As we approach the new millennium, it is becoming increasingly evident that the franchised dealership's special finance department must become more aggressive in its efforts to attract the sub-prime customer. No longer can the special finance department depend on writing a handful of "grossed up" sub-prime deals a month. Sub-prime business is no longer looked at as "icing on the cake"; it has become an intricate part of the dealers' business as more and more prospects fall into the category known as sub-prime. Dealers have therefore come to expect sub-prime finance deals to contribute monthly toward the store's bottom line.
Traditionally, sub-prime business has been generated from the franchise stores' turndowns and limited print advertising in community newspapers that target a blue collar or credit challenged & equity impaired readership. One of the most costly challenges found in the franchise store that does not have an efficient sub-prime finance department is when the salesperson determines their customer is credit challenged & equity impaired. Guess what? Almost more often than not, your faithful salesperson will send the customer down to one of the local independent lots, who will in turn pay a $100.00 or $200.00 referral fee. Hate to break the news to you franchise guys, but the independent has been doing sub-prime finance since the beginning of time. What they lack in financial resources and inventory they more than make up for in EXPERIENCE. Take note: the best special finance manager/salesperson a franchise store can have is an individual with a strong independent background. Not only are they used to dealing with credit challenged & equity impaired customers, they welcome them with open arms because they know how much pure unadulterated profit can be generated by simply treating the customer like a human being rather than just another bough wasting their time! Take notice of what the independents are doing because in this arena, not only are they stiff competition, but more often than not they know what the score is!
In the early days of the franchise stores sub-prime finance boom, a modest ad budget could generate ample leads for the average special finance manager. In the last three or four years we have seen an increase in the number of franchise dealerships that offer special finance services via advertising that touts "Everyone Financed...Your Job is Your Credit" or "Bad Things Happen to Good People." Dealers have recognized the need to be in this market. However, these customers have a greater variety of choices when it comes to special financing options (whether they are aware of it or not). More dealers are advertising for the same customer base. Consequently, the modest print advertising budget is not producing the same number of customer responses as it used to in the "good old days." Today the dealership depends on the special finance department to contribute its share of profits toward the dealership's monthly nut. The cost per lead has increased because of heightened competition.
Mark A. Hafner is president of Automotive Solutions International, Inc., a Tennessee-based sub-prime oriented consulting company. If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3. mhafner@dealeronline.com