Unlocking Profits in Bank Retail Financing: A Beginner’s Guide to Building Your Lender Network

If you’re just starting out in the world of bank retail financing for your auto dealership, you’re stepping into a realm where relationships, strategy, and smart decisions can make or break your success. Financing is the engine that drives car sales, especially for dealers serving diverse markets with varying credit profiles. By building a strong network of lenders, you can close more deals, boost profits, and keep your inventory moving. This guide will walk you through the essentials of leveraging lenders like Westlake Financial and Western Funding, offering practical tips to maximize your margins while avoiding common pitfalls. Let’s dive into the world of bank financing and explore how to turn your dealership into a profit powerhouse.

Why Your Lender Network Matters

In the auto dealership business, your lender network is your lifeline. The right lenders can approve customers who might otherwise walk away, turning potential losses into sales. Whether you’re dealing with subprime borrowers, first-time buyers, or customers seeking rebuilt-title vehicles, having a diverse set of lenders ensures you can match the right financing to the right customer. In Texas, where 25% of car buyers have subprime credit (based on 2024 automotive lending trends), this flexibility is crucial, especially in high-demand markets like Dallas and Houston.

Think of lenders as partners in your profit journey. They’re not just providing loans—they’re enabling you to sell warranties, gap insurance, and other add-ons that can significantly boost your bottom line. However, not all lenders are created equal. Some offer more flexibility and profit potential, while others come with restrictions that can limit your margins. By understanding the strengths and weaknesses of each lender, you can strategically position your dealership for success.

Meet Your Key Lenders: Westlake Financial and Western Funding

Let’s break down two powerhouse lenders that are ideal for new dealers: Westlake Financial and Western Funding. Both specialize in subprime lending, making them perfect for serving customers with less-than-perfect credit. However, they each have unique strengths that can help you target different types of deals.

Westlake Financial: Your Go-To for Flexibility and Profits

Westlake Financial is a subprime lender that’s a game-changer for dealers serving diverse markets. Known for its flexible approvals, Westlake specializes in financing customers who might be turned away by traditional banks. Whether it’s a first-time buyer with no credit history or a customer with a shaky credit score, Westlake often says “yes” when others say “no.” This makes it a must-have lender for Texas dealers, where subprime borrowers are a significant portion of the market.

One of Westlake’s biggest strengths is its willingness to finance both clean and rebuilt-title vehicles. If you’re sourcing cars from insurance auctions—a common strategy for new dealers—this flexibility allows you to move inventory that other lenders might reject. For example, a rebuilt-title SUV that you picked up for a steal at an auction can become a profitable sale with Westlake’s financing.

But what truly sets Westlake apart is its profit potential. Unlike some lenders that force you to use their warranty and gap insurance products, Westlake gives you the freedom to sell your own vehicle service contracts (VSCs) and gap insurance through third-party providers like AUL or Fidelity. This is where the real money comes in. By offering a competitive 3-year/36,000-mile warranty, you can add $500 to $1,500 to your profit per deal. For instance, one dealer shared a story of selling a used SUV with a third-party VSC, pocketing an extra $800 that would’ve been lost with a lender’s default plan. That’s the kind of margin that can transform your dealership’s cash flow.

Western Funding: High Approvals with Some Trade-Offs

Western Funding, Westlake’s sister company, operates in a similar subprime space but with a slightly different flavor. Like Westlake, Western Funding is lenient with approvals, often basing decisions on a customer’s income rather than their credit score. This makes it a fantastic option for closing deals with budget-conscious buyers who need affordable monthly payments. Western Funding’s loan terms are particularly generous, extending up to 72 months, which lowers payments and attracts customers who prioritize affordability.

Another perk of Western Funding is its willingness to finance both clean and rebuilt-title vehicles. They also approve customers for multiple loans if their income supports it, meaning you can sell to buyers without requiring a trade-in. This flexibility is a lifesaver when you need to move inventory quickly. For example, a dealer once used Western Funding to finance a rebuilt-title truck for a customer with shaky credit, closing the deal in just one day when other lenders refused. That kind of speed can keep your cash flow humming.

