Another One Bites The Dust

The following notice was posted on Triad Financial’s website last week

IMPORTANT DEALER NOTICE

Effective May 23, Triad Financial Corporation will cease all lending operations for its Indirect Dealer Channel. Conditions in the financial markets have been extraordinarily unstable, and have hindered our ability to adequately and cost-effectively fund future business through traditional methods, including asset-backed securitizations.

Triad has served the dealer community for more than 18 years, and values the relationships we have enjoyed with you and the customers we share. We will no longer accept new applications as of 5 p.m. today.

Triad will, however, honor existing approvals and fund eligible contracts forwarded to us through June 23. Triad will continue to operate and fund loans in its Direct-Lending Channel, RoadLoans.

On behalf of our fine team of lending professionals in our Credit & Funding Center in North Richland Hills, Texas and our highly dedicated Sales team across the United States, we would like to thank you for your business. We value the support you have shown us over the past 18 years and wish you future success.

It seems like the handwriting on the wall is becoming clearer, and not only is it getting tougher for consumers to get a loan. It’s getting tougher for the lenders to securitize their portfolios to get money to fund new deals. As the marketplace tightens up on all sides, everyone is going to take a long, hard look at the business they are in.

Lenders are going to take a long hard look at the business they get from their dealers, and how that business performs over time. Dealers that provide a good mix of business which performs at an expected level will continue to enjoy the relationships they have with lenders they deal with. Marginal deals, and dealers that provide them, will become tougher to find a home, as lenders consider whether that dealership should remain a part of their “team”.

Now, more than ever, it is critical to know how your lenders look at your dealership. What is the value your dealership has to a lender? Are you a winner or a whiner; do you work your customer and then the lender, or do you try and break a lender’s back before you even try to close a customer.

When lenders find it harder to secure funding, it all flows downhill. Until the markets rebound, and investors see the opportunity in these deeper lender portfolios, it’s going to harder on everyone involved. The days of “EZ Credit” are long gone, and customers need to realize that credit id a privilege, not an entitlement. Educate your customer on the process, what’s involved and how it works. Help them understand that it’s a different game now. You may be able to get them approved for a loan; it’s up to them to determine whether or not they can live with the terms and conditions of the approval!

It's Finally Happened...Now I've Heard It All!

“Guns and Gas”Multi-line new car dealer in Butler MO gets a lot of free publicity with controversial promotion

DealersEdge Daily Headlines (5/22/2008)

Buyers of new vehicles can choose between a $250 gas card or a semi-automatic hand gun. So far 80% opt for the gun.Max Motors in Butler Missouri is a GM, Ford and Chrysler dealer offering a wide variety of new vehicle brands. The “Guns and Gas” promotion is getting him a lot of free publicity and runs through May 31.

This story is getting a lot of play on local Kansas City news stations and newspapers and also has resulted in an Associated Press report. There was no indication in any of the news reports of how successful the stunt was in producing new vehicle sales, but it certainly has been successful in putting this small-town dealer on the map. Butler is a town of about 4,200 and lies about 30 miles south of Kansas City.

The Max Motors Web site trumpets the promotion with a cartoon character holding a pistol in one hand and a gas pump nozzle in the other. Under the banner- “FREE Handgun* or Gas Card with Every Purchase” comes the sub-head reading - “We are aware of the gasoline and crime problem in America. Max Motors, the Country Dealer wants to be part of the solution and not part of the problem.” The “*” spells out that the dealership will issue a coupon with which the customer can claim their pistol after going through the necessary background checks.

Some of the more colorful quotes appearing include: “I’m telling them to get the semiautomatic because it holds more rounds,” said the dealership’s general manager Walter Moore. (from KansasCity.com) or – “Just a nice small little gun,” said dealer Steve Priest. (from a report filed by WCSH) Also from the WCSH report Moore is quoted as saying, “You’ve got car-jackings. You got innocent people being shot and killed. I figure it’s time for people to protect themselves.”

In a televised video report a representative from Max Motors commented that everyone around Butler carries guns and that when they appraise trade-ins it is not unusual at all to find multiple guns in the vehicle.

There was no mention of Chrysler’s guaranteed $2.99 gas promotion or whether or not this was the inspiration for the “Guns and Gas” promotion.

I wonder...Maybe they're planning on using their new gun to hold up a gas station!

Special Finance Dealer Survey

I've added a link on the top right side of this page to a short survey. Please take a moment to click on the link and complete this 4 question survey regarding what is happening at your dealership today. Once we have the answers compiles, I will publish our findings, a try and give you all a better idea of what is going on in dealerships around the country TODAY!

