Q: What's your background, Skip? Skip: Been in the car business six years. Started at John Eagle's selling cars. Started here selling new cars and I've been the new car manager, been in finance and now I'm used car manager.
Q: How long has the dealership been in sub-prime finance? Skip: Well, we've had it quite a while, it's just kind of a necessary evil. More and more people you see come through here needing that part of the business. It's kind of a natural transition.
Q: How are you set up? How are deals handled? Skip: All deals start at the desk. They come right by my office and then we look at the deal and decide where it's going to go. If the customer is not here, then we'll structure the deal and put it together and try to get a pre-approval on it. If the customer is here, then we pretty much decide what car to put them in or give them a choice of cars.
Q: How do you determine what vehicle to put them in? Skip: By looking at their credit and from having done this for a while. I can pretty much look at somebody and tell whether they need a '97 car with 25,000 miles or less, or if they need a $10,000 or a $20,000 car, based on income and looking at the credit app.
Q: What is your approach toward the sub-prime customer? Skip: Well, you know, you handle sub-prime differently than you do a lot of other customers.
Q: How's that? Skip: What we try to do is give the customers three or four choices of cars. We treat them all with respect. There are a lot of customers who have bad credit and are still good people. Bad credit just doesn't happen to people who don't pay their bills. There are a lot of different reasons for having bad credit. We try to give them two or three choices of cars, hopefully one of them will fit in what they want and then just go from there.
Q: How do you determine what they need? Skip: Well, we talk to the customers and find out if they need a big car for a family, if they just need a sporty car, or a sport utility or whatever. Then I try to have three of four cars. I try to have sport utilities from $8,000 to $30,000, so I have a diverse selection.
Q: What's the relationship between your special finance department and your new and used car departments, as far as the salespeople and management? Skip: Connie Bond is our special finance department. She runs the special finance department. We all work hand in hand. Like I said, the deal pretty much comes to the desk here, I will look at it and decide what needs to be done. Now, a lot of times I'll call and say, "Hey, Connie come up here a sec" and Connie will come up and she'll look at it and say, "Well, let's do this or it'll qualify for a $400 a month payment if they can prove their income", things like that. So we all work hand in hand. Sub-prime is probably 30%- 40% of my used car business, and that just adds to the used car department. In this market we have a lot of sub-prime customers. You have to treat them right and do the deal.
Q: How many units per month do you average? Skip: Sub-prime? Anywhere between 30 and 50. I'll do 30 in February and I'll do 50 during the hot months of the year.
Q: On a sub-prime finance deal, what would you consider to be a respectable gross? Skip: We're averaging about $2,000 a copy front and back. Sometimes a little bit higher, but after you average all the fees and stuff, probably $2,000 a copy.
Q: What type of advertising and promotion do you run? Skip: We do newspaper and we do some radio. A little TV. That's about it.
Q: How many lenders do you use? Skip: Sub-prime, probably six.
Q: Who do you do most of your business with? Skip: The biggest three would be Household, First City and Bank of America.
Q: Why do you use them? Skip: Depth. First City will buy anybody. Household and Bank of America are a little bit more picky, but they all give us a spectrum of lenders that will buy just about anything.
Q: What about funding turnaround? Skip: We don't have a problem with funding. All of our deals are put together real clean. We do business the right way.
Q: So when you send it in, it has everything that the lender needs and you expect them to fund accordingly? Skip: Positively. I'd bet my longest funding deal is probably between 20-25 days. Within a month I'm done with all of them.
Q: What advice would you have for those wanting to start a special finance department? Skip: I think the best advice would be just do business the right way. Get a customer, and get a finance manager you can trust, because the special finance department can burn you and leave you buried. And then have somebody that takes care of all of it and watches it closely.
Q: So you would say that it is important to not only have a special finance, management and sales team, but also, like your store does, to have a director, so to speak, that kind of oversees the whole thing. Skip: Yeah, but you need somebody that is accountable. Connie is accountable to me. I go in there and we sit down and go over our business every day. She knows what I expect and she does well.
Q: It's a matter of staying on top of it. Skip: Yes.
Q: And I guess the last thing is what advice, if any, would you have for a dealership that's started in sub-prime, but they're wanting to grow their existing special finance department Skip: Buy the right cars. Buy some cars that you can sell in the eight to ten thousand dollar range. I think that's a real good market. Every time I go out and buy 20 of those cars, I sell them faster than I can get them. If you buy the car right and you keep it in a range of ten to twelve grand and turn your funding quickly, you'll make the money.
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