Surprises Abound In New Mexico

After graduating high school, Cockerham went to college to become an electrical engineer. However, putting yourself though college is hard and you often run out of money. That lack of funds led him to employment, washing cars for a local dealership. “At some point I realized that I was going to college for a degree in which I would be competing for jobs with experienced engineers twice my age and it didn’t make much sense any more,” stated Cockerham. That revelation led him to look at the automotive industry as potential career. He moved throughout the dealership roles over the next several years learning every nuance of dealership operations.

Five years ago, Cockerham opened the first Car World location in Albuquerque. The second one opened in early 2005. When you take a hard look at Car World there are several surprises in the efficiency of the operations. The biggest one is the volume of sales compared to the inventory. Between the two used vehicle operations, they stock about 20-25 vehicles per lot. That is barely a 15 day supply of inventory on a slow month. “I hear people say I hope business picks up for you,” says Cockerham. “I just smile.” What they don’t realize is that by keeping his inventory lean he maximizes all cash, manages gross profit margins and controls the special finance business better.

In the beginning, it was difficult to convince the staff that the lean inventory was a good idea. Now if one lot gets more than 25 units, the staff starts trying to move the “excess” to the other lot. Cockerham equates it to the “just in time” parts inventory methodology; you get new inventory regularly, recondition it quickly and get it on the lot just in time to sell it. Cockerham still purchases almost his entire inventory himself. He is a believer in online auctions, so much so that he is one of Manheim top online purchasers. By combining online purchasing with a large network of local dealerships and wholesalers, he rarely has to worry about securing inventory.

The second surprise is reconditioning. “I don’t want any customer to be concerned with the condition of the vehicle,” said Cockerham. “How many dealers do you know recondition 2005 model vehicles with 17,000 miles? That’s our average unit on the lot.” If the tires or brakes show more than 50 percent wear on them they are replaced. Complete CarFax histories are run on all vehicles and if a recall appears on the report, it is completed. Kelly Blue Book reports and payments are posted on all vehicles. All of this gives the customer more than enough information to feel good about their purchase before they even drive it.

Next is the marketing surprise. He utilizes just two forms of advertising. The first is the largest automotive publication in the state of New Mexico, published exclusively for Car World. It takes two weeks just to accumulate enough photos of vehicles to publish 250,000 copies of this catalog that is distributed in 2,300 outlets. The second is a half an hour infomercial that is re-cut every 60 days.

Between these two forms of advertising Car World generates approximately 2000 incoming calls per month, thus the need for a BDC. The BDC is comprised solely of telemarketers. Their job is to handle every incoming and outgoing call from the dealership and to set appointments. Appointments are set with the sales managers: who then controls the hand-off toa sales professional. It is not unusual to have 40-60 appointments set for a Saturday.

The sale process at Car World is surprisingly simple but effective. The sales approach is referred to as the “WITH” method and everyone is well trained on it.

1. Welcome the customer.
2. Introduce yourself and the dealership.
3. Thank the customer for coming.
4. How did you hear about us?

At that point the staff is trained to complete a guest sheet with the customer. It’s really just a short needs analysis with 4 important questions.

1. What type of vehicle are you interested in? Get 3 options from the customer.
2. What vehicle do you have now? This allows you to obtain valuable trade information and prior loan information.
3. What are you hoping to accomplish today? Train your staff to get this answer. Lower payments? Find something with better gas mileage? Zero in on what they really want to accomplish with their purchase.
4. On a scale of one to ten, rate your credit. Anything less than ten we ask “Why do you rate yourself less than ten?” The customer will usually disclose more than enough information for you to work with at this point.

Once the guest sheet is completed the staff moves to a short credit application with a simple question. “To save time I’ll have my manager work on financing for you while we look for a vehicle, would that be alright?” At that point a short application and authorization to pull credit is completed.

The next big surprise is the staffing. Typically the application would be given to the finance or special finance manager. Not so at these stores. Staffing consist of a First Desk, a Second Desk, a loan officer/contractor, and a re-verification department. The First Desk pulls credit, reviews the needs analysis and directs the salesperson to the vehicles that the customer should be shown. This person is responsible for lender contact & deal structure. Second Desk is responsible for backing up the First Desk on deal structuring when necessary, but mainly he is responsible for traffic control of the sales staff and customers, as well as handling all turnovers. The loan officer/contractor is responsible for printing all paperwork, creating a “stip” list, and confirming appointments set by the BDC. Once the contractor has the deal completed it is then is turned over to the re-verification department.