We all know that the landscape for Special Finance has changed dramatically since January 1. The market is tougher, lenders are tighter, and customers are facing more challenges than ever. Take a moment to let me know what you think is happeneing at your dealership so we can help each other SURVIVE & THRIVE through these tough times. Thanks.

Two Bulls

by David Preston
www.zenfinance.ca

The advertisement says “ One months profit in just four days!” How can any dealer say no to that! Imagine, 4 days to the promised land. Clean, no mess, no hassle just profit! Well if that is the case, its obvious that dealerships have missed the boat for many years then. Imagine, staying open six days a week, all month long! Hell, they could have picked 4 days a month to be open and been done with that annoying nuisance called work, and spent more time on the golf course!

Ok enough with the sarcasm you say. True, these “staffed slammer sales” do quite a bit of volume, and move some older units for the dealerships, but at what cost to your special finance department?

Assuming you have a well run efficient special finance office, you should be able to keep the fallout to a minimum if not zero. The way to do that is by having YOUR special finance manager be kept in the loop on all deals during the event. Remember, at the end of the day, when the big top is taken down and the clowns have left, it is YOUR reputation on the line. Not just the reputation that you hold so highly with your customers, but also with the lenders.

Chances are, if your sub prime department is running as it should be your special finance manager has built a solid reputation with the lenders. The kind of reputation that takes years to develop and only one deal to destroy. Its that reputation that will probably be the reason some of the “tough” deals during the sale were approved and delivered. I'm sure most would agree that damaging that reputation in order to move a few extra units over a one week period is not worth it. I'm not saying all staffed companies are going to jeopardize your store's reputation, but erring on the side of caution in this regard, will always prove to be the correct choice.

Tips to stay safe:

1- Know each and every deal that is being presented. This doesn't mean hover behind the event's finance manager watching every key stroke. But spot check from time to time as the sale goes on.

2-Try and meet each customer to ensure they were satisfied with there experience at “YOUR” store. Ask them question about the transaction and ensure that promises made can be kept. Remember, once the sales company leaves its YOUR promise.

3-Let the sales team know what will not be acceptable when it comes to paper work, deal submissions and promises made.

4- Make sure that you are dealing with a reputable company that has a good track record and consistent repeat business with other dealerships.

5- Remember the story of the two bulls standing on the hill. The little bull looked up at his dad and said “lets run down there and get us one of them cows pa!” The big bull looked down at his son and shook his head. “No son, lets walk down, and get them all!”

...however, this is just my opinion and I could be wrong. After all, I'm just the finance guy.

Fishing Season? I Don't Think So!

I read a comment by Peter Salinas in the Dealer Business Journal, May 2008 that rings true to me: “Not many thought the national credit woes affecting subprime mortgage industry would come to so dramatically affect the subprime used-vehicle business as much as it has.”

Do you agree? Are you surprised as well? What to do…? What can we do – we have to act. Now is the time to manage our business better. How can we make the most of every opportunity in this changing market?Start by putting up the “No Fishing” sign in the F&I department. Stop fishing for approvals that fit the customer. Get approvals and let the customer decide if it works for them. It is up to the customer to decide which options work for them. You limit opportunities by spending so much time and effort “fishing” for the "magic" approval (the one the customer will sign on the dotted line). Keep before you the fact that 100% of the customers who don't get the opportunity to buy, can't! If the customer never gets the chance to decide whether t hey can meet the terms and conditions of a lender’s approval, regardless of whether it was what that customer originally hoped for, it is impossible to know whether or not they can. Let them find a way to meet the terms of the approval. "Get money down or a co-signer" is the common response from the sales desk, and with those words, the customer leaves and goes down the street to a competitor that gives them the "opportunity to buy". Now is the time to seize these occasions to educate the customer and help him or her to adjust expectations. Take the time to walk them through the reasons for the terms offered and help them to see how to make it work. You need to spend more time consulting your customers in this tight credit market.

Today lenders scrutinize the business they are doing and, as a result, those little green check marks on DealerTrack and Route One are popping up less frequently. You must familiarize yourself with the lenders and their programs. If you don’t know your lenders, you won’t know what they will say “yes!” to. Loan applications receive more scrutiny than ever before. Are you in the habit of throwing deals against the wall? Results will be predictable. The good finance managers know each lender and the kind of deals they approve.

Have you looked at the process from your lender’s perspective? It costs a lender money when a dealership sends them a deal that won’t work in their program. Build a relationship by knowing and partnering with the lenders who handle the paper in each tier of credit. Knowledge of what they look for will position your dealership for better success at approvals.

