New FICO Score to be More Understanding

Consumers caught in the subprime mortgage crisis may find some relief with Fair Isaac’s new FICO 08. Aside from providing a more accurate risk assessment of consumer credit, the new formula also aims to reward customers for keep other credit accounts up to date.

“The main thing we tried to do with the score was to make sure it was in tune with current consumer behaviors,” said Fair Isaac’s Craig Watts. “We changed the formula to improve the predictiveness.”
The new formula takes into account consumer credit behaviors in all credit areas rather than focusing on accounts that have gone delinquent. Now, consumers who’ve fallen behind on one account could be rewarded for remaining in good standing with other credit accounts.

“If a person has a repossession or foreclosure on their credit score today, that casts a shadow over everything else. They are scored along with other people with serious delinquencies,” explained Watts. “But this new formula looks at not just serious delinquencies, but also at whether consumers have other accounts with positive credit histories. The consumer’s score is not penalized as much for serious delinquencies that are uncommon to his or her credit behavior.”

Although a consumer’s credit standing will vary from lender to lender, the new formula may present more opportunities for F&I managers to get consumer loans bought.

“Our expectation is that lenders will reduce the amounts of defaults on loans by 5 to 15 percent in certain demographic groups. It really helps with consumers who already have serious credit problems, those who are new to credit and those who are seeking credit.”

Making Lemon Aid from Lemons

Everyone that has anything to say about Special Finance all agree on at least one thing. No matter how many cars or how much profit they make, it’s never enough. For the amount of effort required, Special Finance Departments are always expected to do better than they do, yet nobody seems to be able to pinpoint the short comings. They point fingers at the Used Car Manager (“The inventory stinks!”), the Special Finance Manager (“He can’t get a deal bought!”}, the Salespeople (“They can’t qualify a customer!”), the Sales Desk (“They can’t work a deal right!”) or the BDC (The leads they get stink!”).

Sound familiar? Some if not all of those comments are probably heard at your dealership’s Manager’s Meetings on a regular basis. So what can be done about it? Either let the war go on, with each department trying to blame the other, or call a truce and find a solution.

Regardless of the source, your dealership’s leads are only as good as you make them. The main reason that leads don’t produce appointments for a dealership is nobody has really worked them. What typically happens is whoever is making your dealership’s calls attempts to contact the lead once or twice. After getting no response, they assume the lead is dead, and it’s filed away in the no-sale category. Let’s analyze this for a moment.

Who does your dealership have making these calls? If your dealership has a BDC, there is no reason for this lead to be filed away and forgotten. The BDC’s primary responsibility is to make contact with your leads and/or customers. They should continue attempting to contact until either the customer buys a vehicle from your dealership or specifically asks not to be contacted again. If your dealership has a specific person making these calls, be sure the process is the same. Your dealership has only two types of customers – those that buy and those that don’t!

The secret to phone success is perseverance. Continue to call until someone actually reaches the customer. Make the initial contact, set the appointment and sell the process. Sell the concept of rebuilding the customer’s credit. “Sell a loan and get a car”. Continually leaving messages accomplishes nothing. Stagger the calls, so you do not try to reach them at the same time each day. The mission is to secure an appointment. If the initial contact is say, Monday at 1PM, and there is no answer, call back during the next day at 3PM. Work in two hour intervals. Why call back the next day at the same time? Follow up on Monday at 4pm as well as Tuesday at 6PM. Use this 2 hour stagger arrangement for the next two weeks until this lead is contacted and an appointment is made. In the meantime, be sure to send a follow-up letter this lead, which at least lets them know your dealership received their inquiry and have been trying to contact them.

