Tracking Your SF Numbers

I have tracked the performance of special finance departments (and dealerships) since the mid-90s. For years, the data was pretty consistent. Deviations from year to year between industry averages and benchmarks were fairly small and always upward. Then, the recession hit in the latter part of 2008, and for the next 18 months, the special finance market went into a complete tailspin. In a cyclical industry marked by distinct ebbs and flows, this became such a low-water mark that it took many dealers right out of the SF business.

It is now a full year after the SF market has returned from the doldrums. It has been a year marked by the easing of credit policies, slightly higher advances of the finance companies serving the market and improved dealer operations. Most significantly, it has been a year of increased amounts-to-finance and monthly payments. Indeed, many dealers are now performing at sales volumes and gross profit levels near the peak four years ago.

Deal volume and gross profits have increased so dramatically that I recently felt it prudent to perform an interim recalculation of the SF benchmarks. (A complete recalculation will be performed and presented at the 2011 Special Finance Conference held in late September.) This recalculation revealed that gross profits are already up mid-year by $313 for franchise dealers (to $3,117 per deal) and $145 for independent dealers (to $2,949 per deal).

So how exactly do you stack up? That is the question that I hear and see repeatedly through calls and emails each month. To simplify the answer, we have created a quick and easy online Special Finance Profit Analyzer that you can complete in a matter of minutes.

To use it, simply go to SpecialFinanceInsider.com, our sister publication and the sponsor of the 2011 Special Finance Conference. Once there, it is hard to miss the “Profit Analyzer” tab. Simply click on it and you will find a form to complete with data about your department (or store if it is a standalone SF location). Benchmarks (the 75th percentile, meaning one of four is above it and three of four fall below it) have been calculated for three different types of dealerships—franchise, independent and independent locations that are owned by franchise dealers (i.e., they have all the franchise finance companies). Once the data is entered, simply click “submit” and you will instantly see how you compare.

The profit analyzer takes into consideration a number of factors, some of which many dealers may not be currently tracking. If that is the case, the dealership will plug in some assumptions that pull from the average sale rates, average credit demographics and average conversion rates. In any case, you will instantly know where (if) any opportunities exist for your dealership. I have seen many instances where a dealer will be performing above the benchmark, but are falling woefully short in other areas.

The lead conversion ratio is where I see many dealerships currently missing opportunities. Dealerships performing at and above benchmark level are still converting one or more out of every eight opportunities, and that counts e-leads. When lead conversion is off, it always ties back to the Ten Critical Components for Success in SF. Generally, it will be inventory, the phone or the sales process.

A classic example occurred recently. I took a call from a dealership in North Carolina – a state in which dealers traditionally have done well in SF. The caller couldn’t understand why they were having such a hard time getting customers to set appointments and then show up for them.

In this case, it involved one of the most common situations I see. It is where a dealership is working leads from either a lead provider or their own website, and rather than contacting the lead immediately to set an appointment, they either call the customer to work their credit (or even worse, work it based on the information they have) in order to secure an approval. They are often successful in getting an approval, but can never seem to be able to reach the customer (that likely has bought elsewhere by now). If they are able to reach them and get them into the store, they have either scared the customer off or given them “credit muscles,” which means they now know they can buy and will shop every other place near them as they always know they can come to your dealership.

About three hours after I took the call from the North Carolina dealer, I received a detailed email from a former 20 group member seeking answers. In this case, it was again simple. I logged on to their Promax system and examined their inventory. While the inventory they had booked out quite well for SF, it was far too expensive for the credit demographics they were seeing come in the door. Almost every approval was causing them to have to cut the sales price (and ultimately the amount-to-finance) back so far that their gross profit disappeared, eliminating the chance to put together deals. These are just two examples that I commonly see, and they just happened to come in nearly back to back. 

When you finish with this article, go to SpecialFinanceInsider.com and analyze your department. It won’t take but a few minutes, and if for some reason you aren’t tracking all the information that is asked of you, that will give you a good idea of other areas that need to be tracked in order to better manage your efforts.

Finally, highlight September 26 to 28, on your calendar. That is when the 2011 Special Finance Conference will travel to Las Vegas for the first time in its five-year history. This year, we’ve teamed up with F & I and Showroom and their annual Industry Summit, which should provide an unparalleled educational opportunity for everyone in your sales and finance department. Don’t miss it!

Until next month,
Check those benchmarks!