While considering a lender’s perspective, demonstrate appreciation for they do by sending some of the better customers along with some of the more challenging deals. Say thank you tangibly – send lunch in, send some cookies or gift baskets. Your investment into the relationship will pay off in a workable partnership.

The market is tough right now. Adjust your expectations and do things differently. You may not be able to hit the home run every time. So what should you do? Move the cars when you can! You may have to take the occasional short deal or move an old-aged unit. Cultivate better business habits while persevering and you will see results.

Myths and Misunderstanding of "Car Dealer Thinking"

How did the car business become so concerned with cost per sale that it mises total available profit?

There used to be some wisdom n the age old axiom of measuring the cost of advertising per vehicle sold. However do we keep the same scorecard on our newspaper, print or electronic media (TV/Radio)? Today, with some of the tools that track phone numbers , it is possible to narrow down some of this, but how often does a dealership base their numbers on the sales force reporting back the answer to the question; “How did you hear about us?”

Until recently this would have accepted this as “normal practice”, however after recent discussions internally and with a few dealers have led to an adjustment of the paradigm.

Observation I: Putting all of the available advertising eggs into the Internet may not be the best move. According to the Cobalt Study of Dealerships for 2007, while 83% of car shoppers used the Internet to research vehicles and 79% used search engines to research dealerships, just over half (55%) of the leads a dealership receives convert into sales. The study went on to say that 90% of these customers made a deal at a dealership other than the one it was originally sent to, and 30% of the leads went unanswered!

Action Step: Have you ever “Googled” your dealership? Does the dealership name appear on consumer websites like the Ripoff Report? If a dealership is depending on the internet to fill the showroom with customers who intend to purchase a vehicle from that dealership, this may be leading to a false sense of reality.

Observation II: Is the information from the sales force is accurate regarding the marketing questions they ask? For example, unless the only marketing done is newspaper or the customer carries the paper in the door, is it possible to know if they came as a result of the newspaper? Salespeople are interested in selling cars and cashing checks, so maybe next month’s ad budget shouldn’t be based on their responses?

Action Step: Review the dealership’s advertising and see how to can add accountability to the marketing efforts being undertaken through separate 800#’s, the use of live operator call centers etc. Get verifiable email addresses from potential purchasers and customers and survey them regularly about the dealership’s ads and offerings. Consider using blind advertising as a method to increase special finance efforts.

Observation III: “Car Think” math does not always produce the right answer. Take a look at a dealership that utilized two types of lead sources with, what appear to be, widely varying results:

Traditional “Car Think” math would seem to indicate that $428 vs. $1400 cost per vehicle is a no-brainer. However if one source produces 58% higher gross profit per unit, despite the higher initial cost, maybe the math is flawed. An additional $23,500 more net profit would seem to be a more desirable result, especially if this result is consistent, month after month. The question that comes to mind is whether the goal here is to increase gross profit or produced a perceived reduction of costs? Is this a quick fix or long term plans?

Is it the cost or price of a marketing effort that a dealer should have concerns with? Price is the fee per lead; cost is something that takes into consideration time, effort, results etc. So, in order to effective measure the results of any marketing effort a dealership undertakes, measure the overall cost as well as the price of every vendor and provider you deal with. If each month in the automobile business stands on its own, then it makes sense to capitalize on money spent in previous months. Make the results of any marketing effort carry over from month to month, and the dealership can enjoy sales generated by marketing dollars that were spent in previous months.

Dealerships that succeed and thrive in this turbulent time look a little deeper to find all the information necessary to make smart marketing decisions. At the end of the day, the business of selling automobiles is much more complex than it seems to those people outside of our business. Don’t get caught relying too quickly on facts and responses that are not complete or accurate

Here We Go Again!

AG Settles in Case of Deceptive Advertising

May 6, 2008 Attorney General's Office

NEWS RELEASE May 6, 2008 Jim McKenna, AAG (207) 626-8842 David Loughran, (207) 626-8577

Attorney General Steve Rowe announced today that the State has entered into a Consent Decree with Level 10 Marketing, Inc., a New Orleans corporation, and Newcastle Chrysler Dodge Jeep of Newcastle Maine. The Consent Decree, which was signed by Kennebec County Superior Court, prohibits the two companies from using unfair and deceptive advertisements or practices such as sales “vouchers” which appear to promise “$4,000 Instant Savings” when in fact such savings are not realized. Further, neither Level 10 nor Newcastle Chrysler can use promises of significant savings unless such savings can be documented, including the following:
• “Will be sacrificed for pennies on the dollar;”
• “Save up to 90% off original M.S.R.P.;”
• “Prices will be slashed for immediate liquidation;”
• “Wholesale pricing direct to the public.”

