This month’s column was inspired by two dealers’ phone calls that came virtually back-to-back recently. It is a common situation that I am asked to address and something that all too often winds up costing a dealership $100,000+ in lost gross profits, or in these cases, much more.
Both of these dealers have had very successful Special Finance departments. One southern domestic dealer was regularly delivering upwards of 70 Special Finance deals per month with near benchmark gross profits. Another southeastern import dealer was averaging 30+ deals per month. Each had the wheels fall off (and sales dry up) overnight due to one of the most common problems in the retail automobile industry. Employee turnover.
The focus of this article is clearly pointed to the Dealer Principal, Executive or General Manager. It also indirectly ties into the ongoing debate as to which department structure is better – a separate department or a blended selling floor.
The turnover issue is nothing new to the industry. It is higher in the retail auto industry than most. It is something that upper management in any dealership operation must continually address. For nearly 23 years, my teams and I had to address it. When the inevitable occurs, the dealership keeps going, new or used vehicles continue to be sold, service continues to be written and vehicles continue to be repaired. Through cross training, employee development or ongoing recruiting someone slides into the vacated role and business continues. Yes, there are hiccups, but generally the dealership keeps functioning.
The biggest exception seems to be in the Special Finance department. I have had the pleasure to train and work with thousands of dealers and their employees. As a trainer and consultant your biggest joy is to see the fruits of your coaching pay off. To see the dealer take tools and confidence in using them back to their dealership and turn them into increased profits. On the other hand, it is as big a disappointment to check in on a dealer and find out that the Special Finance manager is gone, the store is back to square one, and that the time, money and effort was essentially squandered.
The latter happens more often than I would like to admit. Sometimes overnight. I had one northern dealer invest their money to send the Special Finance manager (who had already agreed to take a job with a competitor) to one of my seminars. They attended, learned, went back and immediately resigned. Naturally that is not the norm. But whether it is one day, one week, or one year, if you have but a single person in the dealership that understands and is capable of executing the Special Finance game plan, you are in a precarious position.
This takes us back to the separate department or blended floor debate. I do not intend to re-open that in this space. My answer is that they both work, each better than the other in specific instances. Separate departments are much more prevalent (again, I use the term “department” loosely as it is generally a one or two person department). The problem is then created by nature, whenever turnover occurs – whether by termination or by your competitor hiring the lead individual away – the department implodes.
No matter what the size of the dealership, seldom has sufficient cross training occurred so that a person can slide into the role and take over. Generally the sales management team has focused on their own roles and job descriptions and allowed the individual handling the “headaches” (as they are so often perceived) of the Special Finance customers to do their own thing. Even if someone can be moved into the role, the dealer and management team has allowed the departed manager to develop the all important relationships with the finance companies’ buyers and funders. Many dealerships don’t even have an idea of which finance companies to send specific types of sub prime credit customers to.
Often the dealer assumes that should the inevitable occur (as the dealers mentioned at the beginning of this article did); they can move the top salesperson or assistant to the departed SF Manager into that role with little or no impact. Unfortunately, in the majority of cases, it is just setting the incoming individual up for failure as they have had neither the training nor background to execute the SF game plan. It just doesn’t happen by osmosis.
What is a dealership to do? First and foremost, start by educating yourself. Most dealers (and upper management) know what it takes to make their service and parts operations work. Most could print a repair order if their life depended on it. They know the basics. Same goes for their finance office. I bet if a finance manager was suddenly gone the dealer could find a way to deliver a vehicle and present after-sale products. If the used car manager or buyer was suddenly gone, I guarantee you that the dealership would still find a way to both buy and sell inventory. Prudent dealers may still not be able to generate a month-end financial statement by themselves, but through cross-training they will have people on staff that can step in and make it through such a transition.
The question then begs to be asked, “Why aren’t they as diligent about their Special Finance department.” An “average” effort in most dealerships should yield a minimum of 25 units and $75,000 of gross profit per month. In most cases, that is barely scratching the surface. You do the math. That’s nearly $1,000,000 of gross profit per year. Why would any prudent dealer or management team want to risk any part of that?
Special Finance is not rocket science or brain surgery. It requires the discipline to execute a game plan dictated by the eight essential elements. It also requires that the entire team from the top down, regardless of their role, has the knowledge of these elements and that they are in place in their dealership.
I always scratch my head when talking with a dealer about Special Finance training and they don’t think they need to include themselves and upper management. It is generally an issue of time away and sometimes money. I guarantee you one thing, you won’t find the time any easier to come by when the wheels fall off. Similarly the cost to train will be dwarfed by that of the lost opportunity when your department grinds to a halt.
I recognize that in most situations there is little chance that the dealer is ever going to be desking a SF deal (similar to printing a bill of sale, or writing a repair order), but why would you not want to take the time to learn what it takes to make the department succeed? When the wheels fall off, someone is going to have to recruit and interview the next Special Finance manager. I have learned that when you interview someone about a subject that you know little about, the applicant, with their hand picked references, will sound impressive. References that will make the applicant sound something akin to a cross between Einstein and Zig Zieglar.
Instead, just like conventional sales, or your service department, make your Special Finance effort part of your culture. Make it a policy to have your sales management team trained and in tune with what it takes to make Special Finance succeed. Have the general manager (or yourself), a finance manager or desk manager work closely with the SF Manager to understand the finance companies and the relationships. Have the role defined and a job description in place. When change occurs, you not only know what it takes to make Special Finance work in your dealership, but you are interviewing an applicant to become part of your team to fill a role which you and your team have already defined – not allowing the individual to define it for you. Meanwhile, until that day occurs, your other byproduct will be (oh by the way) increased sales and profitability due to the fact that everyone is in tune with the Special Finance game plan.
Personnel change is inevitable and it always seems to happen at the most inconvenient time. Have a back up plan – just in case. Most of all, don’t rely on a single individual or a few individuals to possess all of the special finance knowledge that can have such a dramatic impact on your bottom line - EDUCATE YOURSELF!
Vol 2, Issue 11
Lending Tree’s most recent auto finance snapshot finds originations, amounts financed, and monthly payments all accelerated in 2018.