Doing the Math

Following up on unsold leads is like money in the bank. Take your blinders off and see the future. If you only manage to get 20% of your leads to turn into appointments, how many future opportunities does that leave you? If you only close 20% of your appointments, how many prospects does that leave you to follow up? And don’t forget the references that your customer’s provide. How many personal references does your dealership get from each subprime customer that comes into your dealership and completes a credit application? Isn’t each of them a future opportunity as well? Ask you customers if you can mention their name when you call these folks. Remind them that, even if they don’t buy a vehicle from you today, they can still refer customers to your dealership and get referral fee or “bird dog” for each one that buys a vehicle. Keep it personal, and soon the only place these folks will send their friends, family, co-workers, fellow church members, golf buddies, anybody they know, to buy a vehicle from is your dealership. Do the math and you’ll see how, with a little personal touch, you can sell a lot more vehicles!

Personally Speaking

The problem with some Special Finance Managers is that we tend to wear blinders. More often than not, we view a deal as “now or never”. The philosophy de jure is “If I don’t close them now, someone else will later.” We loose sight of the fact that every customer can’t be closed the first time around. We get caught up in the idea of an immediate sale, and never see future opportunities.

Every lead I get is a potential sale. Successful subprime dealers understand this, and realize that just because you can’t close the deal today it doesn’t mean you might not sell them tomorrow. Customers can’t buy for a variety of reasons – insufficient down payment, insufficient income, new job, new to the area; the list goes on and on. Whatever the reason, one thing is for sure. Whatever is holding them back today is bound to change in the future. Maybe there’s a raise on the horizon. A cosigner suddenly appears. The tax return check comes in the mail. Whatever the obstacle, if you keep in touch with that lead, when he’s able to buy, your dealership will be the first one he calls!

by Christopher Blackburn

So the G.M. says, “We got this big event coming up this month! I love it because they bring guys in and all I have to do is stand to the side and they do all the work!” Does that mean that for the other 26 days of the month he do nothing? This guy was excited because at the last event they did 22 units in 4 days. The way I understand the math on most of these things is that they bring a group of guys in so they can take half your profit. They earned $100,000 and you only get $50,000. Not only that, but how long are they going to be able to advertise for “The Big Event” before their list of names to mail to gets stale?

Now, approach #2…you sell 22 cars in the month and get to keep your $50,000 and their $50,000. So, the guy that stood to the side (yea, stood, as in past tense, as in he should no longer be there) and lost your extra $50,000, should have considered an alternative method. Have a steady flow of leads every week so that your dedicated special finance staff can get into a rhythm. They need to learn how to sell the loan and establish long-term relationships with these potential customers. Who would have know working backwards would work so well for moving ahead.

When it comes to those Big Events, try to resist the temptation to pay another company half your profits. Oh, and keep your legal cost in mind!

These leads *&%*^$#@@ (leave something to be desired)!

Depending on who you speak to regarding Special Finance, there are either too many leads or not enough quality leads to work. The difference here is one of perception. How you determine your lead quality will ultimately determine whether you have a subprime “deal or no deal”.

If you see your leads as too many, you might want to consider how efficiently you are working your leads. Who do you have making your calls? Are they really calling every lead to secure an appointment, or are they rushing through each call without truly committing the customer to that appointment? Are they trying to sell a vehicle to each customer they contact, or are they trying to secure an appointment? If you are handing out leads to your sales force, are you sure that they are making every effort to contact these leads, or are they making just a token effort to appease you?

I Have All the Business I Can Handle!

by Christopher Blackburn

Do you really think you have all the Subprime that you can handle. Does this mean you don’t want to sell anymore cars to the special finance market? Are you truly seeing all the customers you could ever want?

At last check, the car business was designed to sell cars. Granted, there are a bunch of guys that stand out front filling the silver container with paper wrapped cotton. In almost every dealership, there is a least one guy that would love to sell more cars. More than likely it is one of the guys out front right now.

The real point, whether they know it or not, if you think that you “have all you can handle”, you probably don’t know how to handle it at all!

Have you ever tried to hold 12 ounces of soda in your hands without using the can? They call it a spill. Yea you can probably drink a little of it out of your palm but the truth is that you probably missed 11 ounces. Now, if you use the right container to hold the soda—a can—then you will be able to drink all 12 ounces.

Now the correlation. Some dealers sell some Subprime vehicles, but they only drink 1 ounce of success. Then there are those dealers that get to drink all 12 ounces. Capturing every possible deal out of your special finance business is the point of the business itself. If there is only one customer a day that leaves without a loan for a vehicle, then you have already lost 25-30 units a month. Based on my experience, one a day is a good day.

How Do You Approach Your Customers

Taking a proactive approach to the subprime sales process can make a big difference in your bottom line. By settling the credit issues up front, you help set the customer’s expectation to reality. Avoid the “no sale” or short deal you’re forced into taking. Have your sales people once again explain the concept your dealership embraces. Keep your customers in the “credit decision” mode. Emphasize your dealership’s role as a credit counselor, trying to help them rebuild their credit. Doing this accomplishes several things:

• First of all, it tells the customer that your dealership is genuinely concerned and trying to help him.

• This gives your customer a chance to explain away their credit problems. Bad things happen to good people, and lenders try to understand that. A serious catastrophic medical event can bankrupt a family faster than anything else. This is much different from the guy who just went out on a “credit bender”, overdosed on easy credit, and just financed himself right into the ground.

• It reconfirms the credit issues that got the customer here in the first place. This sets the stage for later negotiations, legitimizing the higher rates they may have to pay.

• It helps set customer expectations where you need them – firmly in the reality mode. It gets the customer away from the “product decision” and focused on the “credit decision”.

Are You Too Busy to do Special Finance?

No matter how you look at it, to be truly successful in subprime, you need to have dedicated personnel responsible for it. Sales people who are handling primary customers as well will more than likely opt to deal with these “easier” customers, avoiding what they perceive as too much work for too little money. If you have your primary F&I managers dealing with subprime, you’re probably “stepping over dollars to pick up nickels.” Some F&I managers tend to be overly intimidated by subprime. There’s too much math involved, what with maximum advances, PTI, DTI and all the rest of the alphabet soup associated with subprime Finance. Your subprime deals probably end up with minimal front-end grosses but phenomenal back end penetration and profits. Why? Because that’s where they get paid from, so where do their loyalties lie? Keep in mind that, with subprime, front-end gross (profit on the actual sale of the vehicle) is dollar for dollar, i.e. you get 100% of the profit directly to your store. Back end profits (MBI’s, GAP, A&H, Life,) only make you 40-50% on the dollar. And it may be subject to charge-backs. Where do you want your money going?