“As part of this Consent Decree, 22 consumers who purchased vehicles at the sale will each receive a refund of $550,” Rowe said.

The Attorney General’s Consumer Protection Division investigated the purchases made at the Level 10/Newcastle Chrysler sale held November 14 through November 18, 2006. It found that consumers did not receive the promised savings. “During this sale, many consumers paid non-sale prices despite promises of ‘wholesale prices’ that had allegedly been ‘slashed for immediate liquidation’” Attorney General Rowe said.

Level 10 designed the advertising flyer that was sent out in Newcastle Chrysler’s name and it also arranged for a team of salespeople to travel to Maine to deal with potential customers during the November, 2006 “sale”.

Both Level 10 and Newcastle Chrysler are now subject to a Court order that prohibits such deceptive advertising techniques in the future. Neither company admitted to any wrongdoing. Pursuant to the Court Order, both Newcastle and Level 10 must pay a civil penalty of $6,250 and refund to consumers part of the purchase price.

I am truly amazed each and every time I get one of these notices in my email. Maybe I was absent that day in Business Ethics class, when the professor spoke about good business pracitces that lead to good business. Time and time again I read about shady practices by out of state companies that come in and promise extraordinary results in a short period of time. The "staffed event" held at this dealership may not be much different than what goes on at many others; the only difference is this time, someone complained that they were misled. While we don't know how may units were sold during this "sale", nor do we know how much profit was made by the dealerhsip and the marketing comany, I do know this much - the bad press this event generated will more than likely have a negative value that far exceeds any profits made.

I've said it before, and I'll repeat myself over and over again. Before you invest money in a marketing campaign, do some research of you own. Google the company's name, check Ripoff Report.com, do your own investigating and don't rely on references the company you're planning to hire sends you. After all, who do you think you think they're going to want you to talk to?

How’s Your Vital Signs?

When you visit a doctor’s office, after they get your name and your co-payment, you’re typically ushered into one exam room. A few minutes later (hopefully it’s only a few minutes), a nurse comes in and gets some basic information. She checks your pulse, temperature, blood pressure, and asks if there have been any changes in medications recently.

This assessment of your vital signs tells your doctor if there is any problem that needs immediate attention. Sometimes, even subtle changes can be indicative of something that needs further examination. Hopefully, early detection prevents anything more serious from developing.

Is it time for you to check the vital signs of your dealership? When was the last time you took a good, hard constructive look at what’s happening and make some changes to prevent more serious conditions from developing?

Many times, the most obvious vital sign that shows a problem is declining number of sold units. Lately, this is probably becoming more epidemic in dealerships than we would all like, and unfortunately, there’s no vaccine that can prevent it in a down economy. A side effect of this can be a decline in the average gross profit per sale, as dealerships look to move more units, at any cost, in a n effort to cut inventories. Manufacturers may throw incentives and rebates on slow moving units, like a vitamin shot, to help dealers feel better, for a short period of time. But, as well all know, a vitamin has little effect if only taken once,

Dealer that thrive and survive in down times know how to adapt to a changing market. They’re proactive on their approach to tough times. Many dealers reduce advertising expenditures and look for “cheaper” sources to invest their advertising dollars. Others eliminate advertising all together, figuring the same they sell the same number of units whether they advertise or not.

.In tough times, when dollars are short, spending money haphazardly is not something any of us want to do. We look at each purchase we make to insure we get the most for our money. Marketing efforts for dealerships are not different.

Recently, I met with a client who wanted to know how many customers had come into his dealership as a result of the direct mail we were doing for him. His concern was that, for the money he was spending, he didn’t feel he was getting enough “bodies walking through the door”. When I asked him how many of the customers that had responded to our mailing his dealership had sold and how much profit he had made on these sales, he said he didn’t know, but that was not as important to him as knowing how many customers had actually come in.

The response rate in his dealership was one of the highest we had seen, yet the return on investment was something this dealership did not know. Isn’t that the most vital sign of any marketing campaign? Knowing not only how much it cost, but how much profit a marketing campaign produces, how many units and at what average gross profit each produces is the most vital statistic available. It shows the “health” of your marketing efforts, and indicates where limited dollars can be best spent to produce maximum profits. After all, anyone can sell you cheap leads, but as we all heard, “You get what you pay for!”

Look carefully at what you’re spending your marketing dollars on these days. Check the “vital signs” of each marketing sources you use, and determine which ones a providing long term “healthy” benefits to your dealership, and which ones may be “snake oil” promising quick relief, but no real growth for your dealership. To grow business these days, it going to take more than a quick fix; it’s going to take a careful analysis of what can produce the ongoing results we all want, more sales and more profits!