Times have changed in powersports over the past five years. Gone are the days when the lending opportunity in the powersports market was wide open.
However, despite the fact that many new lending companies have entered the space, there are still underserved finance areas dealers are looking to capture.
Additionally, with an influx of financial institutions in the space — heightening competition across the board — building a solid dealer network is top of mind for many lenders. To that end, powersports dealers are seeking additional support from their lender partners to improve and maintain the relationship.
“Dealer training and support are essential,” Emre Ucer, managing partner at MotoLease LLC, said Wednesday during the Powersports Finance Twitter Chat. “Be available for the dealers when they need you, approve who you said you would approve, and fund quickly.”
Here are 11 dealer wishlist items for improved lender-dealer relations, and tips for lenders to build and maintain a solid network:
1. Nonprime Lending
Many powersports dealers and manufacturers have noted a lack of nonprime financing in the market.
Freedom EuroCycle Las Vegas, for example, is set to partner with nonprime lender Marine One Acceptance Corp. by mid-July in an effort to to accommodate nonprime consumers — an underserved and high-demand market, John Hollywood, the dealership’s finance and business development manager, told Powersports Finance.
Additionally, Roadrunner Financial — a second-chance lender — also took note of the underserved market, and launched into the space in June 2016. The startup is a joint venture between lender aggregator Octane Lending and three bank and non-bank partners, Chief Executive Jason Guss previously told Powersports Finance.
Roadrunner Financial aims “to serve a segment of market where we were having trouble attracting lenders to [Octane’s online] marketplace,” Guss said. “Namely, the segment of the market below where the bigger lenders stop lending, and the market above where the lease-to-own providers play. That narrow slug in low 600 Ficos is our sweet spot.”
2. Training on Lending Criteria, Loan Structure
It’s no secret powersports dealers and lenders often disagree about loan structures, which is why dealer training is key.
“Some independent dealers need guidance on how to structure a deal to have frontend margin separate than the backend margin with add-ons,” MotoLease’s Ucer said. For example, lenders can provide dealers with periodic dealer newsletters, coordination of semi-annual dealer seminars, print and digital marketing collateral, and training guides.
However, as the industry grows a dealer newsletter once a month no longer gets the job done, said Glenice Wilder, EFG Companies’ vice president of powersports. “Training on lending criteria rather than relying on email memos is critical,” she said.
“We utilize a lot of sources for training that revolve around selling, product knowledge, and compliance best practices. The additional training that is most helpful for us is when a lender gives us a better understanding of what types of loans they are looking for and how to best structure the loan for their bank. This would include which types of motorcycle, down payment, etc., that best fits their model.” — Neil Noble, business partner to Owner Adam Smith at Calculated Risk Motorcycle Group
3. Lending Parameter Checklists
In addition to frequent communication, dealers also want updated checklists or set criteria of lending parameters.
“I think it would be great if [more lenders] offered some kind of training — if not on-site, some kind of webinar training, or at the least some kind of sheet or checklist that they go through and say, ‘When [consumers] fall into these categories, then we want these things,” Freedom EuroCycle’s Hollywood said.
However, checklists should only be offered in addition to frequent communication between lenders and dealers — not in lieu of, EFG’s Wilder said.
“Communication needs to be constant,” she said during the Twitter Chat. “Checklists are great, but what happens when a new F&I manager takes over? Regular communication is best.”
4. Frequent Communication, Site Visits
“In all cases the relationship between the lenders and us as dealers starts with the team that we interact with directly,” said Neil Noble, business partner to Owner Adam Smith at Calculated Risk Motorcycle Group — the management team for the dealership family. “Having a strong field team, as well as consistent voices on the other end of the phone when we call in makes a big difference. It is also very helpful when we get regular reporting and check ins from each lender.”
MotoLease, for example, recently hired a full-time internal marketing coordinator, Mitchell Palm, “just to do a better job with dealer communication,” Ucer said during the Twitter Chat. “The key is being available via chat, email, or phone when the dealer needs it and not only when the lender has a message to share.”
5. Prime Leasing
The leasing space seems to be focused on subprime or “payment-sensitive customers,” Jon-Erik Burleson, KTM North America’s former president, previously said.
