In today's aggressive and ever-changing world of sub-prime finance, most automobile dealers have determined the need to aggressively go after the special finance customer. Here are six simple steps that can be taken to insure a successful sub-prime finance department:
Step One: Remember that sub-prime finance is in a world of its own and is completely different from conventional finance and standard sales principles. Training of the personnel who will be dealing with the sub-prime clientele is paramount to the success of the department-and I don't mean training them how to sell. This not only includes salespeople, but managers as well. The most important thing that must be taught to anyone dealing with the special finance is HOW TO FOLLOW DIRECTIONS! It does your dealership no good to sell a vehicle if you can't get funded. Therefore, the first thing salespeople need to learn is how to put a sub-prime funding package together and why the lender requires all of the information requested to fund a deal. I would suggest having one of the reps from a lender you are doing or going to do business with come into your store and train the entire department on how to do paperwork and explain why it is needed. You will reduce your funding problems tremendously. In addition, it is important to train your people in the following areas: deal structure, booking of inventory (both the sale vehicle and the trade-in), how to conduct a customer interview and fill out an acceptable credit application, and the process of the sale: qualify, interview, inventory selection, sale, close, and delivery.
Step Two: When recruiting the proper personnel to staff the department, remember that it is helpful if salespeople have automotive sales experience, though in most cases it is not necessary, as the sale of the automobile is secondary to the opportunity for the consumer to establish or reestablish credit. It is very important that at least one of the members of the special finance department has strong secretarial skills and pays attention to detail; this does not mean doubling up responsibility on the title clerk.
Step Three: Inventory for your special finance department is much different than inventory for your prime customers. Be sure to choose stock with the proper book to value. The bank buys the book value, not the actual vehicle. The best vehicles are those which may not necessarily be appealing to you or any normal retail customers, but are well-suited for the special finance customer. Remember what you're selling. The right inventory will give the special finance manager the ability to structure profitable deals and stay within the guidelines and parameters of the finance company's guidelines.
Step Four: It is important to remember that the clientele you are trying to reach will not be reached by the normal means. The special finance customer is best found watching late-night television like Springer, reading the local freebie car papers and publications like the Greensheet or the Thrifty Nickel. The nice thing is that, as compared to advertising for your prime customers, this type of advertising is typically less expensive.This is part of the reason why a properly run special finance department will out-gross both new and used vehicle sales every time.
Step Five: Dealerships actively involved in sub-prime finance are only fooling themselves if they believe their management team has the ability to properly structure sub-prime deals to the fullest potential without the assistance of some type of automation. There are software applications out there that will assist in deal structure and maximize the profit of every deal. Take into consideration the consumer's financial situation, his available cash down, and the value of the trade-in based on both N.A.D.A. and Kelley Blue Book values. Analyze the value of your inventory based on the same.
Step Six: Tracking of the customer from the time of application all the way through the delivery process is imperative. There are companies that will enable your dealership to accept credit applications 24 hours a day, 7 days a week, which is extremely important because the vast majority of your sub-prime customers will see your advertisement when you are closed. By nature they are impulsive, which for most of them is the reason they are in the shape they are in. Even better, most of these companies are very inexpensive and will generate reports showing you exactly what advertising works best for your marketplace.
Mark A. Hafner is the Director of Special Projects for Adtel International, Inc. 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