I'm trying to get some dealer input about CAC instead of just input from CAC. They want $10k and tell me that it's a great program with the right inventory, but according to their public financials the average dealer only does 3 CAC deals per mo. I have a small lot located in Louisiana and it's primarily just a Special Finance Store. We currently primarily do RTO/LTO, but looking at CAC to make some front end profit instead of going in the hole on every one and depending on the revenue stream. I've used DSC's RTO/LTO line and it was awful, I've used Finance Express and we never completed a deal with them. I used a company called Fairway Lending out of Duluth, GA until they went bust, and they were great as long as the inventory fit the program. When I find a good program, I buy inventory that best fits their program. Any input or any other finance company suggestions would be great.
I think it is not logical to put all your cost over your 1st 100 deals as hopefully you will do many more packages in the futue and you can look at your sign up fee over more deals. Also , all the sub prime lenders I do business with charge some type of extra fee above the reserve or discount. The other great thing about CAC is that you can make money on Gap and Service Contacts that other finance companies do not even want to finance. Finally you are thinking that the PPE Check is the last money you will see on the deal when in fact it is only a small part of what you will yet to recieve ( I take it back Karl maybe CAC should hire me !!!!!!!!!)
OK here is the other way to look at it:
I paid $0 up front to CAC (did not pay $2000), and I pay $0 as a monthly fee. Not even thinking about the back end money, I've done 150 deals that I've AVERAGED $1700 up front profit on customers that COULD NOT BE FUNDED WITH VIRTUALLY ANYONE ELSE. I don't care what their fees are if they allow me to do this. They could take $500 fee off the top of every deal if they still allow me to make that happen.
Sean, you have 6 cars in you inventory, you would not even be accepted by CAC.
Maybe your talking about another dealership you no longer work at.
In any case , I have been involved with CAC since 1998 at different stores, I have never found them to be the be all , end all of auto finance.
But if I make $ 1500 a car up front , I dont care about the back end reserve check.
If you have a 30 car lot , you need CAC...period.
I have used CAC for many years and if you have never been in the special finance market it would be extremely wise to partner up with CAC. Keep in mind that the risk that this company takes for only 20% of the profits for collecting and repossesing the car is well worth it.
CAC brings a professional appearance lacking in many finance companies. I have a lot of dealer friends that have become RICH with this program!!
But remember it takes hard work, dedication and a great desire to help others get into a car that other dealers have said "NO". That in itself is worth the effort and you will also be rewarded.
Sean, I've got a few questions for you. I'm a relatively new CAC dealer, but I'm not new to the car business, and my experience with special finance in the car business is relatively extensive. Do you have any idea why CAC cut you off? Do you have any idea why your portfolio is performing so poorly? Are you following CAC's processes? I would appreciate any insight. Next, I've got a few questions about the numbers from your previous post. Why do you not consider your initial profit in any of the numbers above. Were you not making any initial profit on your deals? Have you ever worked with any sf companies before? CAC has a $95 fee on the 1st 100 deals, and the monthly access fee is assessed against you pool. I have paid as much as $1,800 in an advance holdback per deal to deal with some sf companies, and I've never paid less than 10% of the gross deal to deal with any sf company. I'm not talking about guys that call themselves sf companies and cherry pick deals, I'm talking about companies that really take risks, and put deals on the street. I've also paid $500 per month to access a program that wasn't nearly as useful or profitable as CAPS. Before the credit markets tightened in 07, I probably did 400-500 deals with a company, and made an initial profit per deal of around $2,500. If I consider the advance holdback of $1,800 per deal a cost, then those deals would have cost me $700-$900k on about $1mil- $1.2 mil profit which would result in a gross profit of $300k or so, but in reality, the advance holdback was taken before the advance so I actually made a gross profit of the full $1-1.2mil. on these deals. It's just simple accounting, and I think that anyone in this business should be able to see the difference. I would love it if I could deduct the advance holdback from the profit, but I can't deduct something that didn't actually come out of the initial profit. In order to deduct it, I would also have to add it to the complete deal, then deduct it also, so technically my initial profit would have been about $4,300 per deal, then the advance holdback deduction of $1,800 would have still resulted in the $2,500 average initial profit per deal. Also, I have never had any company actually pay the advance holdback back to us. CAC is the only legitimate company that I know of that actually pays you on the full deal once the advance is paid back. Sure there's a 20% admin. fee, and other fees, but the 20% is their profit, and the other fees are actually legitimate and reasonable fees that any company charges. Do you understand that when you receive an advance on a deal, you are being advanced your own money, and it must be paid back before anyone realizes a profit? I do understand the fees, but it's worth the fees to me if they are collecting my deals for me. I have chased payments for years, and while it can be fun sometimes, I am looking forward to CAC chasing payments for me for a change. I have one other observation. I'm from the finance side of this business so I understand that I must put a quality deal on the road for it to be profitable. I understand that sf deals seldom ever pay out completely, but if I don't put a quality deal together from the start, then it's never going to pay like it should. Dealers that are on what I call the "cash and carry" side of this business are done with the deal once it leaves, and don't know or care how a deal pays because they are simply done with it at that point. They have a disconnect at that point, and don't understand that there is real accountability down the road as that deal pays in the finance side of this business. I know guys that try Buy Here Pay Here with that attitude, and they never make it because they just don't see the bigger picture. Is it possible that you are able to move the volume that you do because of this? Please give me some insight into your point of view. I really appreciate your input, but please give me the real picture if you want to talk numbers. It's very easy to add costs, and not add profits, and slant the numbers any way that you want.
Sean, it appears that your previous post was deleted. Here's my response to the previous post. I think that you weren't supposed to put a link in your post. Anyway, please read.