Freedom EuroCycle Las Vegas, for example, is “actively” seeking a prime leasing provider that serves the West Coast area to meet increasing demand for 650-plus Fico consumers, Hollywood said. “I just want an A-tier leasing company,” he said.
As a customer not dealer, a lease program for prime customers with low monthly payments would be nice, subvented residuals like in auto
— RidersShare (@RidersShare) June 28, 2017
6. Reasonable Stipulations
“The biggest thing I run into — as far as working with current lenders — is that everything varies with what they want to see for stipulations,” Hollywood said. “Everyone wants paystubs, bank statements, utility bills, driver’s licenses, and so forth. But sometimes there are a lot of gray areas.”
For many consumers, Freedom EuroCycle knows if “the loan is good,” Hollywood said. “I don’t need all this other stuff [stipulations]. I can see his paystub, he makes good money.”
If the person is established — meaning he or she has been in the same career for five-plus years — then one or two paystubs, a driver’s license, a utility bill, and making sure those stips match — that’s about all you need, he said.
“He’s stable, he’s not going anywhere, as long as they are sending the right paystubs and driver’s license, that would be the end of it,” Hollywood said.
If the LTV is at 70% and the consumer is putting up a large down payment, “why are we drilling this guy?” he said. However, the bigger issue is, if the lender is requesting all of these extra stipulations, “I need to know faster,” he added. “The last thing I want to do is contract, paperwork, etc. and then you tell me three days later that these don’t work.”
7. Insight Into Portfolio Performance
Dealers need more insight into how their loans and leases are performing, Ucer said. “It can be challenging for the dealers to understand the importance of this balance without visibility to their portfolio performance. We try to get better at sharing some aggregate statistical data on dealer level so that there are no privacy concerns with personal information.”
8. Quick Callbacks, Faster Funding
While training, support, and communication are high up on a dealer’s wishlist from lenders, the No. 1 thing dealers need is quick callbacks, Hollywood said.
“The faster I can get a callback, the better chance I have of closing the deal,” he said. “Currently, my best partner in terms of callbacks is MB Financial. They have turnarounds in short of 10 minutes.” FreedomRoad Financial offers the next best lender callback time, he said.
“The biggest complaint I’ve had on any lender is just response time,” he said. For example, Freedom EuroCycle once sent a credit application to a lender and it took three days to receive an answer, he said. “By then, I’ve lost the deal. By day two, it’s just a stretch to keep that deal alive.”
9. Weekend Hours
While most powersports lenders are open on the weekends, or at least have personnel on-hand to take dealer calls, there are still some banks and financial institutions that have limited weekend hours.
Lenders need to make themselves available on weekends, EFG’s Wilder said. It “absolutely” makes a difference, she added. “Think about when consumers buy — at night and on weekends — not during banker’s hours.”
Sundays are slower than other days, Ucer said. In certain states, it may be a “riding day” but in other states it is also a “shopping day,” he added.
Freedom EuroCycle, for example, is only open by appointment on Sundays, but plans to shift to being open all seven days of the week within the next three to six months, Hollywood said. “It won’t kill me, but it would be nice to have some kind of system [lender hours] in place for that.”
10. No More ‘Teaser’ Rates
Powersports dealers are struggling to fit “square-peg” consumers into “round holes,” Chris Clovis, dealer principle of Freedom EuroCycle and BMW Motorcycles of Las Vegas, previously told Powersports Finance. In other words, attracting subprime consumers with prime-targeted, OEM-sponsored incentive offers.
“Promoting teaser rates that almost nobody qualifies creates disappointment on the customers and doesn’t help converting approvals to funding,” Ucer said.
“We can pretty much assume that [those promotions are] merely a means to get consumers into the dealership door, and at the end of the day, I am going to get them financed any way I can,” Clovis said.
11. Regular Website Updates
While mobile apps are booming in other areas of finance, they are not catching on in powersports finance, Paula Tompkins, chief executive and founder at ChannelNet, previously said, but that just means lenders need to place more focus on upgrading their websites.
Lenders need to offer “regular website updates with banners directing dealers to more information on changing lending requirements, compliance, etc.,” EFG’s Wilder said.