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Why It Pays To Cheat: Sage Advice From Waikem Auto Group's Special Finance Department

In school, Doug Waikem couldn’t cheat; his report card marked with Cs and Ds. In business, however, “…you can cheat!” he exclaimed. “I simply find the best guys in the business, then do exactly what they do.” With Doug’s cheating method (which some might call open-book research), the Waikem Auto Group has gone from averaging five to 10 special finance deals per month in 2005, to a current average of 45 deals per month. Special finance now fuels approximately 35 percent of their used car gross profits.
The Waikem Auto Group, a family-run corporation in Massillon, Ohio, encompasses 13 franchises under six rooftops on 40 acres, all along the same auto strip. A customer can walk past all 2,000 cars without ever leaving Waikem grounds. With such a huge campus, Waikem, who runs the business with brothers Chip and Dave, needed to copy a bunch of notes (best practices) from the most successful dealers.
For two-and-a-half years, the Waikem team copied all the SF knowledge they could find. They listened to Greg Goebel, Special Finance trainer and consultant, who advised them that only 20 percent of dealers in special finance ever reach their full potential and they were determined to be in that 20 percent. They visited several dealerships, including Champion Ford in Erie, Pa., watched their business practices and then emulated them back in Ohio.

The Waikems finally decided it would work best to have two special finance centers for all stores—a main “control center” on the south side of the strip and a smaller center on the north side, through which all special finance deals must filter. Louis Giavasis, secondary finance director, oversees the department from its main control center. The control center houses a staff of two to five (depending on the number of incoming leads, 60 percent of which are Internet-based) that sets appointments and follows up with phone calls.

LEAD PROVIDERS: The “Biggest Scam” in Special Finance
Equipped with the right business model, Waikem’s team set out to acquire the best leads. Even with his “cheating” tactics, Waikem admits he has lost money through much trial and error. He now believes the lead-providing business is overcrowded with “scam artists” and no longer considers a provider unless they can satisfactorily answer these questions:

  • Do you sell these leads to anyone else in my area? Is anyone in my radius getting these same leads before I do? 
  • How did you obtain the credit application? Do you provide your own site where customers can apply for credit, or do you gather leads from a pool source? 
  • Are these prospects actually looking for a car? What were the customer’s intentions? Were they applying for a home loan? Were they filling out an application as part of a sweepstakes entry? Were they trying to win a car, or buy a car?

Waikem figures if he can save $1,500 by “purifying” his leads every month, he can put that extra $1,500 toward buying more leads. How does one purify leads—by not paying for the “bogus” ones, according to him. Three tell-tale signs of bogus leads are:

  • A customer with a credit score lower than your targeted score (e.g. less than 500).
  • A teen driver who filled out an application online and cannot be financed easily.
  • A customer with a non-working phone number who cannot be reached.

If a dealer provides 100 leads in a month, and 20 of those leads are bogus, “…then we need to deduct those 20 from the invoice,” he said. It’s a battle many dealers don’t want to fight, but Waikem constantly sticks with it.

Of the countless lead providers, Waikem has found only half a dozen he considers “useful.” His favorites are: InterActive Financial Marketing Group, CyberLead and blueSky. Of these, he feels that blueSky is the most thorough at prescreening leads.

Market Thief, another lead source, generates leads by pulling credit bureaus and mailing out pre-approved offers (in Waikem’s name) to a specific score range and geographic area. They will also deliver phone numbers, excluding those on the Do-Not-Call list, to Waikem for quick follow-up. Additionally, 5 to 10 percent of consumers will respond to Market Thief’s letter using an 800 number or at a secure Web site, which redirects them to Waikem. “There is a high likelihood that other dealerships [are not] equipped to handle these credit-challenged consumers,” said Denny Long, senior vice president of Dealer Marketing Services, Inc. “Waikem, on the other hand, has the tools—right lenders, right inventory and right attitude—to help them.”

If the recommended advertising cost averages around $400 per vehicle sold, Waikem is willing to spend as much as $600 or $700 per vehicle sold in special finance, because his SF gross profits are 30 to 40 percent greater. At Waikem Ford, for example, special finance makes up 25 percent of sales in numbers, but claims 40 percent in gross profit dollars. The higher gross profits justify the risk.

