During 1999 many changes took place in the sub-prime arena and within dealerships. This article is designed to assist dealers increase market share, raise gross profits and speed funding in the special finance department. I encourage all members of senior management to review and make corrections as needed to ensure success in 2000.
CommitmentAre all members of management committed to the success of special finance? Commitment to inventory, advertising, lenders and training are the keys to success of any special finance department.
AccountabilityEach staff member must be held accountable for superior customer service, professional interviews, well-maintained inventory and attention to detail to ensure higher grosses and quicker funding.
TrainingOngoing training is the main difference between average and great departments. This should include all staff members and be conducted regularly by the special finance director or guest speakers from the industry.
Proper AdvertisingImproper advertising results in numerous customers who cannot buy. Proper advertising is targeted to the customer who can and will buy immediately. When dealerships are not specific in advertising or make claims that are unrealistic, the end result is lots of traffic with no deliveries. Specific advertising targeting customers who meet lender guidelines results in less traffic but much higher delivery and gross profit ratios.
InventoryInventory management is critical to the success of a special finance department. Vehicles that require higher payments than the average customer can afford or vehicles that are too old for lender guidelines tie up too much capital. Pay attention to the demographics of your market as they relate to income and vehicle preference plus lender guidelines and the result will be a quick turn, higher grosses and less aged inventory.
Lender RelationsWith the lending arena shrinking daily it is imperative to build and maintain great lender relations. High approval and quick funding is directly affected by the relationship between lender and dealership.
Customer InterviewsWhen dealerships conduct proper interviews early in the sales process, greater results are achieved. This is the time when customers are explained processes, information verified and basic stipps collected. When reviewing problem deals and low-gross deliveries the main reason is normally poor or ineffective interviews.
Lead Generation Management800 number and Internet lead generation provide dealerships with customers who respond to specific advertising 24 hours per day. All leads should be taken seriously and followed up immediately. Studies show that 14 to 17% of all leads received turn into deliveries, in many cases this number is much higher because management holds everyone accountable for leads distributed. Pay attention to reports generated by the lead generation service in order to properly target advertising for maximum results.
FundingDesignate a funding clerk whose pay plan is tied to the number of days it takes for the dealership to receive payment from lenders. This one practice has proven to increase cash flow and eliminate slow funding issues. In addition to having a funding clerk, pay close attention to details, never accept faxed copies of important stipps such as income or residence because they are easily changed and may result in non-funding or fraud charges by the lender. Do not deliver vehicles to customers who cannot provide a valid drivers license, insurance or proof of income and residence. Remember, when customers take delivery of the vehicle your chances of collecting these documents drops dramatically.
ReferralsIn previous articles I discussed the impact of building business through customer referrals. This has proven to be one of the most effective methods of increasing business at a nominal cost. Customers who enjoy positive experiences are very likely to refer friends, family and co-workers.
As we close 1999 and enter the next century (and millennium) it goes without saying that special or non-conforming loans and credit-impaired customers are not going away. Dealers who pay attention to detail and treat sub-prime as another profit center will continue to grow and prosper.