“My staff is not full of negotiators,” says Cockerham. “They are just really good at needs analysis. You don’t need to negotiate if you have solved what the customer is trying to accomplish.” If a customer wants to look at a different vehicle they will certainly show it, however they always go back to their needs analysis and the triangle of customer choices. The triangle, of customer choices, is cash down, vehicle selection or payment. If a customer wants to drive a vehicle that has a $500 per month payment and the customer indicated in the needs analysis that they wanted a $350 per month payment, the salesman will explain that they can certainly look at it, however the customer needs to be flexible in one of three areas -cash down, vehicle selection or payment. Invariably it is vehicle selection. Giving the customer choices along the way seems to be a key in the Car World closing rate success. Closing rate once the customer gets to write up remains consistent at 87-90 percemt.

With this many surprises in this organization how do you pull it all together? You put the right combination of checks and balances in place to make sure that everything runs smoothly and stays on track. The BDC is quality controlled by the contractor who confirms all appointments. The re-verification office is a safety check for all deals that the First Desk, Second Desk, and contractor process. “My re-verification department is tougher than any lenders funding department,” claims Cockerham. “Dealers think that lenders look for reasons not to fund deals and it’s just not true, dealers just don’t check to insure that their paperwork is in order.” The re-verification at Car World means every aspect of the lender approval is checked against the package if it doesn’t match it is returned to the contractor. If it clears it is stacked and processed in the order that the lender requires to insure fast and flawless turnaround. The proof that it works is in the 6.1 days average from contract to ACH in the bank.

Daily, Monday through Friday, a Save-a-Deal meeting conference call is held with all stores. They work through every deal, both contracts in transit and deals that are not approved, collectively discussing call backs. The staff is managed by F&I inventory. There are two types of vehicle inventory according to Cockerham. Static inventory is the vehicles you can visually see on your lot. Dynamic inventory is all the vehicles in the F&I office which are not yet able to be funded. The goal at Car World is to stay in the single digits in dynamic inventory at all times. This doesn’t always happen, especially on Mondays, but it is the goal that they are constantly striving for.

A strong sense of accountability is another thing that keeps them all on track. “From the accountability side, my primary vendor asset is Who’s Calling,” states Cockerham. “I track everything through Who’s Calling. I not only measure advertising but the quality of our phone skills with it. It is crucial to our operation.” By utilizing a single DealerTrack system and ProMax Online, every sales desk manager, contractor, and office manager can view all contracts in transit, funding notices, and BDC follow-up. This allows the personnel to spot areas of improvement in both locations.

Clear expectations are just as important and are intertwined with accountability. Each and every day that the dealership is open every sales manager, contractor, and BDC manager must fax a DOC sheet to Cockerham. The last manager out each day is required to fax a combo fax to Cockerham. This includes number of units sold, front and back end gross, traffic, ad sources, appointments set for the next day, appointments confirmed for the next day and at the bottom a “No Sale Board”.

The “No Sale Board” is simply a list of the sales staff and the number of days since their last sale. Car World is very proactive about sales slumps. Three is their magic number. If a sales professional has not sold a unit in three days, Cockerham will be speaking with the sales manager to find out why. “I always start with the sales manager. It is their job to insure that their staff is performing at acceptable levels. If after hearing the story, I need to speak with the sales professional I will, but it is ultimately up to the sales manager.” With reports like this Cockerham can easily evaluate where he needs to focus his attention the following day.

If you ask Cockerham what sets his business apart from his competition he has plenty to say. “Stay focused on your core business model.” If you are in the business of servicing the sub-prime market, focus on it. Resist the temptation each and every day to purchase vehicles that don’t work with your programs. Stock sub prime cars for sub prime customers, market to sub prime customers and sell to sub prime customers. If it doesn’t work within that model don’t do it. “We concern ourselves with ‘Will this customer make their payments?’ not ‘How much gross are we going to make?’” When you focus on meeting the customer’s needs and the lenders needs, you make money. For Cockerham it’s all about determining if the customer needs a chicken or a tuna today.