Over the past eight months I have detailed the Eight Essential Elements of Special Finance in this column. I thank the many readers that have written with kind words and questions. This month I will address the most common question I receive, that being “My department (dealership) is struggling and I know that my inventory is in good shape. Where should I look first?”
Assuming that the inventory truly is in good shape (something that I hate to ever assume), the problem is that eliminating just one of the eight elements is like trying to drive a car on three wheels; possible, but not particularly fun or effective. Most dealerships that are struggling have more than one element missing.
If I had to focus on a single element (outside of inventory), I generally suggest you focus on the sales process/deal structure. Since the majority of Special Finance operations are operated as a one or two person “island” within the dealership, many of the leads that they receive (but hate to count) are ineffective turnovers from the prime sales or finance side of the store.
These “leads” are the ones that have been worked (to death) as a prime credit customer, only to find out that there is no possible way the customer who has been closed on a $30,000 vehicle can be approved. The obvious problem present in this situation is that this process often takes 48 to 96 hours to dead-end, and by then the customer is so frustrated and disappointed (rightly so) that by the time the Special Finance Manager receives the deal it is as cold as the winters in Wisconsin. If, and I stress “if”, the Special Finance Manager is able to work something out with a sub prime lender, the gross profit of the deal will certainly be greatly reduced in order to get the customer qualified.
The trouble is that this scenario occurs in nine out of ten dealerships everyday – multiple times. With all due respect to many of the renowned sales trainers across the country, the sales process that they teach seldom, if ever, considers the fact that the customer has substandard credit. Unfortunately, more than half of the buyers walking into most showrooms have credit problems. With that being the case, any sales process that ignores that fact will cause the ordinary Special Finance deal (those with the $3400 deal grosses) to derail.
I have talked and trained many very competent Special Finance Managers who are frustrated at always having to pick up the pieces of shattered deals. Yes, they are marketing their own leads with which they are able to work the process correctly beginning with the phone call. They also realize, however, that opportunities simply walk in the door, but with the sales team assuming that all customers have good credit, they know most of those opportunities never have a chance to become a viable deal.
So what is the answer? In my training seminars (and in these pages) I have, tongue-in-cheek, offered “Balloons!” It would simply be nice if the customers coming to the dealership had to park their car and walk over to a balloon rack and select the appropriate balloon – green for good credit or red for sub-prime credit. Then any salesperson would know which sales process to begin, and not cause the customer frustration and embarrassment.
As we all know, I haven’t seen many of those balloon racks. Therefore the key, regardless of the department structure, is inserting a simple, non-offending qualifying question (or two) into your meet-and-greet process. It can be as simple as, “Are you here for the big sale today? Great! Are you interested in our special [insert the appropriate number] percent APR interest rate program for people with preferred credit?” If they the answer is yes, they just became a green balloon and you would proceed with your normal 11 steps to the sale. If the answer is no, or some stammering and stuttering then you simply reply “No, then would you be here to take advantage of our special financing programs to help you establish or re-establish credit? If they then answer yes, you simply reply “Great, please follow me inside and we can get you quickly pre-approved.” They have just become a red balloon and you proceed with the traditional Special Finance sales process.
In some stores the “Red Balloon” will mean turning over the customer to the Special Finance sales team or department. In others, it will mean beginning to offer the customer the opportunity to discuss their credit background. Ultimately, with this customer, it means that the focus shifts to qualifying for financing rather than looking at a specific vehicle. The customer is shifted out of the typical 11 steps to the sale. The process begins with getting a customer statement and getting a credit bureau report as early as possible.
With that information available, a Special Finance Manager or Desk Manager can assess which, if any, programs the customer will qualify for, and what budgetary constraints will exist with the available lenders.
This is a process that the customer also appreciates. In most cases they are already well aware of their credit challenges. The last thing they want is the frustration, embarrassment and wasting of their time by being shown vehicles they cannot qualify for. Following this process means the dealership will have a much better opportunity to deliver a vehicle, and the sales process for these customers will be a more positive buying experience.
If you will simply dedicate your dealership to identifying the strength of the customer’s credit early on in the sales process, you will certainly put your dealership in a position to deliver more vehicles every month, at a substantially greater gross profit.