He estimated 25 percent of their advertising/lead budget goes toward Market Thief currently, and 16 percent is spent on dot-com lead providers. Another 21 percent is spent on radio and television spots. “Print is dead; I haven’t advertised in the newspaper in 5 years,” Waikem commented.

Direct mail is also important, but the only mail campaigns Waikem trusts are those from bank databases. The bank’s own data lets Waikem target customers within a certain credit rating. If Waikem Auto can place those customers in the right car with the right payment, the bank is usually willing to finance them.

INVENTORY: What the Bank Wants
The next step is to prepare the lot for sub-prime shoppers. It is imperative, said Waikem, to “build your used car inventory on what the banks want you to sell the customer. A car at 29,900 miles is worth $700 more than a car with 30,001 miles.”

The “perfect” car varies from finance source to finance source, said Giavasis. Most prefer a 2000 model unit or newer, with 70,000 miles or less. They would rather finance domestic rentals—Fords and Chevys that have already wrung out most of their depreciation—than a less established import brand, like Kia.

“No Volvos or SAABs,” said Waikem.
Stocking inventory for 13 stores is “a daily struggle,” said Giavasis, for which they hire designated buyers to visit used car auctions everyday. They also skim online listings at and similar sites to see what other dealers might want to get rid of. They round out the numbers with trade-ins and lease returns. Waikem likes to stock 110 to130 used cars per lot (depending on the size of lot), with a consumer price tag range of $8,000 to $11,000 per unit.

SALES: Our Pizza Shop, Our Process  
Once sub-prime leads cross into the showroom and become three-dimensional customers, they are greeted with a process known as R.B.I. SCORETM, courtesy of Rising Beyond Incorporated. Every salesperson follows the same formula, across the board. “You may make good pizza,” Waikem declared, “but it’s our pizza shop, so you have to make the pizza with our recipe.” The basic sales recipe, or R.B.I. process, is:

On Deck Circle:
Always preparing for the next opportunity

First Base:

  • Personal Acceptance
  • welcome
  • exchange information/ask questions
  • make a personal connection

Second Base:
Product Acceptance

  • select a car
  • vehicle presentation
  • demo ride

Third Base:
Customer Offer

  • set the stage
  • develop a commitment from the customer
  • present a solid offer

Running Home:
The Sale

  • make the first counter-offer
  • find a win-win agreement (if no agreement, leave them with an incentive to come back)
  • close the deal

Waikem is happy with this process. However, he discovered that special finance needs a slight revision. “Special finance customers are shopping for a loan first, a car second,” elaborated Giavasis. The key is to find out if the customer is special finance before they fall in love with the wrong car. Asking, “How’s your credit?” seemed too blunt and offensive. Waikem had to devise a subtler way to gather clues. During the “exchange information/ask questions” step, Waikem’s sales staff will plug in a “trigger” question to reveal the customer’s credit standing, such as:

  • Are you here for our big sale?
  • Are you here to take advantage of our credit rebuilding program?
  • How do you like your bank?

Waikem also suggests looking at the customer’s license plate frame. Is it from a franchise dealer, or a BHPH lot? Giavasis added one more question to help pre-qualify customers: Who financed your last car?

If the customer triggers a sub-prime answer, they are rerouted to the “special finance” version of R.B.I. SCORETM. “It’s similar to the [original] R.B.I. model,” said Giavasis. “The only difference is we find out their credit situation early on in the process and get them financed.” After the customer is qualified, next comes the selection process (normally second base), then the final steps to the sale. The R.B.I. stays in place because “it makes the customer feel comfortable,” said Giavasis. “The special finance customer gets no less respect. We want to keep them as customers because we know their credit will improve.”

Recently, a couple from Akron, Ohio, drove over 20 miles to the Waikem Auto Center because they were unsuccessful getting financed with other dealers. When the deal was closed at Waikem, the couple told Giavasis, “We’ve never been treated this nice even before we had credit problems.”

Waikem wasn’t surprised. “Car dealers like helping people,” he stated. The resultant “good marks,” or high customer satisfaction scores, make all the cheating and note-taking worthwhile.

Vol 4, Issue 10

Originally posted on Auto Dealer Today



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