By the Numbers
By Paul Snider
Managing a profitable special finance department is not difficult when approached properly. Successful managers and dealers pay close attention to both the department numbers plus the information received from lenders. The most important daily numbers other than gross profit are: Phone Ups, Appointments Set, Appointments Kept, WalkIn Traffic, Turnovers from sales and finance department, Write UP's, and Deliveries. Each category will alert managers to possible problems that can and should be corrected immediately as opposed to waiting until the following month, when it is too late. Let's take a moment to outline benchmarks for each category and how to recognize possible problem areas.
Phone Calls-When this number shows decline for more than two days, advertising needs to be reviewed.
Appointments Set-This number should be 80 % of all phone calls.
Appointments Kept-This should be 70% of all appointments set.
Note: If either number begins to drop, training is needed immediately to correct the problem. Often times your staff will be very proficient at making appointments but weak at setting appointments that actually show up. Train by listening to your staff handle calls. Is too much information being given? Did we call back to confirm the appointment? Remember: telephones account for better than 90% of the results we try to achieve through advertising.
Walk-In Traffic: again, examine your advertising. Is your advertising bringing in customers who qualify or just lots of customers who require too much time and will not qualify due to income, job stability or other factors?
Turnovers form sales and finance department-if this number drops, it usually indicates staff training issues or misunderstanding about how the department functions. Pay close attention to not only the numbers but also the quality of each prospect. Make sure advertising is netting the results you desire for the total dollars spent.
Write UPs-In every case the number of write-ups should be 70% of the combined number of appointments kept, walk in traffic and turnovers from sales and finance. When this number drops it usually indicates a problem with advertising to customers who cannot qualify or the result of staff members taking short cuts and not following procedures.
Deliveries-Deliveries should average 60% of all write-ups. When this number falls it means we either did not properly interview the customer in order to obtain an approval we can live with or the inventory is out of balance and customers do not find vehicles they want to buy. Often we see this drop when lenders change program guidelines and finance staff is not aware or educated on what lenders are now buying.
Numbers are also important when building relationships with lenders. The following are a few of the most important numbers to review monthly on each lender.
Average Days to Fund-Experienced and well-trained dealers pay very close attention to this for many reasons. The most important is cash flow: the life blood of any company is cash. When packages take too long to fund, it causes many problems including lack of inventory plus pressure from management that may cause future department growth to be limited. Slow funding creates other problems such as extra time spent by staff members cleaning up sloppy deals, poor lender relationships, first payment defaults, spot deliveries and increased management pressure on good special finance managers that results in reduced deliveries due to the time being spent on cleaning up old business. Records should be maintained on each lender and reviewed monthly. If slow funding of clean packages persists the issue should be addressed with senior management of the lender.
Funded to Reviewed (Looked to Booked)-This percentage is becoming more of a factor with lenders each month due to the rising cost of doing business plus the level of service lenders are trying to provide for quality dealers. Lenders want this number to be 10% or better. When this percentage drops often lenders will visit or call and put dealership on "watch" until it improves.
Funded to Approved-Top dealers consistently average 35% or better in this category. Lenders provide higher levels of service for elite dealers who maintain high Funded to Approved and Looked to Book ratios.
Portfolio Performance-With delinquencies and defaults increasing each quarter for lenders this is becoming a very important number to review with each lender your dealership does business with. Included in this number is the percentage of "First Payment Defaults." Lenders will sever relationships with dealers when portfolios reach above average levels in these areas. Dealers should contact each lender they do business with and review their portfolio plus learn more about the benchmarks they expect.
Hope to see you at the NADA Convention in Orlando.
Paul Snider is President of VOISYS Systems Corporation, specializing in lead-generating services including 800 loan-by-phone and Internet applications. psnider@dealeronline.com
