Q&A:
Jeff Griggs
Special Finance Manager
Lindsay Chevrolet
- 200+ units/month-new and used
- 43 units/month-Sub-prime
- $2,205 front end gross
- $450 back end
What is your background, Jeff?
I have six years experience in the sub-prime department. I went from salesman to sales manager and then on to used car manager and finally special finance manager. I also worked with Steve Hall's group, Custom Finance Services, which consults with 22 dealerships.
Describe your market to me.
The market in Woodbridge, Va., is middle-class income with folks having past credit problems but trying to reestablish. The payment cap is about $350 to $400 max. We keep our inventory in line with that.
How is your department set up?
It is totally separate from our used car department and set up as a credit resource center. We work by appointment only. We have very few walk-ins. When I was asked to take over this department, I met with the owner, the company's GM and the comptroller to get the commitment it would take to make this department successful. When I met with them, I told them that there is a market out there that they could capture but it would take about 90 days of developing our resources. They assured me of their commitment and gave us all the support and resources we needed to be successful. I think that is where it starts. If you are going to get into this market, find the right people who know the business and hire them. Then pay them well.
What were some of the first things you did when they said they were ready to go with this?
The first thing I did was change the environment of the building. It had to be conducive to a professional sales environment, ready to do business. When I came here, it had the appearance of, "If we do sell a car, that is great, if we don't, that is great too." We sat down with all the employees and advised them of our goals for this department. I changed some personnel and hired an F&I manager. I then put in a business development center to handle all our leads, since we are by appointment only. Their income is derived off of how many people they get through the door. Then there's generating the leads.
You have to have an excellent source in developing leads. One of them is the VOISYS. That has to be one of the top lead generating companies that I have found in the past six years doing this. This morning I had over 43 leads waiting for our business development center to start calling. They will call all day long making appointments, getting people to come down to evaluate their credit and putting them in one of our programs.
What percentage of those leads do you think will turn to car-buying customers?
The BDC that we have is tremendous. If they do not get them in on the first or second day, they will send out letters and continue with follow up calls. They are very persistent in letting the customer know that they must meet with a credit analyst. The car does not come into the equation. Out of about 320 leads she is bringing in about 115. That's about one third. We are closing about 30% of those.
Those leads are pre-qualified?
Most leads and ads that you put in the paper should already have qualifications. If they don't see that they are qualified, they don't even call. We take the top ten lenders we like to deal with and average out their income and criteria and we put that in our ads, so we are going to get a qualified lead.
You mentioned direct mail, do you use anybody particular on that?
We found a few that can really generate traffic. Be-Back Promotions has a strong flyer. The actual piece itself is high quality and very responsive. The first month that we hit, over 40 units were due to Be-Back's promotional flyer.
How do you handle turnover between the new and used departments and your department?
Because we are separated, we do not get that much. Sometimes the used car department may come over at the end of the month, but I don't depend on it, even though we will take it.
Tell me how you handle customers after they have been pre-qualified.
They will come in and ask for a credit analyst. We then sit them down and start the loan process. I will interview all the customers as if I was the bank. A typical problem with the sub-prime business is that it takes too long to get funded. The person who works with us has the process down to less than four days for funding. With the pre-interview, we have an idea of how long it will take for that loan to be processed.
What is the key to her success?
Having the customers bring the stips in advance. The key to funding is that the people are coming in by appointments and have their stipulations with them. Also, the post interview is important. She lets the customer know to be available because the bank is going to call them, their boss and also their landlord. She also verifies everything before it goes to the bank so that there are no surprises when the bank is trying to fund. I think that is where most finance departments lose it because this requires a lot of work. They would rather package it and throw it against the wall and hope it gets funded. We find the problems before the package goes to the bank and correct the problems if we can; that's why we verify everything up front. If you didn't have the time to do it right the first time, where did you find the time to do it right the second time?
Are the banks aware of the process that you go through? Does this help you in terms of turnaround?
That is a true statement towards the end of the month, when the banks are posting their deals. If they see five Lindsay deals coming in on the 28th and they know that in the past three months our deals have been tight, then yes, they are going to post them first. This is the kind of reputation that you need to have with your banks.
Who are your primary lenders?
Auto One, GE, Triad, Household and some local banks in Fredericksburg and Richmond.
Are there any companies you use besides VOISYS and Be-Back that are important in your operation? What about matching your inventory with your lenders for the most profitable deal?
We use Diamond Technologies and the Wizard Program. It is as strong as anything I have seen for managing your inventory and matching the lender with the most profitable vehicle in the quickest amount of time. I think it is less than two to three minutes.
If somebody finances a vehicle with you, when are they contacted again by your dealership?
I suggest to our customers to put away say $50 to $100 a month so that in a year to 18 months they can have $1,500-$2,000 to put down when trading out of that vehicle. If they are going to stay with the car, I suggest refinancing. If they do not do those two, then I ask them to come in and I appraise the vehicle, and, given current market conditions and their loan history, will suggest certain alternatives for them. We also contact them after the first 12 months and find out if they want to refinance online. If we do not get a response after 18 months, we mail them letters stating that their loan has matured and they may be in an equity position on their loan and they should come in and have their car appraised and their loan evaluated so we can get them a lower interest rate.
When they come back in, are you trying to get them a better interest rate on a sub-prime loan or are you attempting to get them to the point where they can get better credit and a new car?
We try and get them out of the vehicle they are in and into a better position interest-wise and car-wise. We always want to resell the car; it depends on how the market is going and the vehicle they purchased. There are a lot of different factors that are going to end up in the equation. We give them an idea of where they are going to be and what route they have to go to get out of that vehicle or refinance. They are very responsive, and we usually do not have to call them because they are already calling us.
So you get your leads from Be-Back and VOISYS, you do some local advertising and you have someone there that will call and qualify the people and get the information from them. They come in. At what point do you start talking about the car that they can get?
Once the credit analyst brings me all the paperwork, I evaluate the credit and their income. I interview all the customers after the analyst has gotten the paperwork. I do a customer survey sheet, which has been probably the best tool developed. We go through these 30 questions or so and by the time we get to the end of the survey they are thinking loan, not car. It leads to where they know they came in for credit and that they are just looking for reliable transportation. I get people that wanted SUVs leaving in Cavaliers. Many departments will get an attitude when the customers come in and want a Tahoe and the salesman will think he does not want to deal with them. I will simply ask them, "Do you want to pay $700 a month for it?" I will then advise them to go into a smaller car that will get them reestablished in 12 to 18 months and then perhaps move into something larger. They understand that what they want is not necessarily what they are going to get. They also understand that what they are getting is a second chance.
When the customer understands he is not going to get the Tahoe, is that when you do your post interview?
No, at that point I will match a vehicle with him. I give three choices and I tell the salesman to bring up the worst one first, the best one last. The key is that everything is matched. No one is running around and hunting. We pretty much have everything right there in front of us.
Is that when this post interview takes place?
That takes place once all the paperwork is completed by the salesman. I load the deal with all the bank numbers and then comes the post interview. We print up all of the necessary paperwork with all the disclosures. We then tell them what to expect in the next three days for their loan to finalize.
Jeff, what do you see down the road for sub-prime?
With the new bankruptcy laws coming in, it is going to be a lot harder to generate that type of customer because of the way the laws are changing to benefit the creditors. Bankruptcies are going to be harder to file, and at that point the customers are going to have fewer choices-so dealers who are not handling the customers correctly, by pre-qualifying, keeping up with lenders' programs and not fully committing to this department will continue to struggle. Keep it simple!