If customers are not being worked properly, then it’s time to rethink your entire process. Too often it seems that a dealership is missing out on the special finance business in their market while the dealership down the street is doing extraordinarily well. The reason more often that not revolves around the process the dealership employs. The sales desk gets the prospect first and the desk and the salesman work the deal like a primary customer, only to find out after the deal is made that the customer has credit issues. Special finance customers must be worked backwards from a regular customer. Keep the customer focused on the credit issue and away from an inventory issue. Teach the sales force how to properly qualify a customer. Make sure that all special finance appointments come in asking for a manager who is already expecting them. Doing this helps upfront to know how to deal with a customer when they first come in to your dealership. Make sure the sales force knows to refer these people directly to the proper people or all is lost again.

Speaking of salespeople, make sure to properly train the sales force on how to deal with a special finance customer. Consistently successful dealerships know that these customers need to be work backwards. The first order of business is to assess their credit issues. Find out exactly what their situation is and work the deal accordingly. Keep the customer focused on the credit rebuilding process and away from the inventory. This will close a lot more deals.

Inventory is always an issue but should never prevent your dealership from making a deal. If the used car inventory is not properly aligned for Special Finance, there are two choices: pass on every deal because there isn’t enough profit on that particular vehicle or deliver a car, make the most profit on that particular deal, reduce your used car inventory by one, and go on to the next deal. As my dad used to say, “It’s just a hunk of steel that needs to go away.” Get it off the lot and get another one to replace it. It’s not like there aren’t any more used cars to go around.

More importantly, is the Used Car Manager up to speed on what he needs to buy. Does anybody let him know what inventory is preferred by the special finance lenders your dealership uses, or what vehicles tend to do the best with special finance customers? To get the best inventory, everyone needs to be on the same page. Communication is always the key.

If the problem is getting deals bought, the question is “Who is working these deals?” Are the sales desk or primary F&I manager working the deals? If there are problems getting deals hung, consider splitting the primary and special finance departments. A dedicated department focusing solely on special finance can rehash deals more efficiently, as well as having someone who knows the lenders and how to structure a deal accordingly. Remember that anybody can deliver a vehicle; the real talent lies in getting the deal funded quickly and without any deductions.

Things are never as bleak as they seem to be. No matter how bad things may look, with a little bit of cooperation, success is within your dealership’s reach. Stop the finger pointing and get everyone moving in the same direction. Soon your dealership’s special finance efforts will be everything you hope for and more

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

The quality of direct mail leads hasn't changed. It's the circumstances these people face that is different

The subprime mortgage crisis effects the the people we mail to. Many of them are "victims" of these subprime mortgage loans and are unsure of what their mortgage payment will be when their rate goes up!

These are the same people that were banking on the equity in their home continuing to rise. Many took out equity lines or second mortgages and now don't have the equity left to support these loans.

The housing market is down, and many of the people who work in it are feeling the pain. The construction worker, carpenter, framer, electrician, plumber, etc. all were riding high when the new housing market was in full swing. Now, many of them, if they are still employed, have gone from 70-80 hour weeks making big overtime to 40 or less hours a week with no overtime. Income is way off, so many of them don't have down payments available.

Most special finance guys would walk away from this market because it's too hard to do the business. But then again, we're not most "special finance guys", are we?

Don't Sell Like You Buy

By Keith Rosen, MCC The Executive Sales Coach™

I was almost at the end of the keynote I was delivering to an audience of Internet service providers in Tampa, Florida. As I brought the program to its natural conclusion, I let the audience know that I would open the floor to answer any questions that they may have.

Several hands went up. The third person I called on made a statement, not a question.

“Keith, that sounds too sales-y. I could never do that with a prospect.” He was referring to the four qualifying questions that I claimed are guaranteed to bring in more sales when meeting with a prospect.

“Sounds too sales-y?” I wanted to confirm I heard him correctly. I responded to this gentleman with a question. “To whom?” I wondered.

“To me!” the gentleman replied. “Those questions that you suggest we ask every prospect sound way too sales-y to me. There’s no way that would work with my prospects.” (Said a different way: “There’s no way I could ask those questions. I’m scared!”)

