Managing Your Fleet

How much do finance managers make at car dealerships?

Luisa Ddakis | 16 August 2021 | 3 years ago

How much do finance managers make at car dealerships?

Having the qualifications and experience to set you up as a finance manager makes the world your oyster. Every industry needs a finance manager, so you can choose the one that excites you the most.

If you are a car enthusiast, then what better place to look than in the auto industry! The industry has seen steady growth year on year, albeit that the pandemic years saw sales drop significantly, as with all industries. The second-hand car industry started booming during the pandemic, which saw some eyebrow-raising prices in that sector.

Here is information on where dealerships make money and what the money-man, a.k.a. finance manager, can expect to earn.

What is a dealership’s primary income?

The biggest portion of profit in a car dealership is not from the cars. This is not a car industry anomaly, but it is an anomaly to industries that sell on credit. Money is more profitable than ‘things’.

When it comes time to buy your beloved, or practical, vehicle, there are perhaps only a handful of people who can walk in and pay for the vehicle, in full, upfront. The methodology mostly used is to use the credit facilities of a car dealership for the full amount or, at least, for the difference you can’t cover.  This is where a finance manager plays a leading role in the agency.

The dealerships depend heavily on finance managers to source the most profitable finance tools, educate the sales staff of the upfront details of financing, explain and close the loan deals, and be the biggest boost to the company’s profits via interest earned.

What does a car dealership finance manager job entail?

A finance manager’s job in the car dealership industry is primarily to satisfy a customer’s need for appropriate, vehicle-related finance whilst protecting the dealership against bad debt. They must assess the suitability of each customer with finance tools, then explain the costs and obligations of the finance deal directly to each of the suitable customers. They must also complete all the related paperwork and upload it.

They will take steps such as completing the application forms and sales contract on behalf of the customer but in the customer’s presence. They will pull the customer’s credit score related to the principal amount What does principal mean in finance , guide the customer in reaching the most viable repayment amounts, and do title checks. At this stage of the conversation, a lot of dealerships require finance managers to also engage in purchase creep, i.e. add extra products sold by the dealership to the deal.

Not all customers qualify for finance as it is subject to income, credit experience, credit scores, number of credit facilities or loans taken out recently, and other factors. The finance manager is usually an intermediary between finance companies, the dealership, and the dealership’s clients.

The finance manager becomes a master craftsman of solutions whereby the customer gets the dream car, and the dealership gets the maximum profits.

Dealership earning opportunities

There is another opportunity that arises in deals for car dealerships to make a profit. The new vehicle customer usually has an old vehicle which they trade in to offset the loan amount they need to take out. The sales team must work closely with the finance manager in order to ensure that the dealership gets the maximum profit possible from new car sales, trade-ins and financing.

The customers are not obliged to take on financing from the dealership. They might have shopped around prior to coming in to test drive their preferred vehicle. It is the finance manager’s job to close a finance deal with every car sold. And customers with sterling credit ratings are not necessarily their favourite customers. A customer with a suboptimal credit profile may still qualify for a credit facility if they are prepared to pay a higher interest rate. This means much greater interest earnings for the dealership, and the client is happy to drive off in their new car.

Another profit-boosting strategy is for finance managers to add a markup to the interest rates obtained from the underwriter or agent giving the loan. They could also propose a cashflow easing solution whereby a customer opts for a longer loan term to drive down the monthly repayment amount. This, of course, comes with a slightly higher interest rate = more profit.

The previously mentioned purchase creep is a great source of income. The additional items sold could be paint protection insurance, service and maintenance contracts, and gap cover.

What can a finance manager expect to earn?

A number of dealerships incentivise their finance managers, on top of a salary component, with a commission on certain products. This is usually the case when they are selling the ‘purchase creep’ or getting longer repayment periods. For your guidance, the market norm for an automobile loan repayment period is 68 months/5 years.

The salary component for a finance manager can vary widely. Influencing factors are experience, sales track record, geographical location, the strength of the dealership as a business and the economic situation.

Jobs are currently being advertised for between £40,000 and £69,00, which is a huge difference. It is usually the case that the larger the salary, the smaller the commission structure.

The finance position in mass-market dealerships tends to pay more as the profit margins on the cars are small, and the financial position plays a very important role within the company.

How to get a job as a financial manager

To fit well into a financial manager’s position, a candidate will not only need ‘a head for numbers’ but will also find it vital to have a bit of a sales personality. They will need to build a rapport with a customer sufficiently enough to get them to part with their hard-earned money. To get to that point, the client’s confidence needs to be maintained whilst they are moving forward through the loan application. It’s not done until the dotted line is signed.

The candidate should be highly detail orientated and a lateral thinker.  It is not an easy personality mix to find: sales + detail + lateral.

In addition to these skills, they must be able to make big decisions quickly and close deals. The candidate with proof of an excellent history in deal closing will be in a position to demand a higher salary.

You can gain appropriate experience by working as a salesperson in a car dealership, taking a position in a bank and/or obtaining financial training certificates.

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