Adjusting With the Market

To simply look at Auto-Torium’s special finance numbers, it would be easy to forget the subprime upheavals and poor economic climate that dealers must contend with these days. However, keeping their sales consistent from month to month has not been accomplished without some effort and a few adjustments. As finance director T.C. Munroe said, “It’s a very, very delicate balance.”

Auto-Torium began as a small independent dealership about 17 years ago in Manchester, N.H. According to Munroe, who has been with the company for 15 years, the company’s owner, Greg Marino, started out with “$10,000 and a handful of cars.” The Manchester dealership, which was initially a buy here pay here operation, has grown to include four additional locations in Hooksett, Plaistow, Nashua and Salem, and is now a franchise dealer for Suzuki and Isuzu. Approximately 60 percent of their total sales (or roughly 200 units per month) come from special finance. 

Each store has a finance manager who handles both prime and subprime deals, with Munroe overseeing all five locations. Since the special finance department is integrated with the rest of the sales floor, the entire sales staff must know how to handle special finance customers.

New salespeople are initially trained by one of the stores’ sales managers, all of whom are very well-versed in special finance. They are then assigned to shadow a senior salesperson for several days in order to become familiar with the sales process. “We do have in all our stores a big veteran sales presence,” said Munroe. “These guys have had years of experience in the automobile business and particularly in the subprime business.” Sales training is ongoing; Munroe believes that one of the keys to being a good salesperson is staying informed of the latest developments in the market.

It seems that Auto-Torium’s staff has managed to stay on top of the most recent developments in special finance. The dealership has remained successful despite the challenges that have caused many dealers to take a beating over the past several months.

That is not to say, however, that they haven’t felt the pinch of the subprime lending shakeups. “Yeah, it’s definitely impacted us ... we continually search for subprime lenders,” Munroe said. The dealership has lost a few finance sources, but Munroe believes their constant search for new banks and finance companies has lessened the impact of those losses and has helped keep their special finance performance consistent.

He explained that they regularly monitor any new subprime banks or finance companies waiting to get approved by the state’s banking commission and will make contact with those companies. He mentioned a particular finance company that recently began doing business in the state. “We were aware of that [source entering our market] six months ago and had been calling them and very aggressively pursuing them to take us on,” he said.

In addition to recruiting new finance sources, maintaining the relationships they have with their existing finance sources is high on Munroe’s priority list. Auto-Torium’s finance managers pay close attention to the balance of their portfolios with each finance source and each one’s look-to-book policies, as well as their delinquency rates. Munroe expressed concern that more finance companies are now using computer software to automatically analyze a deal and grade it according to the bank’s internal scorecard.

The problem with these computer-generated decisions, he said, is that there is no one at the bank to talk to about it. “I’ve been doing this now for 20 years, and you used to be able to pick up the phone and call the bank on a turn-down and try to rework it,” he said. “Very few banks offer that now.”

For those banks that will still let them rehash a borderline deal, Munroe said, “rapport is everything.” Dealerships must make a greater effort to cultivate those relationships. For example, he said, they recently took pizzas over to one of their banks, which gave them the perfect opportunity to sit down and talk with the bank’s finance managers.

Another factor in keeping Auto-Torium’s sales performance consistent, according to Munroe, is their effort to maintain a consistent level of advertising. In addition to traditional methods like radio and print, the dealership uses e-mail blasts and also relies heavily on mailers. He estimated that they probably send out anywhere from 100,000 to 150,000 mailers per store. While they’ve had to spend a little more on advertising to keep seeing the results they’re accustomed to, Munroe said that it has worked out well for them.

The dealership is also very active in purchasing leads and has a sizeable monthly budget just for that purpose. Munroe said they acquire leads from at least 10 different third-party providers. Leads are also obtained through the dealership’s own Web site, which has been improved upon over the last few years by BDC manager Frank Tortolano.

