Blending The Special Finance And BHPH Sales Floor: Three Dealers Share Their Keys To Success

B.A. Nerison didn’t just talk the talk about helping his buy here pay here (BHPH) customers restore their credit. He walked the walk for years; working collections, actually reporting to the credit bureaus and helping people work their way back up from the ranks of FICO’s basement dwellers.

Then he lost them. With their credit back up from the bottom of the financial totem pole, they would go out looking for a late model, low mileage vehicle to replace the BHPH cars – typically retailing at $8,000 or less over a 24-month term – he had put them in. Because he wasn’t set up to cater to these newly remade special finance customers, the loyalty he had earned was squandered.

The customers moved on to some other dealer.

“We were the ones taking a chance on them,” says Nerison, the general manager and owner of Wheel City in Sioux Falls, S.D. “But we didn’t have that newer vehicle to let them get into.”

In order to keep his customers – and meet his ambitious plans to grow the business – he switched over to a blended sales floor three years ago. Now, he and his sales people can expertly switch-hit on a BHPH customer or a Special Finance customer.

He can tick off the reasons without a moment’s hesitation.

“We were losing a tremendous amount of business. We had already developed the relationship. They wanted to do business with us, and we didn’t want to lose out on that market share. We’re always creating our own customers in sub prime and prime. It’s really a natural transition for us.”

But that didn’t make it easy.

To complete the transition, Nerison had to change some mindsets. Instead of putting customers into his own program, he had to willingly send them on to a financing source like Americredit or Wells Fargo. But, Nerison’s oldest mindset is still a daily reality: Treat your customers right, work a deal with honesty and integrity, and they’ll keep coming back.

One other thing: Don’t ever stop training.

Training, training and training

“One of the key things to making this work is to eliminate turnover and training, training, training,” he stressed.

According to Nerison, sales people “have to know how to handle customers and make sure they’re not running customers through loops. We don’t deviate on training. It’s five days a week, 8 to 9 every day,” says Nerison.

Other top dealers who have proven themselves in running a blended sales floor endorse that sentiment wholeheartedly.

“We spend lots and lots of time learning our processes and training our people on those processes,” says Scott Pitman, who runs Gorges Motor Company of Wichita, Kan. To make sure that all their customers get treated the way Pitman intends, he offers sales people a bonus system based on the total number of cars sold.

“My sales people don’t care of its good or bad credit. They’re just excited about getting paid,” says Pitman.

“We have a very heavily managed floor,” adds the dealer. There is roughly one manager for every two sales people. The training budget gobbles up 50 cents compared to every dollar spent in advertising – a ratio that would stun most dealers. Pitman works hard at blending training with motivation, celebrating successes as a way of reinforcing his management’s sales philosophy.

“Today we had a lady, well, we needed to do a special deal for her,” says Pitman. “She needed somebody’s help and had been abused by some of our competitors. And I was able to share that story and teach it to the team. [Customers] get to see us as more than just selling cars.”

Training is particularly crucial if, like Pitman, you take a subtle approach to identifying prime, sub prime and BHPH customers through a subtle series of questions.

There are some obvious giveaways, says Pitman. If a sales person’s first question centers on where the customer heard about the dealership, they know where they stand when the customer answers back that they heard one of his ads for people with bad credit. If they press on to learn where they bought their last car and obtained their last loan, they’re usually pretty well clued in whether they’re dealing with a retail customer with good credit, a Special Finance or potential BHPH customer. Anyone with credit challenges to deal with is immediately urged to come in and fill out a credit application, so the sales people will then be able to know what kind of vehicle they can qualify for and what kind of payment they can be expected to cover.

“Right now, sitting in the showroom, are eight or nine guests,” says Pitman as he’s talking with Auto Dealer Monthly. “I have one couple here with perfect credit, and they know we’ve been in business for a long time. They’re not going to be treated nicer; we offer the same great environment to everyone. But the credit customer needs to slow down to speed up. They need to slow that process down so we can get back to the lot and show them cars they are qualified for.”

Get me a credit app

Ryan Linnehan, president of Linnehan’s Credit Now! Auto Company, with lots in Maine, has the same objective as Pitman, but he takes a somewhat different approach to getting there. In his world, managing a blended floor requires a disciplined approach to gaining a credit application as early as you can in sales process.

