The auto industry has experienced several good sales years in a row. According to the Detroit News, auto sales beat expectations in 2018. Originally, experts predicted that 2018 sales would be down significantly from 2017. However, the industry surprised everyone when sales numbers actually increased. The Detroit News reports that a total of 17.3 million vehicles were sold during 2018, up from only 17.1 million in 2017.
In most cases, car dealerships earn very little profit on the actual sale price of a vehicle. Fortunately, most people who purchase a vehicle are unable to pay the full price out-of-pocket and need a loan to make up the difference. Car dealerships rely on their finance managers to bring in these loans and boost their profits through interest. The more interest these loans produce, the more profitable the dealership will be.
What Is a Car Dealership Finance Manager?
A car dealership finance manager is a finance professional responsible for helping customers obtain the financing they need to purchase the vehicle of their choice. Finance managers not only work directly with customers interested in a car loan, but they are also responsible for completing all of the required documentation for each financing transaction. Examples of duties performed by car dealership finance managers include completing applications, pulling credit scores, filling out sales contracts, determining payoff amounts and performing title checks. Car dealership finance managers also present and encourage the purchase of extra products sold by the dealership, such as vehicle purchase add-ons.
Each customer’s ability to obtain financing will depend on his or her likelihood of repayment as determined by income, credit score and other factors. In most cases, the finance manager works as an intermediary between finance companies and the car dealership. The finance manager’s ultimate goal in each transaction is to help the customer get the vehicle he or she desires while also maximizing profits for the dealership.
Car Dealership Finance Manager Responsibilities
With every new vehicle purchase, the car dealership has three separate chances to earn a profit, including on the trade-in of the customer’s old vehicle, on the purchase price of the new vehicle and in the financing process. The dealership’s sales team is responsible for the first two transaction, while the finance manager is responsible for the third transaction. However, both the sales team and the finance team often work together to make sure the deal is as profitable as possible for the dealership.
When purchasing a vehicle, customers can either choose to shop for a loan on their own or work with the dealership’s financing department. For the dealership, it is always better to convince the consumer to finance the purchase in-house. It is especially lucrative for the dealership when the customer has a suboptimal credit profile and is required to pay a higher interest rate.
In order to increase profitability for the dealership, finance managers may entice customers to purchase add-on products that raise their monthly payments. Examples of add-ons include paint protection, an extended service contract and gap insurance. Finance managers may also add to the interest rates quoted to them by lending partners, or they may encourage customers to take on a longer loan with a slightly higher interest rate. The latter strategy results in a lower monthly payment for the customer but an overall increase in profits for the dealership. Many dealerships offer their finance managers commission or other incentives for selling extra products or longer loans. According to Value Penguin, the typical term length for an auto loan in 2019 is 68 months.
How Much Do Finance Managers Make?
The salary of car dealership finance managers varies according to many different factors, including the location, the dealership’s profitability and the finance manager’s experience. According to the Bureau of Labor Statistics, loan officers working for automobile dealers in 2017 earned an average annual salary of $98,270. This works out to approximately $8,189 per month. Some states pay finance managers more than others, with the highest wages found in New York, Connecticut, Massachusetts and New Hampshire.
The salary received by car dealership finance managers varies by general region as well. For example, finance managers on the East Coast and West Coast earn higher wages, with lower wages found in the central part of the country. The lowest wages are found in the northwest part of the country, excluding coastal states.
In general, finance managers will earn more when they work in mass market dealerships. These dealerships work with a smaller profit margin on vehicle sales prices, which means they must make up more of their profits in the area of finance. This allows finance managers to ask for higher wages because they carry more of the responsibility for the dealership’s success. In addition, these dealerships often have the resources to pay higher salaries.
How Are Finance Managers Paid?
For decades, compensation for finance managers and other professionals in the automotive industry was based exclusively on commission. However, in the past few years, the compensation structure within the automotive industry has shifted to include a balance of base salary, commission and other incentives.
The shift to a more balanced compensation structure was not necessarily beneficial to finance managers at the time, as they actually earned more when they were paid in commission. However, finance managers also worked more hours when they worked for commission, and they were more vulnerable to the ups and downs within the auto industry. Today, finance managers enjoy a more comfortable schedule and better job security while still earning a healthy salary.
Getting a Job as an Auto Dealership Finance Manager
In general, someone hoping to be successful in this career needs to have skills that allow them to build rapport with customers and keep them happy throughout the loan application and execution process. Auto dealership finance managers must also be detail oriented so that they can be sure every transaction is as profitable as possible for the dealership. In addition, auto dealership finance managers need to have excellent decision-making skills so they can decide which loan options will be most lucrative for the dealership in each case and which approaches will work best with each individual client.
Most auto dealerships require finance managers to have at least a bachelor’s degree, along with an understanding of the financing process. Finance managers working for car dealerships usually complete on-the-job-training as well before beginning work. In the job market, the basic qualifications may not be sufficient. However, you can set yourself apart from the competition in several ways:
– Get some experience with car sales.
One of the best ways to improve your marketability as an auto dealership finance manager is to gain some experience in the car sales industry. For example, you may accept a sales position temporarily so you can learn more about how the sales process works.
– Work in banking.
If you can’t find a job as an auto dealership finance manager immediately, consider spending some time working in another financial institution, such as a bank. This will allow you to get a better understanding of the lending process, as well as some experience you can list on your resume to make yourself a better candidate when you apply for a job with a dealership.
– Obtain a certification from a certified F&I school with job placement assistance.
Some institutions offer specific certifications for Finance and Insurance Managers for Auto Dealerships. Obtaining this type of certification shows potential employers that you not only understand the basics of lending, but that you have training specific to the car sales industry. It is also highly beneficial if the school you attend offers a job placement assistance program. For example, here at ADI our students experience over 90% success rates when it comes to job placement within 90 days of completing our training.
If you are considering a career as an auto dealership finance manager, keep in mind that the industry is constantly changing. Skills, experience and professional training will help set you apart. For this reason, it is wise to do as much as you can to build your resume before you begin a career as a car dealership finance manager.