However, Western Funding has a downside: it’s stricter about add-ons. You’re required to use their warranty and gap insurance products, which limits your ability to shop for higher-margin options through third-party providers. While their warranties are reliable, they typically yield $200 to $500 less profit per deal compared to independent VSCs.

For new dealers, this trade-off might be worth it for the high approval rates, but it’s something to consider when planning your profit strategy. Use Western Funding for deals where speed and approvals are critical, and lean on Westlake when you want to maximize warranty profits.

Strategies for Success: Making Your Lenders Work for You

Now that you know the strengths of Westlake and Western Funding, let’s explore some practical strategies to leverage these lenders effectively. These tips are designed for new dealers who want to hit the ground running and avoid common mistakes.

1. Know Your Customer Inside and Out

The key to successful financing is matching the right customer to the right lender. Before pitching a deal, use a tool like DealerCenter to pull the customer’s credit report and compare offers from Westlake and Western Funding in real time. For example, if a customer has subprime credit but steady income, Western Funding might offer a longer loan term with lower payments. If the customer is buying a rebuilt-title vehicle and you want to sell a high-margin VSC, Westlake is likely the better choice. Understanding your customer’s financial profile and vehicle preferences will help you close deals faster and with better profits.

2. Shop Smart for Third-Party VSCs

With Westlake, you have the freedom to partner with third-party VSC providers like AUL, Fidelity, or GWC Warranty. Do your homework to find plans that balance customer appeal with high margins. A well-structured 3-year/36,000-mile warranty can add $1,000 or more to your profit while giving buyers peace of mind. Pro tip: present the warranty as a must-have for protecting their investment, and you’ll close more add-on sales.

3. Market Your Financing Option

In today’s digital age, visibility is everything. Advertise your financing options on your website, social media, and even platforms like TikTok. A short video showing a happy customer driving off in a Westlake-financed car with a caption like “Bad credit? No problem!” can attract local leads. Highlight perks like “easy approvals” or “rebuilt titles OK” to draw in subprime borrowers. In Texas, where word-of-mouth travels fast, a single viral post could bring a flood of inquiries to your lot.

4. Stay Compliant with Texas Regulations

Compliance is non-negotiable in the auto industry. Ensure all warranty and gap insurance contracts meet Texas DMV standards, and keep original “wet ink” signatures for every deal, as required by the tax office. A small oversight, like missing a signature, can lead to costly penalties or delays. When in doubt, consult your local tax assessor’s office to stay on the right side of the law.

5. Track Your Profits

To optimize your lender strategy, use DealerCenter’s reporting tools to monitor which deals yield the highest margins. Over time, you’ll notice patterns—maybe Westlake deals with third-party VSCs consistently outperform Western Funding deals with default warranties. Use this data to prioritize high-profit sales and fine-tune your approach.

The Golden Rule: Enroll Customers in Auto-Pay

If there’s one piece of advice you take away from this guide, let it be this: always enroll customers in auto-pay. This simple step is your best defense against a dealer’s worst nightmare—a buyback. A buyback occurs when a customer misses their first payment, forcing you to repay the lender the full loan amount, plus penalties, and repossess the vehicle. One dealer learned this lesson the hard way after a customer skipped the FIRST payment on a their truck, resulting in a the dealer having to buy the entire loan back and a fee plus three days of chasing down the vehicle . The ordeal was a costly setback.

Auto-pay ensures payments are deducted automatically, reducing the risk of missed payments and buybacks. Both Westlake and Western Funding offer auto-pay setup through DealerCenter, so make it a non-negotiable part of every deal. Explain to customers that auto-pay is a hassle-free way to stay on track, and you’ll protect your dealership from unnecessary losses.

Want to Learn About More Lenders?

We’ve covered two powerhouse lenders, but there are so many options out there that could further diversify your financing portfolio. Would you like to learn more about additional lenders that can help you serve different customer types and boost profits?