Why you shouldn't ask to pull credit before the customer comes in…

‘You’ve just won a new car’ – well maybe not

A Beckley West Virginia dealership started to hear from local residents calling to claim their prize. The only problem- there is no prize. (12/11/2007)

Last Friday, Hometown Subaru-Kia started to receive telephone calls from local residents calling to make arrangements to pick up the brand new Kia they were promised through a phone call from someone named “Bethany Lucas”, according to a report in The Register-Herald. One man actually showed up at the dealership ready to claim his “prize” and drive it home.

In what appears to be an identity theft scheme, these calls are placed telling the unsuspecting targets of their prize. Along with congratulations for their good fortune, the caller tells them that they are to bring two forms of identification and proof of insurance to their local Kia dealership in order to claim their prize.

The article does not describe in detail how more personal information is extracted during the call, but it is not hard to imagine that the caller offers to get the paperwork started for them in advance of their visit to the dealership.

The dealership and local officials are warning the public not to fall for the scam and under no circumstances should they surrender any personal details over the phone.

Prejudging, pre-qualifying, pre-screening… no matter what you call it, it’s “cherry-picking”

Looking at leads, many dealerships routinely assess the quality of that lead before any contact effort begins. Looking at the application submitted by this lead, many dealerships decide, unilaterally, that the customer cannot buy, yet alone finance a vehicle for any number of reasons. Income appears insufficient, short job time, severe negative equity, whatever the reason, this customer is often either contacted only once, with limited or no result, or just discarded with no contact at all!

When you prejudge or pre-screen an application, you are making a decision for a customer you know little, if anything, about. Many times, the application that you see does not reflect the complete story. There may be mitigating circumstances you cannot know without conducting a complete interview. Additional income, co-signers, or any other number of solutions may present themselves once you open a dialogue with this customer. But, since we are typically creatures driven to the path of least resistance and greatest success, many sales people look for reasons not to call all their leads, focusing on those leads which they perceive, they have the greatest chance of selling.

We measure success in sales by the size of our commission check. I’ll admit, I’m no different than any one else when it comes to my desire to earn a living. When I’m asked how much I want to make in any given year by an employer, my typical response is “So much that your hand shakes when you sign my check”! But in order to achieve that goal, I have realized that it takes a greater effort, looking deeper for those opportunities that my competitors may not want to pursue because they’re “too hard” or “too distant” to produce a quick, easy commission.

In Subprime, this becomes all the more important when looking at, and working, your leads. Pulling credit before the customer comes in can foreclose your efforts with that customer. Making ANY kind of decision without getting the whole story, IN PERSON, leaves you likely limping badly when you realize that you shot yourself in the foot by not working this lead to the max. This is especially true when you finally decide to follow up this lead, only to find out that they have already purchased a vehicle from a competitor. Doesn’t it suck to pay for someone else’s sale?

Every lead is a sale waiting to happen. It’s up to you to discover the story and make it happen. There are lenders out there that are still buying those deeper deals, despite the current economic conditions. You simply have to find the right combination of unit, payment and down payment to get a lender interested. Every customer deserves the opportunity to get a loan through your dealership. It’s up to you to secure an approval; it’s up to your customer to meet the terms and conditions of that approval. Prejudging, pre-qualifying, or pre-screening to determine which ones you are going to pursue and could leave you missing a significant number of additional sales each month. Since your dealership probably has already paid for these leads, why not work ALL of them, with equal interest and intensity, to maximize your commission check each month? “Cherry picking” belongs in orchids, not dealerships!

Are you looking for a B12 shot or a multi-vitamin?

Every now and again, I talk to a general manager who tells me he just signed for a staffed event to help boost his month. Many times, a dealership turns to these “sales” in an effort to give a quick shot in the arm to a month that may not be setting any records. But some dealerships turn to these “events” with increasing frequency.