“Well, I can certainly appreciate the fact that these questions may sound a bit different or as you say, ‘sales-y,’ to you, especially if you don’t ask the prospect any questions. But what about your prospects? How do they sound to them?”

“Huh?”

“When you ask these questions to your prospect, do they tell you that it sounds ‘sales-y’ to them?” I clarified.

“Sure.”

“Really? Is that what they told you?”

“Not exactly,” the person said and then continued with, “I really don’t know. I’ve never used these questions before.”

“So if you did use these questions, you’re assuming that they will come across as sales-y or unfavorable to your prospects, is that what you’re saying?”

“Yes.”

I thanked this person for their comments and clarification and then asked the entire audience how many people felt similarly. That is, I asked if those of them who had never taken the time to ask the questions felt that it wouldn’t be something that worked for them. A majority of hands went up.

I then asked a question to the audience. “How many people have heard of the Sahara Desert?” Most of the hands in the audience went up. I then asked, “How many people here have actually had the firsthand experience of visiting the Sahara Desert?” No one’s hand went up.

“So, then, how do you know it even exists?”

Silence. I then continued, “If you’ve never experienced it, then how do you know it’s real? Just like the questions I suggest: If you’ve never used these questions, then you really have no idea whether or not they will work or how they will be received by your prospects.”

I was building my case. I then turned to the audience and said, “Do not sell the way you buy.”
Now, you may feel at this point that I’m contradicting some universal selling principles. After all, conventional sales wisdom suggests how important it is to empathize and sympathize with your prospects and clients.

However, there’s a very fine line between understanding and respecting someone’s decision-making process and assuming that everyone makes a purchasing decision in the same manner, using the same criteria that you do. Moreover, it is a faulty assumption that your prospects respond similarly to the type of sales approach and the type of salesperson to whom you would respond and from whom you would buy.

I then shared a personal example of the dangers of selling like you buy. “Folks, if I sold in the same manner in which I make a purchase, and if I in turn transferred those values and beliefs onto each prospect that I speak with, then I could tell you with great certainty that I would not be up here talking with you today.

“Reason being, when I make a purchase of any substantial amount, I take the time to research my options and to learn about the different products or services available. By the time I’m ready to actually make the purchase — whether it’s something for my home, a television, a car, or a computer — more often than not, I will know more about the product, the competition, and the marketplace than the person who is attempting to sell it to me.

“My point is, if I started selling the way in which I make a purchasing decision, I am now putting my values, thought processes, and beliefs on the customer; I’m assuming that they purchase the same or in a similar way that I do. The result? More objections, less sales.

“Besides, what if I was talking with an impulsive or assertive prospect who was ready to buy immediately? I would be talking myself right out of the sale!”

“Let’s defuse a costly myth. The old adage of putting yourself in their shoes is really a costly assumption that destroys many a selling opportunity. Why? Because when you ‘look through their eyes’ or attempt to see things how you assume they see them, it is still really what you see, not what they see.

“The result? You develop a sales process based on how you think they buy rather than how they actually make a decision. Why? Because how you think they buy is really how you buy.

“If you truly want to wear their shoes, then you need to know how they think and what is important to them. Therefore, the only way to uncover how the prospect processes information, how he or she makes a purchasing decision, and what criteria he or she uses to do so is to ask better questions.
“Now, let’s take this same ineffective model of ‘sell like you buy’ and turn it around for a moment. If this belief in selling like you buy gets in the way of taking certain actions or of asking certain questions when on a sales call, then you must ask yourself what else you do or say, which you think safe, that is inappropriate or discomforting to your prospects.

The lesson: Don’t believe everything you sell or tell yourself.

Salespeople who sell in the same manner in which they buy are sure to have a lower number of satisfied clients.

Sell in the manner in which you were trained to sell and stick with the proven selling sequence that works for you and within your industry or profession. You cannot expect prospects to purchase in the same manner as you do.

