Times are hard for both dealers and financial institutions these days. Many times we counter offer cash down on deals and members oblige and put the money down. But did they really have that money or did they borrow it? Did they borrow it from the dealership? I have heard some dealerships are now lending the down payment to their customers. Have you ever had that problem with one of your dealerships? What did you do about it?

NADA (National Automobile Dealers Association) is estimating that 700 or more new car dealerships will close by the end of 2008. Currently there are a total of about 20,700 new car dealers in the US. 430 dealerships closed last year.

What are you doing to monitor your dealerships? When the end is close, who knows what a dealership will do to stay afloat.

Do you allow dealers to refinance auto loans from other financial institutions through your indirect program? If you do, you shouldn’t and if you don’t are you making sure your dealers aren’t sending you refinance loan applications? The main problem is that if that loan is ever part of a bankruptcy you will loose big time because the money you loaned was not used to purchase the car. Monitor you funding packets that come in. If there is not a copy of the title and the loan amount is very close to the payoff on the trade it, call your member and ask them. Make sure you have a clause in your dealer agreement that says something like….”Non-retail loan applications are not allowed.” It will help to give you some recourse if you ever find out.

These are hard times for dealerships, especially independent used car operations. Many are resorting to “Buy Here Pay Here” options for their customers. Stay away and cut off any dealership that becomes one. Also, watch your lien fillings. It should only take a dealership a week or two to compete. If it takes longer, investigate and take the appropriate action. Have you had this with any of your dealers? Share your experience.

Compared to this time last year, 5% more applications were processed through Dealer Tack. By the end of the first quarter of 2008, 23.9 million applications went through their system. Are you on Dealer Track? You can’t afford not to be. In the end, the upfront costs are worth it. It helps to be connected with a third party, like TCI located in upstate NY. With their easy application process and automated application decision process your dealers will fall in love with you again.

It is a great practice to call your new members through an indirect program and verify information. If their income seems high, even if you verified their income, ask them to verify it again over the phone. A credit union in NY recently discovered that their loan officer was working with a dealership in modifying proof of income and tax returns to get loans approved. The said loan officer approved over 1 million dollars in indirect loans that are starting to go bad. He faces up to 25 years in jail.

What is mousing? Have you ever heard of it? I am sure your dealerships have. Many F&I managers admit to mousing at least 25% or more of their deals. It is basically forging a credit application and most dealers think there is nothing wrong with doing it. Watch your dealers and never think twice about asking for proof of income and make sure you look at the year to date income. It’s a good way to tell how long someone has been on the job.

A Dutchess County, New York auto dealership was ordered in June to pay fines of more than $200,000 for selling fake service contracts to customers. They sold bogus service contracts to over 100 customers according to NY state prosecutors. The dealership sold Safe Choice to customers sometimes without their consent for up to $2,000.00, and then they never submitted the contract to the warranty company, pocketing the money.

How can your members avoid being scammed? Encourage them to call their extended warranty company a few weeks after their purchase and verify they do have a warranty in place. Also, if you notice a certain dealership is selling more service contracts than normal, find out why!

I got the ok to give out $100.00 to new indirect members that open up a checking account. I would like to add some stipulations to that, something like so many checks clearing the account or EFT set up. What kind of stipulations do you have for your cross selling programs and what kind of things have worked?

I don’t know about your department, but in mine all my dealers seem to think we have become a subprime lender. It seems like they have become desperate to get deals approved. BE CAREFUL! I have found many of my dealers stretching the truth when it comes to income and job length. Do no just get the pay stub, but verify and carefully look at the YTD income. If its not much then they obviously have not be working there that long. Lately I have been making my dealers fax over proof of income on shady before the loan was even given a decision.

What do you do to keep your dealerships honest?