Tortolano has successfully driven more traffic to the dealership’s site and increased their leads by pushing their inventory out to sites like AutoTrader and Tortolano commented that he also tried to make sure that all advertising directs consumers to the site.

Monitoring the performance of their marketing efforts is essential, a duty which falls to Auto-Torium’s BDC. With help from the sales staff, who obtain a lead and ad source for every person who comes into the dealership, the BDC tracks the effectiveness of their advertising and third-party leads.

“At any given point,” said Tortolano, “we know exactly what each ad source brought in that month in terms of contracts, appointments, shows and solds.” The dealership reviews this information on a regular basis to assess where they’re getting the best results and which ads or third-party lead providers are not performing.

The BDC, based at the Nashua location, manages special finance leads for all five stores. It was launched approximately two-and-a-half years and now employs 10 business development representatives (BDRs), all recruited from the sales floor. Tortolano, who joined the company 11 years ago as a salesperson at the Manchester store, helped to get the BDC off the ground.

Several years ago, Tortolano began taking care of Internet leads after a broken ankle made it difficult to keep up with the pace on the sales floor. At that time, the dealership had a Web site, but, according to Tortolano, “We weren’t actually using it properly.” He set out to redesign the site, which eventually resulted in more leads than he could handle—even with the help of an assistant. They initially turned to an outsource solution for their lead management needs.

However, said Tortolano, “it was expensive and we felt that we could do it probably just as good as they could, if not better, with the sales background and the salespeople that we had.” After outsourcing for only six months, they used the knowledge they had gained in that time to start their own operation.

Today, the BDC manages all of the dealership’s leads and incoming sales calls, sets appointments, makes follow-up calls to no-shows and unsold showroom traffic, tracks advertising, and handles tasks like e-mail blasts to existing customers for specials or targeted campaigns. Auto-Torium’s business development representatives are provided with ongoing education by a trainer from outside of the dealership. Tortolano also listens to and critiques calls to help the BDRs improve their skills.

Despite all of their efforts and vigilance the dealership is still facing challenges. Munroe believes two of their biggest ongoing challenges are maintaining positive relationships with existing finance sources and continuing to finding new subprime finance sources. Another challenge is the problem of obtaining financing for any customers in the lower tier of subprime.

Because so many finance companies are tightening up, Munroe explained, there are more and more people who, despite having sufficient job and residence requirements, cannot be financed anywhere because banks and finance companies have increased their minimum scores for subprime. “We just feel we’re missing a big part of the business, especially in today’s economy,” he said.

This was the primary motivation for the dealership’s latest move: re-entering the buy here pay here (BHPH) arena. BHPH will enable the dealership to continue to handle customers below a 540 credit score without being forced to place that paper with finance sources who, Munroe said, charge astronomical fees on such deals.

He observed that BHPH brings the dealership full circle. Tortolano, who had just started working for the dealership at the time they were moving away from BHPH, pointed out that another advantage to handling BHPH is that those customers can eventually become prospects for purchasing a car through more conventional means of financing.

It’s this kind of ability to adapt and willingness to look toward the future that have undoubtedly enabled Auto-Torium to maintain peak performance during some difficult times. Munroe best summed it up: “We just keep tweaking our business model and doing what we have to do and adjusting it accordingly to what the market’s doing.”

Possible sidebar:

After a lead is delivered to the BDC:
• An automatic response is sent via e-mail
• The BDR attempts to contact the prospect
• If unsuccessful, the lead passes to the appropriate sales department
• Salesperson attempts to reach the prospect at a different time of day
• If unsuccessful, the lead passes back to the BDC for follow-up in two days

Once the prospect is reached:
• An appointment is scheduled with the general manager of the appropriate store
• When the prospect arrives at the dealership, the GM does a meet and greet.
• The GM introduces the customer to the sales manager
• The sales manager turns the customer over to a salesperson to work the deal
• If it’s a no-show, the BDC follows up and reschedules

Special Finance Insider Vol. 2, Issue 3