If you sell in the same manner as you buy, you are instilling your beliefs onto other people. Since every person’s beliefs and buying habits are different, every prospect processes information differently. What is important to one person may not be important to another. Therefore, two presentations should never be exactly the same.

While one prospect might weigh company stability and the quality or value of the product as the most important aspect in making their decision, another prospect might weigh price as the most important factor.

Learn to adapt your presentation around the values of each specific prospect. In the end, people make purchasing decisions based on their style of buying, not yours.

Reading Between the Lines: Decoding Nonverbal Language

It’s been said “A picture is worth a thousand words” The picture your customer paints with their body language can often say more about what they are thinking about you and your product than what they are actually saying. It's frustrating to be rejected when you first approach a customer, but what’s even more frustrating is hitting it off with a customer for a few minutes but soon finding that your presentation comes to a halt just when you thought everything was going so well.

With spoken words making up less than 10% of the information exchanged in a typical conversation, you may be missing out on crucial information being transmitted to you via nonverbal body language. By tuning in to the body language of others—as well as your own—you'll be in a better position to know whether to keep the conversation going or cut your losses

Understanding Body Language Cues
Body language can be very subtle, and can sometimes be misinterpreted. It’s important to keep in mind that individual body language cues are not all-or-nothing observations. Even if you notice a few indicators of disinterest, it doesn't mean you don't still have a chance. It is the sum of all body language cues that will clue you in to how well you're hitting it off.

The full impact of understanding body language comes not only when you can recognize the body language of others from the very start of your conversation, but when you can also perceive subtle changes in their nonverbal communication throughout your interaction with them. So if you're hitting it off but then notice that something changes suddenly for the worst, you can assess what turned them off on the fly by thinking about what and how you're communicating to them.

Most times people are unaware of their own body language and how it might be coming across. You may be saying a lot to a potential customer without saying a single thing! Even socially anxious people who are more sensitive to others' reactions may under- or overestimate their own behavior. So make sure you also clue in to your own body language cues that you're giving off in addition to observing the other person.

Body Language Basics
There are two general categories of body language that can help you assess whether someone shares your same interest level: open and closed. Open body language usually indicates that a person is interested in you or is receptive to your advances. Generally, a person who is expressing open body language is relaxed in stance, with arms and legs uncrossed, and may use their hands to animate their conversation. Also look for these open body language cues:

• 
  Eye contact is relaxed, but eye-to-eye contact between two interested people is fixed for a longer time. In some cases a person's pupils may dilate in when gazing intently at a person they have interest in
• 
  Preening gestures, such as someone running fingers through their own hair and tossing the head slightly to the side
• 
  Leaning inward or closer toward a person to gauge response
• 
  Subtle head nods while the other person is talking
• Touching the other person on the arm, hand or shoulder when making a point in conversation .
• 
  Blocking, or standing between the object of interest and any other potential suitors in the environment

Closed body language usually indicates that a person is expressing some level of disinterest or apprehension in getting to know you further. Generally, a person who is expressing closed body language may appear somewhat tense or defensive in the shoulders, with one or more arms crossed or situated in the "cobra pose," in which hands are tucked upward behind the head with the elbows facing outward. Also look for these other common closed body language cues:

• Eye contact. A person may avoid eye contact altogether, as if to hide their true feelings about you. They may look around the room, feigning interest in other people or objects to avoid you. Additionally this avoidance may alternate with short periods of aggressive or intense staring when you look away from them for a moment, as if to say, "Back off."
• Staying perfectly still. Like looking away, freezing the body can sometimes help a person hide negative feelings toward another in their presence.
• Defensive gestures, such as curling their shoulders inward slightly and pointing the chin downward. Subtle aggression can sometimes be seen with tightly clenched fists as well.
• Leaning away from or physically moving away from the other person, even subtly, can indicate a subconscious desire to get away from the person who is communicating with them.

