I Love It When a Plan Comes Together!

I was out in the field last week, working with a dealer client to improve his subprime sales. The GM had just let his lead subprime manager go, and wasn’t 100% sure of the guy he hung onto. When I got there Monday morning, the GM and I sat down and reviewed what he saw as the problems and what he hope to accomplish while I was there.

As I listened to him, I realized that many of his concerns were probably pretty common. He felt a frustration that his subprime department had not done that many “deep” deals, what he called “true secondary business”, in the last few months. He felt his subprime department was not being aggressive enough and were afraid to spot a deal. 90% of the subprime business his dealership had done had gone to near-prime lenders. ” To me that’s the cake walk of paper and we’ve been missing deals.”

We talked about the lack of confidence his sales force had in the subprime department. The sales force typically viewed customers with credit issues as “another lost cause”, and tended to walk away from these customers because the subprime department couldn’t get an approval for them. The GM was indeed frustrated with the money he had been spending on his subprime department, and in reality, I couldn’t blame him!

My first order of business was to sit down with the remaining Subprime manager and figure out what he thought was wrong. Turns out, he was the back-up, and the guy who left was the lead, who did not want to do the deeper paper deals. Those marginal customers were largely ignored because he didn’t want to have to do that much work! We changed that in a hurry, once I showed them how much profit was available in those tougher deals.

Next I talked to the person calling the subprime leads the GM was buying. She complained that many customers didn’t want to come to the dealership unless they knew they were approved. Once she understood that her only job was to set the appointment, things began to click. By deferring all the questions and concerns these customers may have had to the Credit Manager, who could address them when he called to confirm the customer’s appointment, the number of set appointments soared! And once we got the customers into the dealership, the rest was easy!

The sales force, frustrated by the previous lack of effort by the subprime department, suddenly saw an aggressive, anxious manger wanting to help them. Old customer files, some resurrected from 6- 8 months ago, were looked at in a new light, and approvals were forthcoming. The Subprime manager called every lender to let them know that a “new marshal” was running the department, and he wasn’t afraid of those tougher credit customers. A more aggressive approach with the lenders yielded better approvals, and the credit analyst’s knew things were going top be different at this dealership from now on. Marginal deals were being worked with a renewed vigor, and instead of salesman bringing in another “lost cause”, they were now looking for a way to get a customer approved for a loan. The subprime manager now began to understand that, if he could get an approval from a lender, even it wasn’t the exact approval he was looking for, the customer’s application was approved. The customer could decide whether they could meet the terms and conditions of the lender’s approval!

To make a long story short, by the time I left on Friday, the dealership had delivered 8 subprime deals, for a total gross profit of over $22,000. Not bad, even with Monday being a mail holiday and snow storm on Tuesday that pretty much shut everything down for the day!

The moral of the story here is that subprime is all about perceptions. How you see subprime customers, how they see the dealership’s attitude to subprime, how the dealership views subprime, and how the lenders view the dealership. Once everyone had a clear vision of what could be done, everything started to click. As the GM said to me as I was getting ready to head to the airport to head home, “The showroom is hoping, and we didn’t have to give out Wal-Mart gift cards!”

Nothing like a good success story to make my day!