|Take the oldest family-owned Volvo franchise in the United States, dating back to 1957, and add a strong used car operation with its foundation heavily centered on both sub prime credit and Buy Here Pay Here financing, and what do you get?|
To say the least, you get a unique mix in the auto retailing environment. To President, Marc Gorges of Gorges Volvo, and Operating Partner Scott Pitman, of Gorges Motor Company in Wichita, Kansas, however, it is a highly profitable combination.
To most, the idea mixing of Buy Here Pay Here and new Volvos would seem rather unorthodox at best. But in 1989, when the economy and credit market tightened significantly, Marc Gorges knew that something had to change.
Their location, near the Boeing Aircraft plant in Wichita, had been significantly impacted by the downturn. Worse yet, with tightening credit and Special Finance as it is known today not yet present in Kansas, they had few options.
At first, Gorges turned to a local bank, which offered him an option to do recourse financing. The thought initially appealed to him, but unfortunately the results didn’t follow. With repeated frustration over bank collections (or lack thereof) it was decided they would be better off bringing the notes in house. And it all began!
Starting out at a controlled pace of ten units per month, Gorges inched forward into the Buy Here Pay Here. “Our concept,” said Scott Pitman, “was to rate the risk, and to develop repeat business.”
Did it ever develop! Now 15 years later, Gorges Motor Company retails about 120 used vehicles per month, with an equal mix of conventional highline retail, Special Finance and Buy Here Pay Here, all at the very same location.
Their Buy Here Pay Here operation, which at one time bulged to nearly $15 million in outstanding balances, has been trimmed to between 900 and 1000 accounts. Honing collection practices over time has helped Gorges maintain a low repossession rate of 12 percent to 13 percent annually, and a net-net annual charge-off of just 7.1 percent against outstanding balances, which are some amazing statistics.
Pitman indicates that there have been many dealers that doubted their ability to combine all three types of sales on the same lot – especially when it came to new Volvos and the Buy Here Pay Here spectrum.
“While the business is never easy, we have been able to accomplish this is with heavy, heavy training,” states Pitman. “First of all, we do not hire people with previous automotive experience. We look for good people outside the business, generally in the restaurant or hotel industry – people with good communication skills.”
“We conduct one hour of training every day, for everyone, beginning at 8 AM. We try to eliminate the chance that a salesperson will face a situation that he will be unfamiliar or uncomfortable with.”
The companies have invested over $15,000 per year in training the last two years. “We utilize video training, videos (always under manager tutelage) from Paul Cummings, Grant Cardone and Joe Verde. In addition, we use material from Dave Anderson and Greg Goebel,” offers Pitman. The company works with D. J. Harrington to develop both phone skills and motivation. Finally there are their 20 Groups. “Perhaps the most important training tool we have are the two 20 Groups that we belong to – where you have a chance to learn from your peers.”
Gorges and Pitman also believe that personal development is so important that they scholarship all employees to Dale Carnegie.
Much of their sales success is their ability to determine quickly and without offending someone, whether the customer has come to the dealership for a specific type of vehicle or for financing assistance.
Finance Director, Thomas White adds, “Additionally, we are staffed to have our sales team meet-and-greet only – our managers do all the closing. In that process, we teach the sales staff to ask three questions. We have them ask how the customer heard of the dealership (our credit ads, retail ads or reputation); we have them ask if the interest rate will be important to them; and, we have them ask if they will need to know what they have to put down.”
“From there we generally know where we stand. We will quickly invite those indicating they want assistance with credit inside to begin that process, or, begin the traditional ten steps to the sale with the rest. Over the years it has become a simple process that we can execute consistently.”
Humbly, Pitman looks past another key factor to their success. For the past three years running, the dealership has been ranked either first or second nationally in Customer Satisfaction among all Volvo dealers; which again dispels a notion that often is perceived as incongruous in working with customers in the sub prime sector. Whether new car buyer or Buy Here Pay Here, everyone is treated the same and all business is genuinely appreciated.
One of the keys to high customer satisfaction is high employee satisfaction. When asked how they keep such happy employees, Pitman replied, “Low employee turnover. We target our employees, and then put so much effort into their success. We train them extensively, and make the store a fun place to work. There are lots of high-fives, bell ringing, and much recognition. Our store is a great facility, and everyone works among happy, well-dressed and presented people.
“We are way ahead of most dealers,” adds White. We are not afraid to use technology. All sales people have PCs on their desk and are live on the Internet. Our CRM tool, (OCM based in Gresham, OR) is Web based, even giving the employees the opportunity to follow up from home.”
“Ironically”, admits White, “when special finance lenders entered the market and we decided to investigate it in the late 90s, we were a bit behind the times. When we were talking to lenders about their “discount” programs, we thought they were crazy. Who were they to tell us how much we were going to have to discount our cars!” Gorges Motor Company caught on quickly however, and now one third of their business is done through special finance lenders.
The question that often comes up is pricing. How does a dealer display and/or price such a wide range of vehicles?
The Gorges team realizes that they are not the norm. Pitman states, “We price all of our cars on the lot and on the Internet. We do not alter our prices based on credit, and we do not pass on fees. We add a fair profit. This way, we do not alienate people. Our Buy Here Pay Here grosses may be lower than some, but we are still very profitable. Finally, our F&I process is very strong. We present menus and up sell opportunities to all customers, including the BHPH customers.”
With the overall progressiveness of the dealership, you would expect that they might market in a different manner as well. White explains, “We do many different things, but we are very focused on the Internet. We advertise our own Web site, AutoApproved.com. It is our most cost effective lead generator. We use blind ads, which allow us to attract the sub prime customer without turning Gorges Volvo into a ‘sub prime’ house.”
The team also uses Internet leads generated from third party providers. “They consistently rank second to all of other efforts. We use InterActive Financial Marketing Group (carloan.com) and we will close anywhere from 12 percent – 20 percent of their leads. We also do extremely well with leads from Cyberleads, and AfterBK, Inc. Leads from Driverloans.com and Cars.com round out their mix.
Gorges traditional ad mix then falls into two categories – Direct Mail and their local Thrifty Nickel. They do about 15,000 pieces of direct mail each month through Cactus Marketing, and each week have seven or eight consecutive pages in the Thrifty Nickel. All in all, their effective strategies allow them to maintain a paltry $225 per unit sold in advertising!
With CSI among the highest in the industry, collections of their BHPH portfolio averaging just 2 percent delinquent (one-day, one-cent) and selling 120 used cars per month, Gorges Volvo and Gorges Motor Company is a very rare breed.
When asked what advice Pitman would give other BHPH, he jokingly said, “Leave Kansas!” Then he added, “Seriously, treat your people well, and never quit training. We feel it costs less to train someone and have them leave, as opposed to not train them and have them stay! Happy and well trained employees will carry you a long, long way.”
Vol 1, Issue 2
A record year for dealer participation programs pushed CNA National past the $500 million mark in distributions since the company’s inception.