Car Dealer Paperwork Can Gum Up Reconditioning Process
Risks increase when vehicles are spot-delivered and then finance is slow in submitting loan paperwork, or there’s ex-spouse-signature trouble.
By Jim Leman
PALO ALTO, CA, June 15, 2020
A best practice for improving auto dealership reconditioning results is to improve the flow of clear-title status communications between the finance and reconditioning departments.
This seemingly small improvement can help finance play a timelier role in a dealership’s ability to improve inventory turn rate.
In a modern time-to-line and speed-to-sale reconditioning environment, even the sales and finance departments have a hand in getting cars frontline ready faster.
The best practice here is to have a clear finance alert between the finance and reconditioning departments. Clear finance means the dealership now owns the title to the trade-in vehicle waiting for reconditioning.
Reconditioning that starts on a vehicle lacking title clearance can create problems. Delays in bank loan approvals for the new car that generated the trade-in and lagging contracts in transit can mean the dealership is doing recon work on vehicles it doesn’t actually own.
When that happens, and the unresolved clear-title status comes to light, management may choose to:
Pull that vehicle out of reconditioning to wait for the finance-clear signal. This slows the delivery of sale-ready vehicles to the sales lot.
Continue reconditioning, absorbing any repair investments in that vehicle should that transaction need to be unwound due to the lender’s loan decline or another issue. Either situation creates unproductive dead time in the dealership’s reconditioning workflow.
Modern reconditioning is a race to get used cars that a dealer buys at auctions or as trade-ins mechanically and cosmetically inspected, repaired and ready for sale. Any delay slows momentum and affects inventory turn rates. (Nicole Renninger, left)
Speed indeed matters, says Nicole Renninger, a former dealership F&I director who now provides dealership support for reconditioning software company Rapid Recon.
“How fast a dealer can recondition a car and get it ready to sell influences the profitability of a vehicle when sold,” she says. “Delays in communicating clear title status to the recon department slow this process, which becomes a drag on inventory turn.”
The dealership finance department has more influence on recon speed than many dealers and managers consider, Renninger adds.
For dealerships where contracts in transit or deal unwinds are prevalent, adding a step to their reconditioning processes called clear finance may be necessary, she says.
Renninger cites these considerations:
State laws pertaining to title handling.
Percentage of unwound deals.
Percentage of deals with trade-ins.
Finance department efficiency.
The average dollar investment for trade-in reconditioning.
It can depend on the dealership, she says. “I have worked for Kia and GMC stores where this was a challenge, and for Cadillac stores where it wasn’t.
“The risk increases when vehicles are spot-delivered and then finance is slow in submitting loan paperwork, or there’s trouble getting an ex-spouse’s signature on a trade-in title, all the while the consumer drives around in a vehicle they think they own.”
Whether dealers need clear finance notifications for reconditioning “depends on how much risk they want to take,” Renninger says.
Jim Leman has been writing about automotive retail variable and fixed operations since 1992.
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