The Role of Mixed Messages

Sometimes mixed messages come into play during a conversation. During these times someone may seem to like you on the whole, but are giving you cues that they are not 100% comfortable. In mixed-message situations, you may find that a person's body language belies the tone in their voice. (Hint: If you have a hard time picturing this, try shaking your head side to side as if indicating "no" while vocally saying aloud "yes," or nodding your head up and down as if saying "yes" while saying "no" aloud. This is a mixed message in its truest sense.) Other times, someone may lean in toward you to get physically closer but make little eye contact with you, save for brief period of intense eye-to-eye contact.

Here are three basic explanations for mixed messages:
1. Disinterested. The person's not interested in you or your product, or is deceiving you by pretending to like you enough to keep a civil face.
2. Nervous. The person may be interested in you or your product, perhaps even a great deal, but they're really nervous, and are not sure how you feel about them. Really anxious or shy people can come across as aloof and disinterested when they're anything but that once they feel comfortable with you.
3. External conditions. There are external conditions you may not be aware of, such as another product they're interested in, or perhaps they're feeling a bit under the weather. Sometimes someone who is cold might have their arms crossed but is perceived as being defensive.

Putting it all together

All in all, the combination of both spoken and unspoken communication will best tell you how well you're hitting it off with someone. But armed with the basics of body language, you'll be well on your way to putting it into practice, and once in play, you'll be several steps closer to knowing that you're really hitting it off with someone who is eager to do business with you..

Who’s reading your mail?

I’d like to introduce you to a member of my family. Her name is Chooch, and she’s 14 years old. She doesn’t work, does not have a driver’s license or a Social Security number, and as far as I know, has no credit file.

Let me start out by explaining something. My home phone number is listed in Directory Assistance under Chooch’s name. If you haven’t figured it out by now, Chooch is my border collie. That’s right…my dog! I do this so, when someone calls my home during dinner and asks to speak to Chooch, I know it’s a telemarketer. So far, Chooch has gotten calls for magazines, insurance and political contributions.

But recently, something new has started to happen. Chooch has been pre-approved for credit cards, real estate auctions. Recently, and most importantly, she started to receive mailers from auto dealers!

This is one of the credit mailers Chooch has recieved lately!

So, who’s reading your mail? Do you really know who your mail campaign goes to? Direct mail is not cheap, as we all know, and unless your piece is being opened and read by real consumers who need an auto loan, how effective can it be? In order to maximize the effectiveness of your advertising dollars in today’s market, you need to be sure that your marketing efforts are precise. After all, advertising dollars are limited, and, just like you teach your sales people, you have to sell value in order to sell your product.

Offering easy credit to customer with good credit is like trying to sell a compact to a family with six kids. It might work, but in reality, it’s going to be a hard sell. Make sure that the mailer you buy maximizes its impact on customers who truly need your credit offer. Using blind, targeted mail, with a genuine offer of credit, produces customers who want your help

Maximizing YOUR Results

The first question we ask dealers is: "Of the last ten potential customers that came in for a car, how many left without one?" Conservatively, dealerships are losing at least one Special Finance deal a day or 25-30 deals a month. Our analysis of the lost opportunities enables a dealership to correct the processes that are losing these customers. With re-training in proper Special Finance processes a dealer can go from being simply average and frustrated in their Special Finance efforts to solidly and consistently successful.

What does that mean in real money? By recapturing the lost opportunities at $3,000 average gross per deal, an additional $75,000-90,000 in gross profit is added simply by correcting existing mistakes. Then, with AutoLending Network™’s Targeted, Blind Direct Mail Program and the AutoLending Network™ Profit Development Center, we look to add 18-22 additional units a month. This means, with a $3,000 average gross, the AutoLending Network solution adds $54,000-60,000 a month. Combining the AutoLending Network™ Solution and the customers recaptured from lost lot traffic, it is reasonable to add another $129,000-150,000 a month to the bottom line. That is $1,548,000-1,800,000 a year in a market that most dealerships are largely ignoring.