“If you can get me a credit application,” Linnehan tells the sales people, “we can pull the bureau. With that, we know what we’re dealing with.”

That general guidance holds true no matter how the customer is contacting the dealership; phone up, walk-in, online – the credit app is the first step to get them pointed toward the right inventory. That way, customers don’t sell themselves on a vehicle they can’t afford to drive home.

“It’s not impossible to switch from one vehicle back to something they can afford,” says Linnehan, the fourth-generation Linnehan to help run the business. “But it’s easier the other way around. It sure is hard when they fall in love with a $30,000 Yukon and they qualify for a $10,000 Grand Am.”

That’s why it’s so important to make sure that every step of the process in dealing with a customer is choreographed in advance, right down to the dialogue sales people use.

“Scripting is like a curse word to some people,” says Linnehan. “You don’t want it to sound canned. Script it the way you want it and role play it enough so that it sounds natural when they do it with the customer.”

But there’s no hard and fast rule that applies here. Both Linnehan and Nerison like to employ common sense in sizing up customers.

“A lot of our prime customers come from drive-bys and referrals,” says Nerison. “When they come in, pull up in a 2005 Chevy Suburban, we’re pretty sure their credit is pretty decent and we let them go out and tire kick.” Linnehan’s subscribes to the same process for sizing up potential buyers.

In general, though, anytime a customer makes contact, the first thing Nerison wants – like Linnehan -- is a credit application.

One way or another, Nerison also wants their contact information. All that information immediately goes into his database of potential customers, whether they end up buying a vehicle or not.

A blended sales floor calls for more than just subtlety in dealing with customers, but also how Pitman presents the lot to the public. Unlike a lot of BHPH operations, Pitman steers away from the big signs that scream BAD CREDIT/BANKRUPTCY NO PROBLEM. It may cost him something in the BHPH niche, but he makes it back with other customers who would otherwise be turned off, and away, by the pitch.

Add it all up, says Pitman, and a blended approach will always pay off.

“For me, what I like about it is that it’s counter-economic,” says Pitman. “If the Buy Here Pay Here market is down, the retail market is up and vice versa. And at tax season, Buy Here Pay Here and Special Finance goes through the roof. It just insulates me from ups and downs.”

Making the transition

To fully succeed, you need to make sure that everyone on the dealership team subscribes to the same philosophy as the owner.

“Make sure you have integrity in your finance department,” says Nerison. “My younger brother is working for me now, but that always hasn’t always been the case. We went through several people in the finance department.”

Whoever you get, you want to avoid all the old nightmares about dishonest sales tactics, adding on options and putting people in cars they can’t afford. “Stips are a big thing,” adds Nerison. “Get all the stips lined up, the utility bills, pay stubs and everything else up front, or you’re chasing your tail.”

From Nerison’s perspective, getting to the point where you can handle any customer allowed him to expand inventory. Instead of strictly dealing with lower-priced vehicles, he gradually added a new selection of ‘04s to ‘06s on the lot. He now has 120 to choose from.

But you can’t make the switch overnight, he insists. Prepare to spend plenty of time educating your customers about the new role. Make sure your advertising hammers home the message that anyone, with any type of credit, can get a good deal.

“You can’t just go out and buy 100 vehicles and say, ‘OK, I’m going to go out and do sub prime,’” says Nerison.

Nerison is on track to balancing out his SF and BHPH business at 50/50 with monthly sales at 200 vehicles. Last month, he hit 164 sales, with 63 in Special Finance. To hit his overall goal, however, he needs to gear up Special Finance sales to about 100 a month.

That kind of balancing act can become second nature to a dealer.

“To me, Special Finance is the natural progression from Buy Here Pay Here,” says Linnehan. “That’s the obvious next step that you should go. We picked up the risk with Buy Here Pay Here, giving them a chance to show that they are responsible and good people, making payments. Once they've reestablished credit to where a Special Finance source will finance them, we need to make sure we have the ability and the options to retain that customer at our dealership, rather than having to send them down the road to another dealer."

It’s not that big a leap, adds Linnehan.

“Our RFC (related finance company) is another Special Finance lender, although a deep buying one with a closely knit relationship,” he says. “They’re just another source with 35 other financing sources that I’m getting deals through.”

For Nerison, it all boils down to good business.