Q&A:
Shawn Jones and Jim Adler
Passport Nissan
Marlow Heights, Md.
- 275 units/month new and used
- 70 units/month sub-prime
- Average front-end gross, Sub-prime-$2,200
- Average back-end gross, Sub-prime - $50
Shawn, tell me what your background is in the business?
Shawn: I've been in the business for five years exclusively with Passport. I started as a salesperson. I have been doing sub-prime for two years now.
How about you, Jim?
Jim: I've been in the business since '95. I have a background in collections with a collection agency in California. I moved here to be near my family. I have been in the business since '95.
How is your sub-prime finance department set up?
Jim: I am the showroom manager, or the floor manager, which simply means that if the sales manager determines a particular client needs special finance, I get the deal, then I interview the customer. What we are trying to accomplish there is to be on the same page as the customer in terms of what's their ability to pay and verifying their information up-front. We don't want to show them a vehicle yet because people tend to want more car than they can legitimately get financed. I try to settle them down, match up their needs with what we think we can do for them from a finance perspective. Once I do that, I direct a salesperson to show them which car we believe we can get them into. I make sure that my partner, Shawn, is going to inherit a deal that is fairly clean with the kind of stips we need: phone bill, pay stub,reference sheets, what have you. Then I let him take itfrom there.
You don't have any sub-prime salespeople?
Shawn: Not specifically dedicated, sub-prime salespeople. We have tried that and it doesn't work for us. They think they know more than they really know.
So Jim pre-qualifies, gets a salesperson to assist the customer with vehicle selection, then Shawn picks up the deal and gets it financed?
Jim/Shawn: Right.
Are you guys cross-trained in that you can do each other's job if you had to?
Jim: Exactly.
Why is it that Jim does the initial customer work and Shawn does the back-end work?
Shawn: Jim used to be over at our BMW store. There wasn't really enough business at the BMW store, so that manager made a decision to bring us together. Jim loves getting in there with the customer and setting them straight. A lot of times, customers come in here wanting a BMW or they want a Maxima, when they can only afford an Ultima. Jim is very good at hitting the customer right between the eyes and saying, "Hey, this is what you can afford and this is what we can do for you." My specialty is, I am a little more organized. I have a real good rapport with the banks; I have a little bit more patience with the banks than Jim does, but he is real good at what he does and we work real good as a team. His strengths are my weaknesses and vice versa. I used to do it all by myself. I was doing 40 to 45 by myself in a month, but the grosses weren't there because I wasn't able to concentrate on doing the customer interview. Jim is very good at it. He builds a good rapport with the customer. He'll knock them all the way down and then build them back up. He is very good with the customers.
Describe your local market.
Jim: We are outside the beltway, outside Washington, D.C. A typical client would be somebody who has ten years with the U.S. Federal Government in some capacity. They're credit-challenged, they have had issues in the past, whether it be cars or credit cards or what have you. But they do have jobs and a lot of times they do have some money down. That's the key, of course. As you well know, in this business, down-payments equal what? It equals gross. That's why I want an interview or talk to them first. Salespeople tend to be weak in terms of that.
How do you generate leads for your sub-prime department?
Shawn: Of course, we advertise in the local auto trader magazine. We also do BK mailers and we get a lot of word of mouth, a lot of referrals.
Jim: I've never met a customer yet who doesn't know somebody else who can't use a better automobile than the one they are currently in. That's they way I word it...looking for a car, that doesn't register. But I have found that if you ask the client, "Do you know anybody who could use a better automobile than the one they are currently driving?" Everybody, without question, knows that person. Not only do they come into mind, but we use that person as one of their references because most banks require six or seven references. But we use them as leads. If you write six names, talk to the client a little bit. Especially while they are in a happy state of mind, getting their vehicle delivered. You'll be able to get leads from that.
So a customer responds to an ad or mailer, what happens next?
Jim: We deal with Voisys. The customer calls into Voisys and they pre-screen them, and then we will call and set up an appointment. We also get leads generated directly through Voisys.
Who are your primary lenders?
Shawn: Household, Triad, Americredit and CPS.
And how many total lenders do you use?
Shawn: We have about 20 to 21 on the books. Some of them have a certain niche. A lot of them we don't do a lot of business with, maybe one or two deals a month.
Jim: The key to this business is bank relations. This is a business in which you have to build relationships with your lenders. Instead of having 20 banks and each getting two or three deals, get deep with three or four banks, give them 15 deals or 20 deals. Know your programs inside and out so that your look-to-book ratio is really strong. Don't send them stuff that they can't buy. I see a lot of that in this industry. A customer comes in, I'll pull a bureau and the customer will already have six or seven entries. If they went to one dealership, what was on the dealership's mind when they sent them to all these banks? Shawn and I have laughed about this many times.
They're lazy.
Jim: Yes, the truth of the matter is, people are lazy. Because of the fax machine, you can hit a couple of buttons, go on a fishing expedition, which actually will hurt your client because now they have an inquiry or multiple inquires or an inquiry alert. Shawn is extremely good with the banks. He doesn't bother with sending customers to two or three places and the banks appreciate that, the reps appreciate that. We have a very strong working relationship with each of our main banks. We know our buyers, they know us real well, first name basis. We know our reps, that kind of thing. Shawn is an avid golfer, he golfs with half the banking industry.