Not long a go, I was at a dealership training a BDC guy who was given the task of calling subprime leads generated from direct mail. That same day, the dealership was running an “event”, complete with vacation certificate giveaways. As luck would have it, the box with the vacation certificates was placed in the BDC guy’s office, and every few minutes, the event coordinator would come in a grab one to give to a customer. This went on for most of the day.

I finally had to ask the coordinator how many certificates he had given out. “Loads! We’ve had a great response to our promotion!” was his reply, as he ran out to give another certificate away. My next question was to the GM.

“So how many cars have you sold so far?” I asked, innocently enough, figuring with all the traffic, he must be having a great day. “Only 2, and one wasn’t from the promotion”, he responded, and I could hear from the tone of his voice, he wasn’t very happy. “We’ve given out a ton of vacation certificates, but most of the people coming in are coming just to get the vacation. They register, get their certificate, and leave.”

Years ago, I did a sale with a company that, instead of giving away gifts, gave away five silver dollars! They discovered it was easier to simply ask the customer if they had come to the dealership to buy a car or just get their five silver dollars. It was cheaper to give away $5 to these customers than find a premium, buy it, ship it to the dealership, and hope they had enough to give away. After all, don’t most of your employees end up with the mini boom boxes, golf umbrellas and MP3 players you gave away?

My point it this…if you’re looking for a quick fix, a staffed event will probably do just that – bring traffic into your dealership. While you may sell a lot of units in a short period of time, you may end up paying dearly for that “boost”, as much as 50% of the profit generated. And you’re typically stuck cleaning up the mess left behind! If your doing this because you feel you need to bring in the "gunslingers" becasue your sales staff is weak and can't close enough deals, what happens when these guys leave? How's the morale of the sales department when, with all the traffic, only a few, if any of YOUR sales people had the chance to make a sale?

Like a B12 shot form your doctor, you may feel pretty good in the short run. But eventually, you’re still stuck with the same problem that had you feeling poorly to begin with. Why not look for the multi-vitamin you can take everyday, to help you feel better and get healthy? Look for a long term solution, like a blind, targeted direct mail program, and you’ll get consistently great results month in and month out. Look to properly train your sales force. Take the misdirected process and practices that prevent them from closing more deals and retool them for success!

Misdirected Process Can Miss an Opportunity

Saturday I went over to Carmax to get a "buy" figure for my car. I thought it would be a relatively simple process, since all their advertising boasts this fact. It seemed a reasonable assumption that I could drive in, get my car looked at, get their figure and decide whether or not I wanted to sell it to them. After all, their website says "Although CarMax will buy any car, only about half will ever make it to one of our stores for sale to the public. Only cars that pass our rigorous inspection get reconditioned and sold on our lots. Cars that don't meet our high-quality standards are sold at major wholesale auctions."

I drove to the Carmax location ON THE OTHER SIDE OF TOWN to get my vehicle appraised. I walked into the showroom, and asked a staff member, seated at a central podium, how to go about the appraisal process. He directed me to a young lady sitting at a computer terminal, who would take my information and begin the process. Before I had walked two steps towards her, I was intercepted by a sales associated, who said he could get me started. I gave him my keys and then he proceeded to launch into his standard sales presentation. I explained that:

1. I just wanted an appraisal on my vehicle
2.I was not in the market to purchase a vehicle
3.I was familiar with Carmax since I was in the auto business

When I asked if I could simply get my vehicle appraised without having to go through their entire presentation, I was empathically told “NO!” Needless to say, I grabbed my keys and left.

What happened here was typical of what occurs every day, in not only auto dealerships, but most retail businesses. The staff failed to access the customer they had. By following set of misdirected procedures, they assumed I was willing to go through the whole, long-winded presentation, despite the fact that I told them the specific purpose of my visit, which was not to buy a car! The result of this misdirection is that I left, and will more than likely never go back, nor will I ever recommend anyone to go to Carmax.

