Article courtesy of Maria Kirley, Leasing Expert with Dominion Lending

For those of you with clients whose fiscal year end is coming soon, now is the time for them to consider leasing equipment for their upcoming year. Leasing conserves capital, and can be a way to reduce the tax bite, as leasing can be listed as an operating expense each month.

Learn more about RIFCO, a financing alternative for non-prime or non-traditional credit approvals.

Recorded Interview Friday, July 3, 2009

with Doug Decksheimer, Vice-President of Marketing
and Carol Hanson, Credit Manager
of RIFCO

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What’s YOUR Willingness to be a Top Performer?

An article published in our Profit Drivers website early this year referred to a $12 Billion Fund called the Canadian Secured Credit Facility, to be backed by loans and leases on vehicles and equipment, offered in the Canadian Budget announced on Tuesday, January 27, 2009.  The hope was that this $12 Billion Fund would ease-up recently tightened lending practices by offering more money accessible to auto finance and lease lenders. Have you been wondering where the heck that money is?  After all, have you noticed any increase to credit approvals?

So, here’s the update, an excerpt taken from an article by Nicolas Van Praet, reporting for the National Post/Financial Post, Saturday March 21, 2009:

“…Stephen Harper’s government is working out a plan that will see the government purchase up to $12-billion in asset-backed paper backed by loans and leases on vehicles and equipment.  By getting into securitization, Ottawa hopes to make financing and leasing more available for consumers while freeing up commercial credit for dealers.

Some, like Richard Gauthier, president of the Canadian Automotive Dealers Association, are optimistic a deal can be hammered out that will see money start to flow to the industry by may.  Some 125 industry representatives met at the King Edward Hotel in Toronto in mid-March to discuss how to implement the securitization plan, he said.

“There is absolutely no doubt that this money is going to get out there,” Mr. Gauthier said.  There’s a profit to be made fro the government that could even see Ottawa eventually expand its purchase of securities, he said.

Others, like Stephen Beatty, managing director of Toyota Canada Inc., caution that $12-billion might not be enough even to cover the needs of the automakers’ financing arms, let alone other Independent lenders.  And they warn that to kick-start sales, the money has to be available now.  If it isn’t, governments have to consider other immediate approaches to get more people into dealerships….”

There you have it!  Hope that the auto industry will see more funds available to finance or lease automobiles by May!  Click Here to refer to the entire article.

What’s YOUR Willingness to be a Top Performer?

Finance or Cash?

These days it seems to be harder and harder to convert cash buyers to finance their automotive purchase.  It would seem logical that when interest rates are low to borrow money, people would be standing in line to gobble up the opportunity.  The challenge this presents is that when rates are low for borrowing, they are also low for investment yields.  Many people feel that it is wasteful to keep their cash in investments when their gains on the investment are at an all-time low.  As Business Managers/Financial Service Managers, we don’t want to imply to our customers that we are investment advisors because that’s a whole career in itself but we can give some solid, sound advice.  Typically, people are reacting to fear that they hear and read about in the media.  It’s our responsibility to remind the cash customer of a few valuable facts, ultimately they will make their own decision but these points are important refreshers:

• Personal Line of Credit A customer using their line of credit to purchase a vehicle is not a true cash customer.  It’s your job to find out whether they have the cash sitting in a bank account, if it’s funds invested that are being collapsed OR if it’s a personal line of credit.  There are many reasons a customer should not purchase a vehicle with this resource.  Consider these:

• A personal line of credit is secured by a customer’s tremendous banking track record thereby their signature is all the bank needs to be confident that the debt will be repaid OR, as with most lines of credit these days, they are secured by the customer’s home.  It’s better security for the bank. The value of real estate is dropping. If a line of credit is secured by real estate and the bank believes that the value of the home now jeopardizes the amount they have extended against it in credit, they can call that line of credit as DUE and PAYABLE any time.  If the borrower doesn’t have the cash accessible to payout the debt in full, the amount owing on the personal line of credit will be rolled into a monthly repayment term at a personal loan interest rate as deemed by the bank.
• These financial instruments were originally designed by the banks to keep their clients committed to them for their future financial needs; to have funds readily accessible for sudden events that are time-sensitive and may otherwise be challenging to get a loan for, like emergency home repairs (the roof is leaking!), an unexpected family emergency (maybe for an illness or aging parents), or for an amazing investment or business opportunity that has suddenly presented itself.  Customers should keep their personal line of credit intact and available should they need the funds for any of these reasons.  If a customer qualifies for a collateral based loan (the bank has an asset as security – like an automobile – so they have something they can take ownership of for resell should the client not fulfill their repayment obligations), they should take advantage of that finance opportunity and preserve their line of credit for non-collateral purchases like those mentioned.