Shawn: Also, Mike, on the really tough deals, we get help from Steve Hall at CFS. We use them on a daily basis. Basically, they are just like a consulting firm. Like, if we are not really sure what to do with a deal, we will fax it over to them. They usually have a ten to fifteen minute turnaround and fax us back, like what type of payment range to be in.
What about automation to help you match inventory with lenders?
Jim: Nothing. I will be very candid with you. It's typical "G-I G-O"-garbage in, garbage out. If you don't work those programs real well in the input, then the information you get in the output could be lame. Part of my job is to be a sales manager. I'd better know my inventory. I walk the lot on a daily basis. I print out an inventory sheet every morning. I know exactly which are my most profitable cars. I try to look at cars from a payment arrangement. What the average down payment is, what the average payment is going to be. I try to set my cars up, because you want to get the customer going, you do not want the four or five hour deal. You are not going to put 80 cars out in a month working and taking six hours from start to finish with each customer. That's not going to happen. The best way to do it is the old-fashioned way. Know your product.
You've solved half the equation, sounds like you've got inventory down. How do you solve the other half of the equation, which is matching the most profitable lender with the best vehicle for this deal?
Jim: Let me just say this to you. One of the situations is, if you look at the banks that we work with, they change their programs like the weather changes. So, I mean... like Household, they just changed their program March 15. I mean if you don't stay on top of it, with the additions to the lender programs, the computer is going to give you false information. It takes me ten minutes, max, to be able to pick out the most profitable car and make sure I'm going to the best bank. Now, sometimes the bank changes. That's again where our teamwork comes in. I have put out many deals myself where I structured a deal with Bank A, Shawn has been able to get it done at Bank B, holding two points, doing more because that's what he does well. So, from the teamwork approach, it's better. People tend to rely so much on computer programs they become a crutch.
Shawn: Trust me, it takes Jim five to ten minutes to go over his inventory list. We carry about 80 to 100 used cars. And also we have our new car inventory. Within five to ten minutes after interviewing a customer, Jim can look at the inventory and select which car is going to be the most profitable for us.
What are some of the keys to your successful franchise dealership sub-prime department?
Shawn: I was hesitant when I was told they were going to bring Jim over. I'll just be honest with you, I didn't want my income to be cut in half. But I'll tell you what, my income has increased by having a partner, a knowledgeable partner, somebody who knows what they are doing and who is not afraid to take the bull by the horns. We work really well together. I think the key is having two people run it, if you are going to run it right; if you want to do 30 to 40, yeah, you can get away with one person, but you are going to miss deals because the person is either not at the dealership or a lot of times is swamped. I think the key is having it set up properly-you need two people, one person to handle the floor like Jim does and the other person back in the office doing the paperwork and working with the banks, keeping up with all the banks' programs. Honestly, since Jim has come over here we have increased our unit totals and increased our grosses, and I have also increased my quality of life.
Jim: That's what makes it successful. I am out there on the floor, I do want to do a deal. Shawn gets me back to reality, he reels me in. We have mutual respect for each other. You have to have that. You have to find a common ground. We're successful partners, we don't step on each other's toes. You learn to check your egos and know your strengths and you are aware of your weaknesses. I don't want to hear what I do well, I know that. Tell me what I am not doing well. We have had situations where Shawn has gone out and interviewed and talked with the customer because this particular customer and I are absolutely not getting along or vice versa. He has asked me to come in and close this customer on a payment. I was out on the floor with this customer an hour ago. Shawn gets them back in here-all of sudden the story changes and instead of fighting it or trying to do it yourself, we have the mutual respect for each other to say, "help." I am going to step out of this role and I need you to jump into this role.
And Jim reciprocates by...
Shawn: He covers for me when I want to go golfing. (laughter)
As managers, what advice would you have for dealers with sub-prime departments?
Shawn: First of all, if you are going to do it, make the commitment. Don't be afraid of sub-prime. It's still a customer, it's still a car. Treat the customer the same as your other customers. Put the proper people in place and support them, with advertising and especially with the inventory. Sub-prime is the way the market is going.
Jim: Let me jump in there with a quick analogy. If you want to do this business successfully, don't do it like the U.S. did it in Vietnam. Do it like the U.S. did it in Iraq. Go in there with all your forces. Make a commitment to win, set it up to win. To do the sub-prime business profitably, you have got to listen to the people doing the sub-prime business. My general manager is the most supportive person I've ever worked for. If you can't work for him you better be self-employed. He listens to us. He instructs his buyer, who we have a very good working relationship with, on what cars to buy. The general manager allows us to sign up the banks that we want to sign up. Get involved in the industry. Read DEALER magazine. You've got to be involved in the business, we need that support. And don't ever forget, this is a people business, a face-to-face business. It's got to end in trust and respect. That's what makes us very successful: interpersonal relationships with people. A person's beacon score is not his moral score. You treat them with respect, help them out and be a real consultant to them, they appreciate it and it's a profitable relationship for both the client and the dealership.