TOP TEN REASONS YOUR LENDER SHOULD BUY THIS DEAL

TOP TEN REASONS YOUR LENDER SHOULD BUY THIS DEAL

10. IF YOU COULD ONLY SEE THESE PEOPLE, YOU’D BUY THEM
9. YOU’VE GOT TO HELP ME, IT’S THE OLDEST CAR ON MY LOT!
8. LOOK AT IT THIS WAY, HE CAN’T FILE BANKRUPTCY FOR ANOTHER SEVEN YEARS.
7. WHEN’S THE LAST TIME I ASKED YOU FOR A FAVOR?
6. YOU SHOULD ONLY HOPE THIS GUY GOES BAD, YOU’LL MAKE MONEY ON THE REPO!
5. NO, HE’S NOT A GYPSY – HE’S A ROOFER.
4. YOU DON’T WANT ME TO HAVE TO CALL YOUR BOSS, DO YOU?
3. COME ON, THIS GUY KNOWS THE OWNER.
2. YOU HAVE TO HELP ME; THE CAR’S ALREADY BEEN ON THE ROAD FOR TWO WEEKS!

AND THE NUMBER 1 REASON WHY THEY SHOULD BUY THIS DEAL…


OK – BUT THE REPO WASN’T WITH YOU!!!

What Makes Special Finance So Special?

by Geoff Cohen

Many of you are sitting there reading this thinking just that thought. What is it about special finance that makes it so special for your dealership?

The answer to that question is indeed one of the great mysteries of the auto business. Why is it that some dealerships do special finance extremely well and profitable, while others just can’t seem to get IT?

I typically hear these dealerships crying, “It’s too hard” or “There’s too much brain damage”. Well, if it were easy, they wouldn’t call it special! Anyone with a computer and access to Dealer Track could do Special Finance, and in some cases, that’s probably how it gets done in some stores. But in reality, is the easy way necessarily the best way? Are you getting the most out of your special finance department, or is it the orphan stepchild of your dealership, stuck away in a cold, dark corner, out of sight and mind until all other methods have been exhausted.

The first thing to consider is how do YOU define special finance? Do you use Beacon or FICO scores to determine who gets your business? Is it determined by whether the lender charges a fee or requires any stips? Do you leave it up in the air, and decide on a deal by deal basis? Consider that, if you are using any kind of lead generator, they typically use a credit score of 640 or below as their main criteria, so maybe you should consider this as well. While there may be cases of a sub-prime FICO score getting bought by a primary lending source, these are few and far between, and in many cases, may not be you best call because the lender may limit the amount you can sell the car for (advance).

Why should you treat your special finance department …SPECIAL?
· Primarily because “if you’re not in it for love, you’re outta here!” You have to love the fact that this is extra business that you might not have done. These are some of the most pliable as well as loyal customers you can find, and if you give them just a little attention, they grow into a sizeable profit for you.
· You have to love the fact that special finance gives you an outlet to retail some of those trades you might have wholesaled to someone else who ended up making a nice profit selling these customers.
· You have to love the fact that, done properly, special finance deals that include mechanical breakdown insurance (MBI) contracts create additional income for your parts and service departments.
· You have to love the fact that today’s special finance customer may be tomorrow’s prime customer; wouldn’t you want them back as easy repeat business.

Do you ever consider these customers to be free residual business in your sales, parts, service and your body shop as well? In addition, they become so of the best “good will ambassadors” for your dealership that you never hired!

How do treat your special finance department?
Do you even have a separate special finance department?

This is an issue we will address later on. Right now, I want you to think back to the early to mid 1990’s, when every dealer in America was jumping on the leasing bandwagon. Leasing and finance were two separate entities in most dealerships. Your leasing manager was one of your most valued and highly paid employees. He was your negative equity problem solver, low payment specialists, high profit generator who drove the most expensive demo you had and you treated him like a king. He knew every leasing company out there, and could write you advertising copy that would fill your dealership to capacity with customers looking for those ridiculously low monthly payments. Your service and parts department loved him as well, because of all the accessories he used to install on the cars he leased. And then one day it all changed! What ever happened to him when leasing software came into your store, and suddenly everyone could calculate a lease and most of the leasing companies we knew and loved went out of business? Well, if he was smart, he went into special finance!