Customer service begins when the customer enters your establishment, not when they buy your product. Many auto dealerships fail to recognize this fact. Sales forces are drilled to fulfill a single objective, which is to sell a car. But, more often than not, while this objective is a possibility, you have to earn the right to earn the business. Learning to understand how this business must be transacted is critical to earning that right. Treating every customer the same, regardless of the buying situation of that customer, can be business suicide! Embracing practices and procedures simply because “that’s how it’s always been done” fails to recognize that subprime customers must be worked in a different manner than customers with good credit. A business practice that embraces one or the other, without understanding how to determine which customer you have, will fail to produce the desired results. Asking non-offensive, non-confrontational questions can help determine what kind of customer you have. A question as simple as “Are you looking for a particular type of vehicle, or just good, dependable transportation?” can tell you what you’ve got right up front. This allows you to determine what process to follow. Misdirected processes often lead to missed sales.

3 Reasons Why FICO 08 Will Not Happen

By Ted J Stearns

With all the hubbub surrounding FICO 08, we thought we owed it to our readers to separate the truth from the myth. This is Fair Isaac's "answer" to the problem of authorized users and other complications with the credit score world. It is a software program to be used by all three credit bureaus to weed out authorized users and prevent their scores from being accepted by lenders as "legitimate." It also aims to do much more that could put millions of credit card users in financial jeopardy. Fair Isaac, who incidentally own Experian, said that Experian would begin implementing the new software in September with the other two agencies to follow sometime next year. Well, September has come and gone and no changes have been made. Apparently it has been easier for critics to confuse the public, than to actually implement the software.

Even amid all the controversy surrounding the purchase of trade lines, experts in the business have good reason to believe itwill never happen. Here are three legitimate reasons why FICO 08 won't happen:

1. It is not in the interest of any of the three credit agencies to promote or support the use of FICO 08.
If it is implemented, the agencies would report the exact same credit score for each individual. Presently, each agency comes up with the score through different means; Experian uses 'Fair Isaac Version2, TransUnion uses Emperica 95 and Equifax uses Beacon 5.0, providing three different scores from which lenders take the middle. If FICO 08 is used, all three agencies will come up with the same score. This would ultimately negate the need for three agencies, when one would be sufficient.

Craig Watts, a spokesman for Fair Isaac said regarding the proposed release of FICO 08, "Adopting the FICO blueprint to get the maximum benefit for each repository is difficult because each uses unique data. When we update the FICO score we need to do that individually with each credit reporting agency." Implementing this new software is apparently much more complicated, which may explain why no one has yet begun using it.

2. It would be detrimental to the millions of families facing foreclosure.
With the real estate market taking a dive and countless people facing foreclosure (due mainly to lenders and their "creative loan option"), to prevent these same Americans from boosting their credit score through trade lines in order to refinance and get a loan they can afford, would send countless families into foreclosure and our economy spinning out of control. Experts know that lenders and Wall Street banks have attempted to push this program forward as they have the most to lose by people purchasing trade lines and refinancing into affordable loans that they can pay. A loan at a lower rate means hundreds of dollars in the borrowers pockets every month and not the banks'. Even Presidential candidates have remarked that Wall St. banks have stepped up lobbying over the issue of sub-prime lending as underwriting practices have come under scrutiny. They don't want legislation that would ultimately protect the consumer despite recent moves to do so. This is why FICO 08 is their only hope, to continue to line their pockets at the expense of homeowners and to avoid greater speculation regarding their abusive lending practices.

3. FICO 08 could bring legal action against Fair Isaac.
Another aspect of FICO 08 is to redistribute credit users into 12 new categories effecting millions of people, many negatively. With the new categories, everyone will shift somewhat and even a slight change downward could mean the difference between a great and a poor credit score. This shift could ultimately cost a consumer hundreds of dollars a month on a mortgage. Experts say that women are more likely to be ill effected as they are often "authorized users" on their husband's credit cards. The shift would bring down the average score of a couple seeking a loan, hurting their chances of qualifying for one they can afford. All that said, legal experts predict a civil action lawsuit on the horizon for Fair Isaac. Not ignorant of this possibility, it is unlikely that they would be willing to risk great financial risk and negative press over a software program, especially if it fails to benefit all three credit bureaus.

