Every day, dealers across the country watch potential customers walk away because they can't secure financing through prime lenders. Money is left on the table. Applications are filed away and forgotten. But what if 25-30% of those "declined" deals are actually approvable through secondary lending channels?
Angela Hieronimus, Managing Partner of the Amplify Program and CEO of Live Oak Dealer Service, and Mike Geremia, East Coast Manager at Merrick Bank, shed light on the massive opportunity that secondary lending presents for powersports dealerships in a recent podcast with us. Here’s what they shared.
The lending landscape has shifted dramatically, especially post-COVID. "What was considered subprime back in the day was more of those sub-600 scores," explains Hieronimus. "What we're seeing on new lender profiles and prime lender profiles is that a lot of times those lendings are only going down to about 700 now, or maybe even into the 680s."
This shift has created a significant gap in the market. Consider these statistics:
"That's leaving a huge market open for consumer-based buying that we really want to tap into," notes Hieronimus.
Secondary lending, also known as non-prime lending, serves customers who don't qualify for traditional prime financing but are still creditworthy. Unlike automotive financing, powersports lending deals with "wants versus needs," as Geremia points out. "You're not getting in the machine to go to work. You're not getting in the machine to go to school. It creates a different buying experience."
This distinction is crucial because it means customers are making discretionary purchases, often with more flexibility in terms and structure than traditional auto loans.
Most dealerships have a process that Hieronimus knows all too well: "If [a potential buyer] is not approved right away with the two or three banks that they use primarily, then that finance application goes into a drawer. It's just kind of lost."
Those "lost" deals represent significant revenue potential. "I would venture to say that there's about at least 25 to 30% of those deals that are going into that folder that are approvable deals," Hieronimus explains.
Geremia agrees, noting that the percentage can vary by geographic location and demographics, but "at least upwards towards a quarter, if not a third, of the deals are workable."
Success in secondary lending starts with understanding your partners. "They are all going to have some sort of rate sheet. They're going to have checklists. They'll tell you exactly what they need," says Hieronimus. Each lender has specific requirements for:
Knowing and following these guidelines streamlines the nonprime lending process, making it more likely that your potential buyer will be approved for the deal.
The most common reasons deals get delayed or denied relate to documentation issues. Geremia notes: "More often than not, it's just documentation mismatches in income or verification or ID."
Successful dealerships conduct thorough pre-qualification processes and ensure all documentation is ready before submission. This includes:
"Communication is crucial," emphasizes Geremia. "Pick up the phone and call. We're here to help you. We want to make sure those people are funded."
Strong lender relationships lead to:
Hieronimus suggests visiting local lenders to build relationships: “Take cupcakes and donuts to your local secondary lending and get them engaged with powersports. They're probably familiar with auto, but maybe power sports isn't something that they've really stuck their necks out into yet. See if they'd be willing to take a chance on some motorcycles to get started.”
Dealership leadership plays a crucial role in secondary lending success. Hieronimus and Geremia recommend that GMs and dealer principals actively participate in what she calls SAD, or "save a deal," meetings.
Geremia shares his experience: "Every Saturday morning, it was a GM-led meeting. We’d ask, 'What can we do to make these work?', and everybody would pull together and make those calls and submit to other lenders."
This collaborative approach often uncovers solutions like:
While secondary lending offers significant opportunities, it requires careful attention to compliance. Key areas to watch include:
Secondary lending can significantly boost F&I performance. Most secondary lenders have back-end product requirements, often including protection products like GAP coverage.
"If you have 25 to 30% of those deals that you're able to approve that you weren't able to approve before, and now we have the products available to put on those deals, then you are definitely going to see a huge increase in your F&I gross," explains Hieronimus.
Perhaps most importantly, secondary lending creates customers for life. "That guy that you were able to get approved, that no one else was getting approved–when it's time to buy again, they're going to come right back to you," notes Hieronimus. "They're going to remember that you went to bat for them."
Geremia shares the emotional impact: "It was always a personal thing to watch somebody who couldn't get approved elsewhere get approved and go out the door with that motorcycle, that ATV, side-by-side, whatever, and that big smile on their face."
Ready to tap into this opportunity? Here's how to start:
Secondary lending isn't just about expanding sales - it's about servicing underserved customers while maximizing dealership profitability. As Hieronimus puts it: "If you are not using secondary lending, you are leaving a lot of money and a lot of deals on the table."
The powersports industry has a unique advantage in the recreational nature of its products. Combined with the right secondary lending strategy, this creates an opportunity to serve a broader customer base while building lasting relationships and driving significant revenue growth.
Don't let another deal walk out the door. The secondary lending opportunity is real, substantial, and waiting for dealerships ready to embrace it.
For more insights on powersports finance and dealership operations, join Angela Hieronimus in an upcoming DealerHero Bootcamp.
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