Q&A
Gordon Beecham, Special Finance Manager, Pat McGrath Chevyland,
Cedar Rapids, IA (population 150,000)
- 150 new, 120 used units per month
- 45 units per month average, sub-prime
I started in the car business with Pat McGrath about twelve years ago. I left, was the Special Finance Manager for six months at another store and I've been back here at Pat's going on two and a half years. Pat brought me on as the assistant Special Finance Manager.
Describe your local market for us.
One Chevy store in this town, another Chevy store in Cedar Point, which is about 15 miles north of here and another Chevy store about 20 miles south in Iowa City. Most of the makes are represented here. Of course, the domestics are a lot bigger here than the foreign cars.
How is your special finance department set up?
My department setup is me, an assistant who does all the contracting and five salespeople.
The salespeople sell specifically sub-prime?
They can sell new, they can sell used or sub-prime.
How do you generate your leads?
We do a lot through the local paper, whether here or in Iowa City, and some of the savers/thrifty nickel stuff. We do display and classified. We do a lot with TV.
What do you mean by "a lot with TV?"
Depending on the month, 75 to 100 30-second spots.
Do you mention special finance in all your print ads?
In everything that we advertise, whether it's new car or used cars, there is a little box there in the corner for getting pre-approved, regardless of bankruptcy or whatever, that's always in our ads.
How is turnover handled between new and used?
Well, we work every deal just like it's a new car deal. We have a good working relationship with F&I, if it's not one of my leads, if it's just a person off the lot. It goes to F&I and then with F&I it's usually 600 Beacon. If it's below 600, we still get a chance to look at it before they leave and do a customer interview. So they'll work their deals and I'll work mine and if we get them bought and F&I doesn't, then we can go ahead and take it over. But if they get it bought, then it's their deal.
How do you handle that? Let's say it was a salesperson in the new car department working the deal and it turns out that they don't qualify and it goes over to you.
They get $75.
How do you handle it when somebody comes in, they're looking for a brand-new truck and they just can't qualify, but they need transportation? How do you make that transition from "Well, Mr. Customer, that's a nice vehicle you'd like to have but you just can't afford it"?
We explain how a lot of the bank programs work and what they're looking for.
You educate them?
Yes, we educate and tell them it's baby steps. Actually, after we financed a few people, we've gotten a lot of referrals and be-backs, so after they've been through the process, we tell them, "Maybe if you start making more money or you reestablish your credit, we can go to some other lenders that would go longer." We tell them what we can do and why we can't do what they want in some cases. I always tell them, "It's not between me and you, it's between you and the bank. Most people are real receptive once you explain to them how everything works and that we're trying to reestablish them and we can reestablish them on this car loan; everything that we do reports to the credit bureau, so you are reestablishing their credit.
Who are your primary lenders, Gordon?
Primary lenders are like Triad, Household, Americredit, those are the main ones that we use.
How many do you use, total?
Total, 10.
Why is it important that you take those extra steps to keep your look-to-book numbers good?
Well, for one, you don't want to, what I call, burn the lender up. You're sending him all these apps and you can't put car deals together and it wastes their time. Also it relates to credibility too, because some of the lenders you might be able to get a little bit better advance on certain cars or something when you need it. So in order to have the different places to go, you don't want to use any of them all up.
Remember the good old days when you just shotgunned all the apps to everybody?
Yeah. Throw them out there. Normally if we're going to send something to a lender, we're real close to putting a deal together, although certain situations do come up, job gap here or something just doesn't pan out. But if your look-to-book is good, your lenders, I think, are going to be extra helpful for you.
Gordon, what are the keys to a successful franchised dealership sub-prime department?
The keysI think in order for it to work you need to have a commitment from everybody, from new car, used car, the ownereverybody's got to be committed for it to work. It takes a lot of work, so if you're going to get into it, you've got to jump in with both feet. You can't just dabble in it. Commitment starts from the owner and he's got to back it 100%. In sub-prime, like I said, it's a lot of work and everything doesn't flow as smooth. You might have some deals that do get backed out that you had contracted from time to time. I figure that if you don't back a deal out here and there, then you're probably missing some business, because if you're not losing some, you're not going deep enough.
Any final advice for dealers with special finance departments?
You've got to treat it as an equal department. Some dealerships, they've got new, they've got used and then they treat their managers and their salespeople in the sub-prime department as if they're less.
And they should treat them like they're more! They're generating a higher percentage of profit.
I think so. But a dealership needs to treat them as equal, bring them into
all your managers' meetings and know what's going on. That's what we have.
We have a save-a-deal meeting that we go over all the deals every morning
and so I stay abreast of what's going on. You really have to work with F&I
and stay in touch and stay on top of the deals. Speed is always an issue.
