Sheffield: The Band-Aid We've Been Looking For?

Dealernews › October 15, 2009

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Summary

Sheffield uses credit scores only to establish pricing. Approvals are based primarily on the customer's background information. Good thing, too: [Jack Snow] says that since November 2008 and every month since then, more than 50 percent of applicants have been subprime (having a score of 660 or less). Sheffield has denied the majority of these apps, but it's also bought a significant portion. "I can tell you we've financed some 600s and 580s," Snow says. "I looked at one this morning. He scored in the 400s - and that's rare - but he had 13 loans with us and paid us like clockwork. So I can't walk away from that customer."

Snow doesn't believe in participation. "I try to put myself in the customer's shoes," he explains. "Let's say I go into a dealership today and buy an ATV, and I get financed at 11.95 percent and the dealer gets three points back. Then my brother, who is a better negotiator than I am, goes in with the same credit and gets 8.95 percent financing. I'm going to be upset. So I've stayed away from participation all these years, and I hopefully will continue to do so. It's the dealers' job to move iron, and it's my job to take calculated risks."

Manufacturer/lender relationships aren't what they used to be, Snow contends. "The OEMs are hesitant about signing exclusive with anybody today," he says. "They don't know what banks or finance companies are going to have the capital." Sheffield's Polaris and BRP jet boat programs, for example, are running alongside those of GE Money and U.S. Bank, respectively. Snow says he'd love eventually to take on Victory motorcycle financing. At the moment it's handled by GE, which also funded BRP powersports units alongside Sheffield before pulling out.

The government requires compliance with most of the new regulations by Feb. 22, 2010. "I think the costs of some of the revolving programs are going to have to go up," Snow predicts. "And I think you're going to see a mad rush to installment." Sheffield itself sells on service instead of price, Snow says. He doesn't allow his employees to have voice mail on their work phones because it's too impersonal, he says. Credit decisions are never instantaneous, though he says most are made within 15 minutes. "If we were just financing money, and we just turned on these computers and let them make all the decisions, and not have people answering the phones, we could sell money a lot cheaper. But I'm selling service."