• Cash Is KING! Ask your customer if they know who was successful following the Great Depression of 1929 and why?  It’s a simple principal, as consumer spending dropped, company values declined too, real estate values fell, the stock market had already plummeted, and so on.  Those who had cash were KING!  When the price of everything was in the gutter, the cash holders bought everything at a massive discount and waited for the economy to recover, increasing their asset values multiple times the purchase price.  So how does this relate to your cash customer?  Well we never want to insult anyone’s intelligence and you may just come across someone who is a professor about the Great Depression.  Indeed some will know more about this topic than you and I together.  For the average Canadian though, they will agree with you that the purchase of products and services at a massive discount and selling them at retail is a fundamental business practice.  None of us have a crystal ball.  So, to be conservative, consumers are wise to keep their cash,take advantage of the low-interest rate times, and if they are ever in a need to remove themselves from the monthly obligation, their cash is still intact.  If on the other hand they are propositioned with an amazing opportunity, the cash is available for that purpose.

• Make More Money: This is a simple principal and worth mentioning although many of you and your customers already apply it.  For those who are newer to the Business Manager/Financial Services Manager position, this is a fundamental you need to know.  The manufacturers are still offering some dynamite interest rates on new vehicle purchases.  If your cash customer takes that financing offer and stashes their cash into a secure deposit, GIC or other instrument, they can earn more interest on the money they have tucked away than what they are paying on the automobile loan.  In a real world scenario, lets say that your manufacturer is offering 1.9% financing on the customers vehicle model of choice.  The cash customer can take the sum of that total vehicle purchase, the amount they would otherwise write you a cheque for, and invest it into a GIC.  A 5-year term will get them about 4%, maybe more if they shop around.  Do some research on your own to compare your store manufacturer interest rates and the investment rates offered in the marketplace.  Make some phone calls to banks and ask the questions.  Knowledge is powerful.

If you have any other suggestions for our readers, we welcome your comments, click Add Comment below.

What’s YOUR Willingness to be a Top Performer?

You have all heard by now that HSBC Auto Finance has closed their Western Canada branch.  It’s gone!  There is a question that arises though, what happens to the existing auto loans that originated through HSBC?  Worse yet, what if you have a customer with a trade-in that was financed through HSBC and there is still a balance owing on that loan that will need to be paid out?  Where do you get the payout from and who do you send that payout cheque to?  There is an easy answer!  Scotiabank is sending letters to all of their newly acquired auto loans customers from HSBC.  Appreciate though that this is a process and will take a few months to complete.  Simply ask your customer if they have received a letter from Scotiabank, identifying themselves as the new administrator of that auto loan.  If they have received this letter, then Scotiabank will be your contact source for the payout information.  If the customer has not received this letter yet, then HSBC still administers the loan and you will need to contact them for the payout amount and details of where to forward the cheque.  The HSBC administrative office is in Montreal, if you need their phone #, just click “Add Comment” below and let me know who to send the details to.

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SELL MORE VEHICLES THROUGH CUSTOMER RETENTION!

SELL MORE VEHICLES THROUGH SHORTER SALES CYCLES
with 2, 3 and 4 YEAR LEASES!

WORK with your USED CAR INVENTORY

	Brett Newell, Financialinx Account Manager for BC and Alberta regions offers plenty of reasons to lease an automobile from his wealth of knowledge and experience acquired from several years in the automotive financial services industry:
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WHEN YOUR CUSTOMER HAS BEEN DECLINED FOR FINANCING…

Almost always, there is a story that your customer hasn’t fully disclosed to you. They know their circumstances and their story the best. Go back to your customer and ask more questions. Keep digging until all those little questions that popped up in your head while they were talking, are answered. If your little noggin’ came up with those questions, you can be sure the bank credit officer thought of them too! Once you are clear about the events that took place to impair the financing approval, call the bank back and relay the story to them. Have compassion for the customer, describe the situation with confidence and appeal your case to turn the decline into an approval. This isn’t a sales job to the bank but rather it is your ability to describe a special set of circumstances that took place that were unique due to a specific situation or event(s) such as illness or divorce. The credit officers understand that we are human and things can go sideways in life. If the application is considered on it’s face value only (the black and white appearance it has when the bank receives it over the internet portal), there is no human element involved with the decision process. When you make the effort to get details from your customer and describe the story to the bank, you now give them an opportunity to make an assessment based on a real life situation that they were unable to see in the initial application.

This practice will reap you more approvals, TRY IT!

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One more tidbit that you may find worthwhile to know…Bank of Montreal finance contracts will be funded only if the buyer and co-buyer(s) birthdates are printed on the contract.  They are the only institution I am aware of that includes this criteria as a funding requirement.  Just helpful to know before you print the contract!