Beware the “Turn and Earn” Mindset

At this year’s NIADA Con­ven­tion and Expo – held June 24 – 27 in Las Vegas – NextGear Cap­i­tal Vice Pres­i­dent of Oper­a­tions Alan Lang par­tic­i­pat­ed in a pan­el forum enti­tled, “New Avenues in Deal­er Cap­i­tal,” and field­ed ques­tions on trends in the indus­try.

The fol­low­ing is an excerpt of ques­tions and answers that were field­ed from that forum.

How do you eval­u­ate the finan­cial mar­ket­place today and how do you see it chang­ing in the next five-years?

The mar­ket­place is aggres­sive and very much in favor of both the deal­er and the end con­sumer. Mar­ket cor­rec­tions will like­ly begin in 2014 and con­tin­ue into 2015, with lease vehi­cle inven­to­ry enter­ing the mar­ket and plac­ing a down­ward pres­sure on vehi­cle val­ues. As in all cycles, when this begins and is cou­pled with very com­pet­i­tive lend­ing and an abun­dance of inven­to­ry, deal­ers find them­selves in a unique posi­tion. Con­sumers also have more selec­tion, which is a pos­i­tive fac­tor that encour­ages more buy­ing. Com­pound­ing the buy­ing and lend­ing cycle, deal­ers take less prof­it while lenders buy deep­er. As we have seen before, lenders begin to pull back while the inven­to­ry remains high and pric­ing is dri­ven down fur­ther. While it may be tempt­ing to invest in spec­u­la­tive inven­to­ry, the long-term suc­cess will be a result of stay­ing dis­ci­plined in spite of a “turn and earn” mind­set.

We must also fac­tor in sev­er­al macro and micro-lev­el auto­mo­tive indus­try key index­es that impact over­all deal­er count growth. These include the impact of new car sales, lease returns, and even used vehi­cle his­tor­i­cal trends from pre­vi­ous years. Use of this data allows us to eval­u­ate the finan­cial mar­ket­place in terms of the impact on floor plan vol­ume and deal­er count pro­jec­tions.

How impor­tant is the deal­er rela­tion­ship to your com­pa­ny?

Our rela­tion­ship with deal­ers is the very back­bone of NextGear Cap­i­tal. Our con­tin­u­al focus is build­ing stronger rela­tion­ships with our part­ners, which are our cus­tomers. Through this part­ner­ship, we assist them with the growth and oper­a­tion of their busi­ness. Through our “Deal­er Direct” busi­ness mod­el, we spend time on-site at their deal­er­ship to ensure we are pro­vid­ing the prod­ucts and ser­vices that com­ple­ment their busi­ness for months and years to come.

What cri­te­ria are you look­ing for in a deal­er? 

NextGear Cap­i­tal is a “rela­tion­ship buy­er” in every sense of the expres­sion. As with all lenders, we look at tra­di­tion­al fac­tors such as years in busi­ness and past cred­it per­for­mance. How­ev­er, as a com­mer­cial lender, we assign a per­son­al under­writer to each rela­tion­ship, look­ing for every way pos­si­ble to engage each dealer’s busi­ness mod­el. One fact that makes this approach so unique is that we typ­i­cal­ly con­duct busi­ness with 9 out of 10 deal­ers who want to work with us. This involves a tai­lored solu­tion for each one of them.

As well, we con­sid­er our respon­si­bil­i­ty to the indus­try as a seri­ous con­sid­er­a­tion for NextGear Cap­i­tal. We see a duty to the indus­try to do all we can to lend to every deal­er pos­si­ble. This keeps the indus­try mov­ing for­ward, even when there are antic­i­pat­ed down­ward trends.

In your opin­ion, what do deal­ers find most frus­trat­ing in their deal­ings with financ­ing and the financ­ing process and how we ease these frus­tra­tions through venues like this? 

Deal­ers wish to stay ahead of the ever-chang­ing trends in the indus­try. They are look­ing for a con­sis­tent part­ner to meet their financ­ing needs. We invest a great deal of time in our ini­tial set-up process with a new cus­tomer to thor­ough­ly address what they can expect from NextGear Cap­i­tal. We want them to know the diverse ser­vices avail­able to them, and how we tai­lor our rela­tion­ship with them based on what their needs are, and what is vital­ly impor­tant to them as cus­tomer.

Alan Lang, Vice Pres­i­dent of Oper­a­tions and Busi­ness Devel­op­ment for NextGear Cap­i­tal can be reached at 888–969-3721

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