1. Success, like water, flows downhill. Commitment from your entire organization is needed... that means “buy in” from ownership, senior management and your Subprime staff.
2. Evaluate, implement and reinforce the fundamentals of Subprime: Dedicated Personnel, Proper Lender Relationships, Appropriate Inventory, Efficient Business Systems and Effective Marketing.
3. Properly managed, Subprime customers are sold completely backwards from Prime customers. Work your prospects backwards. Your “Payment Call” will determine the finance appropriate price point and vehicle.
4. Make sure your staff “smells the money” in Subprime. The last thing you want is someone who is not passionate about Subprime to be working your Subprime customers.
5. Leverage your Special Finance Manager’s unique skill set. Your SFM is earning the dealership money when hanging paper, rehashing approvals and landing customers on finance appropriate vehicles.
6. The sales effort in a special finance deal is not in the “walk around”. Make sure your pay plan appropriately rewards the people who create the sale.
7. Need to find good special finance staff? Invite your lender reps to lunch to see who they know. Ask about “first chair” candidates looking for more opportunity and “second chair” candidates ready for more responsibility.
8. Evaluate your lender relationships. Rate each lender you fund contracts with by tier of paper (A/B/C/D). If you are weak in a tier, fill it with at least two lenders. Include niches: no money down, low income, equity buys, high advance, high mileage, open BK, self employed, first time buyer, military, Federal ID vs. Social Security #.
9. To find new lenders talk with others. Talk with successful Subprime dealerships that are outside of your immediate market area, your Twenty Group and your lender Reps. The better ones typically know which other lenders are effectively helping their dealer base.
10. Build solid working relationships with your lenders. When you help them get what they want (contracts), they will help you get what you want (approvals and funded sales).
11. Get to know the lender’s guidelines. Understand not only what is printed on paper but also the Rep’s and Buyer’s interpretation of their program. Learn the lender’s way; don’t try to teach them yours.
12. Lenders look for 3 things: Ability, Stability and Willingness. Look for it before you submit an application for approval. Don’t forget to rehash your approvals... they are part science and part art form.
13. Don’t step over dollars to get to nickels. Pure economics don’t always drive the right funding decision. It may serve you to earn a few hundred dollars less on one deal to insure your lender “owes you” two more.
14. Structure your inventory for Subprime. You should buy specifically for it. Vehicles should be inventoried to match not only your customer’s income and budgetary constraints, but also your lender’s underwriting guidelines.
15. Look for vehicles you can buy $1,000 to $1,500 back of wholesale book. Finding these vehicles covers the fee structure of your lenders, potential negative equity and still affords room for good gross profit.
16. Some of the better profit opportunities are with current year vehicles –“like new invoice”. Also look for feature rich vehicles that book higher. Consider mileage constraints. Don’t forget “virtual inventory” available from your manufacturer’s online auction.
17. Consider the credit demographic in your market area. Profile the percentage of B, C and D paper you see and mirror your inventory to match it.
18. Inventory to Sales ratio should be ~ 2 to 1. If you plan to sell 50 units, have at least 100 on the ground. Remember “approvals” will mean nothing unless you have vehicles your prospects will buy!
19. Maintain a central log to track your Subprime traffic separate from your Prime traffic. We only manage what we measure, so make sure your log allows you to measure performance with each critical task in the Subprime sales process.
20. Controlling the timing of product decisions is your responsibility. Following are three steps you can take to improve control.
21. First, look at your advertising. Make sure your advertising directs your Subprime prospects directly to your Subprime staff. You don’t want your customer landing on a vehicle prematurely.
22. Second, separate initial customer interviews from the sales process. The use of toll free numbers and the purchase of auto finance internet leads are the most effective ways to do this.
23. Finally, create a “credit counseling” culture within your Subprime finance and sales staff. Their responsibility is to help customers “re-establish credit” or “secure the credit necessary” to purchase a vehicle.
24. Live operators capture better interviews and have a higher call capture rate. At the time your advertising runs, make sure you have sufficient capacity to answer calls. Lost calls mean lost sales.
25. The initial customer interview is the foundation of the sale. Be sure it is done correctly... every time! Income is the most misreported piece of data submitted to lenders.
26. Is your lot traffic being handled properly? To maximize your closing ratio and gross profit, be sure your reps ask non-offensive finance questions as a part of their “Discovery Process”.
27. Don’t consider your leads as “leads”; consider them as “ups”. You would not ignore an “up” on the lot. Don’t ignore any of your “leads” either.
28. To prioritize workflow, rate your leads based on your perceived chance of making a sale. Your rating should be a function of your customer’s credit, job & residence history, down payment, trade equity and capacity to repay a loan (DTI ratio). Add to that your lender pool and inventory.
29. Use a rating scale of A/B/C/D. An “A” you would spot deliver, a “B” you’d spot with the right structure (low advance, low pmt, money down etc.), a “C” you’d submit first for approval and a “D” is a get-me-done.
30. Now follow up... but don’t cherry pick. Work your “A” leads first, then your “B” leads and down the line. Thoroughly work and set appointments with everyone. Leads not contacted translate to lost sales.
31. Don’t overly pre-qualify the customer. