Take Time to Talk to Your Customers

I've just returned from 2 weeks working with a client dealership to get their Special Finance efforts off the ground. To say it's been a challenge would be an understatement! Yeah, times are tough, lenders are tight, new vehicle sales are way down, and the used car market is all over the place. Some dealerships are sitting heavy in full size SUV's and pickups, and auction prices are sky high on economical units that are, with $4 a gallon gas, the most desirable.

Despite all that, credit challenged customers still need loans, and the vehicles that go with them. The problem, to me, seems that, while market conditions have changed dramatically, the way business is done still remains the same.

Sales people will always be sales people...motivated to make the sale, and the associated commission. To many sales people, it's a numbers game. The more folks you talk to, the better the chance you'll make a sale. Take more "ups", and sooner or later, you'll find a buyer.

Most dealerships boast of a 20% closing ratio, so the old "more is better" philosophy takes over and we find ways to flood a showroom with customers, figuring that somewhere in the crowd there's got to be a buyer or two. If we can bring in 100 folks, the numbers say we'll sell 20 units.

Truth seems to be that, if only 20 of those folks want to buy, and as NADA says, 3 out of 5 of those customers have some kind of credit problem, unless your sales staff can spot it early enough in the process, you spend a lot of time selling vehicles to folks who can't buy, even though they want to! When you finally discover this, they've already committed to buying the unit they selected while they were out on the lot with the sales rep, and unfortunately, the lenders won't qualify them for that unit.

Take some time to sit down and talk with your customers. We used to call this the "Discovery" or "Qualifying" stage of the sales process. Ask your customer for permission to sit down and gather some information about them and what they came in for. Ask them about their previous car buying experience. If it was good, why didn't they go back to the last dealership they bought from. If it was a bad experience, ask what happened. You'll probably here some horror stories about your competitors, some of which will scare the heck out of you. So far this week, I've heard tales of bait and switch, straw purchases, and possible fraud, from customers that were, to say the least, a bit upset with the last dealership they bought from.

I've also seen customers put onto $38,000 new vehicles who were no where near able to purchase such a unit. Even though the customer said they had previous financed a vehicle with a prime lender, no one bothered to ask if things had changed in her life recently. Then there was the guy who pulled up in a 24 year old car with the windows down on a 98 degree day, that tried to buy the 2003 Hummer!

It all comes down to this simple concept. Talk to your customers before you walk them out to the lot. The more your customers talks, the more you'll find out information that will help you control the process and move it in the right direction - good credit customers to the lot, and credit challenged customers to the finance office.

Look at it this way. If this helps you sell just 1 more unit a week, how much will that mean to you at the end of the month? Sounds to me like money in YOUR pocket!

Good News, Bad News

According to Insure.com, smaller cars may mean bigger insurance premiums for customers. Although smaller, more fuel efficient vehicles may be more desirable by customers, the premium price they may command along with higher insurance premiums may make this choice of vehicle a poor one for subprime customers.

Knowing that insurance companies often use credit reports as one factor in determining the premium they charge a customer, subprime customers may face higher premiums regardless of the vehicle they buy. Now add the higher premium for smaller vehicles, and now you have the double whammy!

Recently, Insure.com wrote "Small cars tend to increase insurance costs because they get into more crashes," says Russ Rader, a spokesman for the Insurance Institute for Highway Safety. "There's a myth that a smaller car is more nimble and helps you avoid crashes, but smaller cars tend to have more collision losses."Of course, it's not the cars causing the accidents -- it's the people behind the wheel.

"Part of the reason is the driver," Rader says. "Smaller cars tend to be less expensive and driven by younger, higher-risk drivers. And they think they can zip around in traffic."
When auto insurers see more-frequent and more-expensive claims attached to certain vehicles, they rate policies for those vehicles accordingly. Thus if you buy a smaller car that has a history of high insurance losses, you're essentially paying for the blunders of other drivers of that vehicle model. "

Make sure that insurance premiums don't kill a deal for your customers. Be sure to discuss insurance, and have them check the premium BEFORE you contract them. There's nothing worse than having to unwind a deal because your customer can't get or afford insurance.

I Need Your Help to Figure Out the What Are the "Best" Subprime Vehicles

I'm trying to compile a list of the best vehicles for Subprime. I'm looking to find out which cars, trucks, SUV's, minivans or crossovers tend to be the most popular for special finance customers, as well as which tend to be the most profitable for special finance dealers.

Please put together a list of your top 10 selling vehicles and email it to subprimecoach@hotmail.com. Submit your lists no later than July 20th, 2008, and I'll compile the results and publish them here, plus, I'll personally email everyone who responds a copy of the final list. Make sure to include your name, the dealership you represent, the location (city and state) and your position there.

Thanks for your help.

Nine In 10 People Expect Ballooning Costs To Squeeze Them Financially

A recent AP/Yahoo News poll found 9 out of 10 respondents worried about how rising gas prices will effect them. Many are already cutting back on other expenses to cover the increase in the cost of a fill up. While some have gone to more economical vehicles, others are cutting back in other areas as well, switching to cheaper alternatives, or in some cases, foregoing additional expenses like summer vacations.

What was interesting in this poll was that it appears that all segments of the population are worried about their economics, and what's in store for them.

According to Alan Fram of the Associated Press, 47% of those surveyed expect higher gas costs to cause serious hardship. " Lower-income people are bearing the brunt of it. As higher prices push grocery, pizza delivery and other costs upward, just over half of those without college degrees – and about the same percentage of those earning less than $50,000 a year – are expecting serious personal financial problems to result."

Fram writes that "... significant numbers of the better-off are feeling pain, too. Four in 10 people in families earning $50,000 to $100,000 annually, and one in six earning more than that, expect serious financial hardships from rising gas costs, as do one in three college graduates...Two-thirds of those earning under $25,000 a year are cooling and heating their homes less, as are nearly six in 10 people earning more than $100,000. Just over four in 10 of the lowest earners are cutting vacation spending – only slightly likelier than those earning at least six figures to do so."