Today’s special finance manager is a lot like yesterdays’ leasing guru. He has to know who has what programs, buys what paper, likes what kind of customer, He has to know all this and make a profit from the worst of the worst customers, and if he’s good, he smiles all the way to the bank. Think about how much bottom line he generates for your dealership from prospects that you probably wouldn’t have even considered to be a customer in the first place. Wouldn’t you agree that makes him pretty special for your dealership as well? Are you really supporting a sub-prime department, or do you simply let it exist; hoping it won’t cause you any headaches?

If you truly want the best for your health, wouldn’t you seek out a specialist? For legal advice, don’t you consult an attorney who specializes in the precise legal problem you have? You wouldn’t consider buying real estate from your parts supplier, so why wouldn’t you have a specialist handling your sub-prime business in your dealership?

When was the last time to actually gave your special finance department a complete physical? Do you meet regularly with your special finance staff to keep up on the latest developments? Do you know enough about what goes on in your special finance department to survive a mass exodus of personnel? Do you have the right mix of personnel, lenders, and inventory? Are you using the most effective business systems? Is your marketing plan still working, or has it become a bit anemic lately? Has the “special” gone out of your special finance department? Maybe it’s time for an annual check up.

Deal or No Deal, Part 1

by Geoff Cohen

Depending on who you speak to regarding Subprime, 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?

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?

If you say that you’re not getting enough quality leads to work, this is a perception problem as well. Every lead is a potential sale, whether it’s today or sometime in the future. Once again, you should have dedicated personnel working your subprime leads. Once you receive the lead from you lead generator, time is of the essence. The half life of a special finance lead is extremely short, and in most cases, if you don’t respond to their inquiry quickly, they will seek out another source and apply there as well Your phone staff’s only objective needs to be securing an appointment to bring these customers into your store so your financial experts can review their credit and help them to obtain financing. Your phone staff must continue to attempt to contact these leads until they either arrive at your dealership or are out of the market. Continually leaving messages accomplishes nothing. They must stagger their calls, so as not to try and reach them at the same time each day. Make the initial contact and set the appointment. If you initial contact is say, Monday at 1PM, and you call and get no answer, call back in two hour intervals until you finally reach them. Why call back the next day at the same time? Follow up on Monday at 3pm as well as Tuesday at 10AM. Use this 2 hour stagger arrangement for the next two weeks until you contact this lead and get an appointment.

Make sure that your phone people aren’t pre-qualifying the leads before they get to your store. Every lead should be worked fully. Even if the income is below the minimum threshold your lenders require, even if they tell you there is no co-applicant available, once they are sitting in your showroom, you’ve “awakened the giant”. They know that, somewhere out there is a loan for them; they just have to find a way to get it. Once you present them with the options, you’ll be surprised how hard they’ll work to get what’s needed to obtain a loan. Too many times it boils down to a half hearted effort on the part of the people you have working your leads that make it seem as though the quality leaves something to be desired. Again, a half hearted effort produces half hearted results. By having dedicated personnel working your leads, 100% of their effort is spent getting the appointment and making sure the lead actually shows up at your dealership.

Bottom line here is that, unless you have people who are dedicated and responsible for your subprime business, you’re probably short changing yourself. While you may be saving a few dollars on your payroll expense, the profit potential your dealership is missing out on is potentially enormous. We all know that subprime sales generate considerable profits for dealerships that are successful with it. Talk to them and you’ll find out that they all have several characteristics in common. First and foremost is using a dedicated staff to pursue the subprime customers in their market. Their phone people have one objective to achieve; to contact every lead and try to bring each and every one into your dealership. What happens next…we’ll address that in Part 2.

