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.
