|Over the past four years, the United States has averaged 16,214,722 new vehicle retail sales. During the same time, the retail sales of used vehicles averaged 43,242,500—a combined total of 59,437,222 vehicle sales during the average year. As compared to 2003, total sales in 2006 dropped 1.2 percent|
During that same time, industry sources would estimate sales to non-prime and sub-prime credit customers have grown from approximately 16,000,000 to almost 19,000,000 sales—an increase of nearly 16 percent.
With shrinking US market share, domestic dealers have recognized that they must replace their lost new vehicle sales with used vehicles, a market where many of the vehicles sold are to individuals with sub-prime credit.
While it is reported that the average Beacon score is a 685, banks consider anything below a 720 Beacon or FICO score as non-prime credit. With credit unions the bar is set slightly lower, with 680 being the line at which prime credit begins.
As a consultant and trainer in the Special Finance industry, one of the first areas that I look at when working with a dealership is the makeup of the existing credit mix where the dealer has pulled a credit bureau. I look at the mean, the median, and perhaps most importantly, the number of existing customers who have credit scores below a 620. (I am not making a statement as to where sub-prime credit begins, but many existing reports seem to have delineations there, making it easier to compile the data).
When working with domestic franchises especially, I customarily see at least 60 percent of customers who had credit bureaus pulled with credit scores below a 620 Beacon or FICO, some as high as 70 percent. That doesn’t include countless others who did not have credit pulled because they were summarily dismissed from the dealership by sales personnel who had determined early on in the sales discussion that the customer would likely not be able to be financed.
Not long ago, I worked with a Toyota dealership which boasted the highest average Beacon score of all Toyota dealers in the country for customers financed with Toyota Motor Credit. The dealership credit bureau pulls indicated that nearly 40 percent of the customers they had pulled credit on were below 620. They average over 900 recorded opportunities per month. For the highest average credit score Toyota store in the country, that still means they had 360 Special Finance opportunities each month. With the benchmark closing rate being 17 percent, that means they likely were passing on over 60 deals per month. What about your store?
The lead in here is to an event so important that I feel there is no way you can afford to pass it up. The 2007 Special Finance Convention takes place September 23rd through 25th in St. Louis, Mo., at the Millennium Hotel. In three short years, this event has become the largest event in the industry with the sole focus on Special Finance. Auto Dealer Monthly is proud to have become a co-promoter of the third annual event.
This three-day event has been designed for dealers and departments of all types. The National Auto Finance Association leads off the convention with educational workshops designed to help dealers and their auto finance company partners, as well as discuss legal and regulatory issues that impact all dealers.
The 11 hours of educational sessions begin on Monday and break the expected 350 attendees into four groups based on their average monthly SF volume. The sessions will be moderated by four top SF trainers (yes, I am one of them). The lower volume groups will cover more training material in their sessions, while the higher volume groups will have the trainers moderating set discussion points, allowing attendees of all groups to get the pertinent information to take their business to even higher levels.
Auto legal experts Tom Hudson and Emily Beck will be there conducting an entertaining (yes, you read that right) and informative session on compliance, as well as answering questions.
Of course no convention is complete without an expo. With 11+ hours of exhibit hall time, all of the “Who’s Who” in the Special Finance industry – vendors and finance companies alike – will be present. If you need it, want it or wonder about it in SF, it will be here. With primary sponsors like AutoTrader.com, BlueSky Marketing, DealerTrack, DealerLink, Interim Funding, ProMax Online and Westlake Finance involved, you know it is going to be an all-out event.
Whether you are one of those dealerships that has been trying to figure out how to replace your shrinking new car market share, have built a foundation in the Special Finance business and are looking to break through to the next level, or already have an elite team looking to stay on the cutting edge, you simply cannot afford to miss this event in St. Louis.
Eighty percent of the dealers in the country have at one time or another been actively engaged in Special Finance. Roughly 20 percent are actively engaged today. Only 10 percent are excelling. With the base of sub-prime credit growing by the day and benchmark deal gross profits averaging over $3,400, more and more dealers are deciding it is time to get back into the SF business—and make it work this time. Don’t procrastinate! If you do, your competitor down the road might comes to this convention and grab your incremental business.
I hope to see you in St. Louis, and when you come, I promise you a SF learning experience that will be second to none.
See you in St. Louis!
Vol 5, Issue 9
Auto retail veteran and F&I products expert Paul McCarthy has joined AUL Corp. as vice president of national sales.