You really need to step back and try to see your numbers through someone else's perspective. If you don't see what I'm going to tell you then please go sit down with an accountant, and pay them to show you exactly what I'm going to tell you for free. Please don't misunderstand this, I know that I'm no CAC veteran, but your numbers are way out of whack. You control these numbers when you structure a deal, and you've structured your deals for failure. It appears that you are delivering an average deal with a $101initial loss, and a projected portfolio profit of $160 for a total projected net gain of $59. You have left no room for profit. If your deals perform as expected, then it's not even worth your time, and if they underperform, then you will owe back part of your advance. It's not a conspiracy, it's just simple math. Again, please don't misunderstand my tone. I find that it is normally impossible to change someone's mind once they have convinced themselve's of something, but you really need to take a long hard look at your numbers. Please sit down with someone that will give you an unbiased opinion if you don't believe what I'm telling you. CAC is a publicly traded company, and has to disclose almost everything. With a little bit of digging you can figure out almost exactly how this program works, and it can be a goldmine if worked correctly. It's just simple math. If you structure your deals similar to this, then there's a pot of gold after about 30 months. These numbers may be a little off, but I'm just using them as an example: Avg. gross contract size $13,000, Avg. total advance including ancillaries $6,500, Avg. collection rate of 70%. X total pool size of 100. $1,300,000 X 70% = $910,000 minus 20% CAC collection fee equals $728,000 minus initial advance of $650,000 = $78,000 backend profit on an average pool. Again, that may be a little off, but it's that simple. I think that the 70% collection avg. is a little low, but it's fairly close. The $390,000 that is the difference in the 1.3 mil and $910k isn't missing money, it's uncollected money. It will never be collected, but if it is, you will be paid 80% of it. It is factored into the projections. Even on a 1 rated customer, you are never projected to collect 100% of the payments. Every deal is projected to fail at a point. The great thing about CAC is that they are as far as I can find, the best at accessing the risk in these transactions. I think that they are able to project with a deviation of about .5% which is unreal. The purpose of the dealer rating is to keep the projections accurate. It's basically a sliding scale that allows CAC to keep everything running within about the .5% range. Your portfolio performance is rated against all other portfolios and based on it's performance, that's how your dealer rating is given. It's just numbers, and numbers may feel personal, but they really aren't. I believe that the each rating is based on about a 2.5% deviation from the next number. So there's about a 15% range of performance from a 1 rated dealer to a 6 rated dealer, and we all have SOME control over how our portfolios perform. I could go on for about an hour, but I really don't have time this morning. Again, please don't misunderstand my tone. I certainly have lots to learn, and try to learn something new everyday. I'm only trying to give you some perspective so that you can see your portfolio through anyone else's eyes. I hope everything works out for you.
Very, very, very well said, Michael.
I am very close to signing up with CAC and will be meeting with them soon, I really like the feedback here and I think most of my questions have been answered but wanted to make sure I understood that one of the options of CAC has is to use them just for up front $$ or as an arm to get deals bought that others might not take. This would be the no upfront or back end fee from CAC or no $95 per unit fee as well. I am starting my first full year at a new location with an entirley new class of inventory (3-9K ) coming from a Franchised Lincoln Mercury store which I owned for 25 years to this end I am not just sure I want to sign on for the full monty just yet. I am not new to SF but it has never been my focus.
Unless things have changed, CAC does have a program that is 100% front end only (no back end whatsoever) but you are only allowed to participate in it after you have done 100 partner deals (front and back end). But quite frankly, it is not nearly as lucrative as the partner deals as the front end is not much more than the normal front profit on their partner deals. You really need to embrace the front end AND pool profit concept of CAC, it does work. As someone else suggested, they pay there sales commissions a little higher on the CAC deals to make it worthwhile for the sales team. And you will still be able to get deals bought that you can't get bought elsewhere, and the process is really very simple if you follow their guidelines and provide the exact stips that you need.
Also, the $95 per deal fee goes away after the first hundred deals (first pool closes).
Thanks for the quick reply Dave, I was reffering to your earlier post which said you paid nothing up front and no $95 per unit but I guess you had already closed one pool and decided not to partner or that was under a different policy they had (CAC)? I will know more in a few days when I meet with my area manager Andi White. Does any one have any feed back on this person as a CAC manager? From reading the prior posts I am under the impression that good one can really make it work well and a bad one can just about kill you.
Another question is in ref to the warranties, do they have to be one of thier approved vendors or can it be of your choice as long as it is a reputable company etc?
Thanks again Dave for your help, I want to be as well informed as poss before I meet with them.
Another person mentioned they paid $495 per month to access the CAPS system, and that was what I was referring to when I said I was not paying any fees. I did pay $95 per unit on the first 100, but that's just another cost per deal, you see it right on the screen and factor it in.
A good rep really can help, but the program works so well that as long as you understand it, you really don't need a good rep. There is really no need for a rep to hold your hand as all of the information you need is available in the CAPS program and the on line information.
Warranties, you are required to use their warranty company. Warranties are not required but they do help the deal in most but not all cases. You make $385 or something in commission but sometimes it changes the up front profit by $1500! Sometimes it doesn't. You will find that CAC analyses EVERYTHING and every single deal is different. But you can play with it all you want in the CAPS program and instantly see the results. For instance sometimes LOWERING the interest rate makes it a more profitable deal for you.
Again many thanks, what about the time it takes to start and finish a pool. Is there a time limit, I see that some dealers are finishing thier first in 20mos and some within a year. Does that effect payout or negate any back door money should you exceed time limits? Do you see any $$ before a pool closes and if I am not mistaken the first check (express?) is a front of your back end residuals or ?? Can you please expalin?