I just got off the phone with one of my good friends, who happens to be a client and one of the best dealers I know of anywhere. This dealership does a terrific job, is enjoying record (and significant) profits and is one of the largest-selling retailers around. After talking about everything from soup to nuts (no references to consumers or employees), the conversation rolled around to their special finance department.

Of course their department is doing well. They have great people in it, and have for a long time. From a volume standpoint, they are probably in the top 10 to 15 percent of the SF dealers in the market. What could be better?

The dealer and the employees of the dealership are not ones to rest on their laurels. They are always looking for ways to improve. In this case, their SF department is enjoying record volume. However, while production is up about 20 percent over the past year, after looking at the credit demographics of the store, there is no doubt that they are just picking the low-hanging fruit. It’s certainly not because they are lazy or unmotivated, but because you can only push so much water through a hose.

Hoses are funny things. It seems that I often find myself referencing water and hoses in the SF business, but darn it, they are appropriate metaphors. You see, during the repression years, the SF business seemed like it was trying to drink from a disconnected hose. No water flowing. During good times, like now, pushing the “go” button with your marketing can be like trying to drink out of a fire hose—not much water gets down and it has the ability to either drown you or rip your face off.

Then, there is the situation the aforementioned dealership is in, which demonstrates that regardless of the amount of pressure built up, a hose has a fixed diameter and only so much water can flow through it. This is something I see very frequently, especially now that the industry has moved forward again. When dealers cut their staffs to the bare bones or less in order to just survive, the diameter of their hoses decreased.

Due to many factors, including increased marketing, more customers are now contacting, calling and walking into showrooms. When comparing SF to prime credit deals, in general, more work is required to get them approved, signed, packaged and funded. When looking at subprime credit, it also can be said that the worse the credit, the more work is required. So what happens? It is simple. Even the most skilled individuals suffer from the hose effect. While their diameters may not be fixed (waistlines unfortunately expand and sometimes shrink), the amount of work they can process is fixed. They can only process so many deals. The tougher the credit, the more work it requires, which is why Tier 3 and certainly Tier 4 subprime credit customers are often put on the back burner.

You don’t have to be a high-volume dealer like the one I was referring to in order to experience this dilemma. Indeed, lower-volume dealers will generally experience this problem earlier and more often than a bigger dealer. So what can you do?

As long as there is plenty of water pressure (leads or opportunities), then simply adding another hose (more people, more efficient systems or both) will allow more water to come through.

In the case of my friend’s dealership, they have four or five very talented salespeople, each selling an extremely high number of units each month. The problem is, while the desk is working the deals, getting them approved, packaged and funded, the salespeople, due to a myriad of reasons, are contracting their own customers.

This raises a number of concerning issues, but for now, I will address the one that revolves around opportunity. If you have more customers than the finance office can possibly work with in a fixed amount of time, the dealership is losing business especially when the salespeople are spending time contracting customers instead of selling. If it takes 20 to 30 minutes to contract a customer and you deliver just 20 units per month (low in this case), that is as much as 10 hours taken away from the time salespeople have to work with new customers. That is 20 percent of their work week being lost. If you have four salespeople, you have just lost a 40-hour work week. Add to that the amount of time the SF manager and assistant lose every week due to copying and packaging and you lose even more time. And it is more significant time, as these are the people trying to structure approvals on higher-risk customers.

So what was my suggestion in this particular case? Add a finance assistant or contractor to the staff. This dealer can add a person to handle all the SF contracting, which in turn will also give them a more efficient, consistent and more compliant delivery. In this case, the customer has already been presented a finance menu, so the assistant simply handles the paperwork to ensure all notices are properly given, the delivery is executed properly, funds are receipted and all copies of deal stipulations received. This individual also is the person who handles the review, packing and shipping of the deal and follows it through funding. They are paid a skilled clerk’s wage with a per-deal bonus based on funding time and will make $28,000 to $36,000 a year depending on the market.

Now, will this always be the answer for a hose that has reached its capacity? Of course not. Each dealership has individual systems, processes and cultures, but it certainly demonstrates why a problem exists and how it can be fixed by taking a step back and looking at the issue from a different perspective.

I have been involved with special finance now for over 22 years, the first 12 as a dealer and the last 10 as a trainer/consultant. For the past 22 years, I have said SF is all about consistent execution of sound processes. Those processes are built around the same 10 Critical Components, but each dealership will integrate those components differently. Take a step back and inspect your hoses. Is there too much or too little pressure? Are they disconnected or kinked? Each represents a different challenge or opportunity.

Until next month,
Check your hoses!

Vol. 8, Issue 8

About the author
Greg Goebel

Greg Goebel


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