case in today's environment. Shane Seys Business Manager Northtowne Auto Group Kansas City, Mo. In the past year, we have seen a major turnaround in our subprime sources. Some new players are coming into the market, while some old players are loos- ening up their underwriting guidelines. At a quick glance, it appears that we have all but forgotten the lessons of our past. One-hundred-sixty-percent advances on sub-600 scores are making a comeback. More prime banks are also dipping deeper into subprime. Local banks and credit unions, especially, are starting to stretch and open up their underwriting. Everyone is fighting for that piece of the pie. For the past few years, we have gone through a massive paper trail. We have had stips (stipulations) on top of stips. Now, it is as if the floodgates have opened back up. Many of the stips can be waived by simply asking. Sources such as Chase Custom have even stopped asking for references. While there have been many changes in the subprime market, the most important has been the return of the relationship. Building that relationship with your buyer as well as keeping track of your portfolio with them will take you a long way. Manny Sedano Dealer Delano Chevrolet / Buick / GMC Delano, Calif. As a franchise dealer, I would say that the impact on our subprime business is that subvented programs are reaching so much deeper in the credit spectrums that you are left trying to accommodate your process toward the finance source in- stead of the buyers. For instance, we sell Chevrolets, and it is much easier and more economical for a consumer to pur- chase a new Chevy Malibu or Cruze than pre-owned (this makes us a hero). It leaves us wondering how long this will last; and do we permanently change our sales process? Before, you would never think of showing that customer a new car. Now that's the first thing you do. Is this a lasting reality? If you are an inde- pendent dealer, that's not a good thing; but for us, we just continue connecting the dots, even if the pattern continues to change month after month. We must take advantage of every opportunity we have in our markets. What Recent Changes Have You Seen in Your Finance Company Programs that Have Impacted Your Subprime Department? Go to www.AutoDealerPeople.com and tell us what you think.