In addition to these reasons, the fact that none of the credit agencies have yet to implement the system, leads market experts to agree that it simply may not happen. Despite what the critics have to say about the acceptance of trade lines and Fair Isaac's full-fledged marketing campaign to confuse and mislead the public to think the loophole has closed, the remains open. So where does that leave us as a business restoring hope to financially troubled families? Where does this leave you as a consumer trying to keep your home? Trade lines are still the best and fastest method to boost your credit score in 30-45 days, refinance, keep your home and experience financial stability.

Ted Stearns, owner of TradeLine Solutions, a San Diego based credit aide company, is not a newcomer to the world of finance. His experience began as an options and futures broker with Currency Trading International about 12 years ago. Since then he has been a financial advisor who hosted a live radio show on AM 1000 KCEO for four years, educating callers and listeners on stocks, bonds and various investments. Over the last five years he has delved into the nationwide mortgage business informing both clients and lenders alike in the arena of purchasing and refinancing.

With all former experience as his guide, he has come into the world of trade lines to help clients better their financial situation. Able to glean from the perspective of both lender and client, he has the unique ability to see the need of the purchaser and meet it head on.

Lower-Priced, Higher-Mileage Used Cars Still Diamond in Rough

By Richard Greene, AR NewsMagazine Editor February 07, 2008

ATLANTA — As the general economy continues to erode, Manheim's chief economist did find a significant bright spot that has major implications for used-car operations. The demand for lower-priced, higher-mileage units presently remains strong, Tom Webb pointed out in his monthly market evaluation. "Despite the overall softness in the market, lower-priced units (less than $5,000) showed no significant weakening of pricing, even with considerably higher volumes being offered," Webb explained. "Some of this strength extended up into the subprime repossession and end-of-service commercial fleet markets, which generally have average transactions prices in the $7,000 to $8,000 range," he added.

But for the most part, Webb's analysis of market conditions was rather bleak. Reflecting reduced floor traffic, lower closing rate and tighter retail financing market experienced by most dealers, wholesale used vehicle prices fell for the fourth consecutive month in January, according to Webb. The prices are on a mix, mileage and seasonally adjusted basis, he indicated. Webb reported that the Manheim Used Vehicle Value Index reading registered at 109.1 for the month, which he said represented a 3.7-percent decrease from the prior January. "Although incentive activity rose in January, and looks to increase again in February, aggregate new-vehicle inventory counts remain low," he noted. Webb pointed to several overarching economic concerns in his monthly report.

— The labor market weakened further. "Initial jobless claims surged in late January and non-farm payrolls posted their first monthly decline since August of 2003," Webb said. "Signs suggest that job growth will remain soft, at best, for several months."

— Credit conditions tightened. "It is nigh impossible to get healthy job gains as long as the credit markets continue to restrict availability," Webb explained. "Rates don't matter if it only means being turned down for a 5-percent loan rather than being turned down for 7-percent loan." Webb noted that the Federal Reserve Board's Survey of Senior Loan Officers in January revealed that more than half of all banks have tightened credit standards for prime mortgages and that more then three-fourths have tightened for non-traditional or subprime mortgages. "The net percentage of banks raising standards for consumer installment loans increased to one-third, up from one-fourth in the October survey," he said. "It was the highest percentage of banks reporting tighter consumer credit standards in more than a decade. And the tightening has also extended to commercial loans."

— New vehicle sales dropped in January, as did inventory levels. "Although the seasonally adjusted annual rate of new-vehicle sales slipped to just 15.2 million in January, production cuts continued to whittle at inventory levels," Webb observed. "Although incentive activity did (and will continue to) increase, low inventory counts mean that manufacturers have been able to target monies to specific models and/or regions of the country. "As such, the negative impact on late-model used vehicle residuals has also been selective," he added.

— All market classes of used vehicles register year-over-year price declines. "SUVs, pickups and sports cars are down the most (more than 5 percent), while compact and midsize cars are down the least (less than 2.5 percent," Webb said.