Deal or No Deal. Part 2

Okay, here’s the situation:

A customer (up) pulls into your dealership parking lot. They get out of their car and start to walk towards your showroom front door. A group of sales representatives are standing outside talking and see them. What happens next?
1. A sales rep goes up and welcomes them to your dealerships and asks what kind of vehicle they are looking for today.

2. A sales rep goes up and welcomes them to your dealership and asks if they are there to see anyone in particular.

So what happens at your dealership? Is it “Deal or No Deal”? Most of the time, the first scene unfolds. While it’s great to have a sales person “assume the sale”, this sales rep is already counting his commission. Better yet, he’s planning on selling that big bonus vehicle your sales manager announced at this morning’s sales meeting. He’s got it all figured out in his head, and he ready to make a deal.

Two hours later, these nice folks are driving away from your dealership in the car they drove up in! Your sales manager is sitting with his head in his hands, and your sales rep is off, muttering to himself about another “waste of time” his customer was.

What missing from this picture? Well, what about the customer? Do you really know why this “hot prospect” turned into a “No Deal” so quickly? It’s probably because the sales person never really took the time to find out the particulars about this customer until it was too late. The customer was never identified as either a primary or secondary customer. They arrived at your dealership, fully prepared to purchase a vehicle, but they were never shown a vehicle that they could actually purchase. The sale person never properly qualified the customer to find this out. And the “No Deal” at your store quick became a “Deal” at the dealer down the street, where your customer went right after he left your store!

“Why?” is the question most people would ask at this point? “What’s different at the dealership down the street?” Very simply, they’re probably identifying their subprime customers at the start of the process. What does that mean?

Most, if not all of us that have been in the business of selling cars for a while, learned the basic sales process known as “The 10 Steps to a Sale”. We probably learned it from someone years ago, who learned it from someone years earlier, who probably learned it from Henry Ford himself! The basic steps in this system haven’t change much over the years although some dealerships have made a few minor modifications. All in all, it is still pretty much the same process system today as it was in the beginning. What has changed, more so lately, is the customer.

As the number of “credit challenged” customers continues to increase, isn’t it time to think about changing the way your sales staff sells cars. Consider the fact that your dealership may no longer just be in the business of selling cars. If you are arranging financing for your customers, aren’t you really in the loan origination business? And if you happen to own your own finance company, you might be in the collections business as well.
If the business you’re in has changed, then the way your sales people conduct your business has got to change as well. If you are doing any subprime business at all, then your sales people need to understand the process to successfully work with these customers. While the meet and greet portions of the 10 Steps remain in essence the same as before, you should delay the “product decision” portion of the sales presentation until you have secured the “credit decision” . Keeping your customer focused on rebuilding their credit instead of trying to purchase a vehicle. They should be selling the program, not the car. Remember, in subprime, the objective is to get a loan and you get a “free” car. If your sales people focus on selling the program, this will avoid landing the customer on a vehicle that they can’t really buy. Keeping the customer off the lot and in your showroom lets you maintain control over the process. You can maximize your profit or move desired inventory by controlling the “product decision” and showing the customer the vehicles you want to sell them,

Take proactive approach to the subprime sales process. 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”.

Explain further that, if the job is done correctly, not only will they get a vehicle to drive, but they’re on their way to obtaining a credit card or maybe even buying a home. Maybe you can even provide them with some information on how they can repair their own credit for free! How many other auto dealerships offered to do that for them? You’re probably going to be the one an only!
Selling the vehicle first, as we have seen causes the “no deal” scenario to keep happening over and over again at your dealership. If your sales staff understands that subprime customers must be worked backwards from the start, they will have a lot more success at closing subprime customers. Your staff will ultimately have an easier time dealing with these customers because they understand the sale process. Keeping your customers focused on the “credit decision” part of the sales process allows you to control the sale and generate substantial profits. You’ll ultimately have a lot more “deals” than “no deals”.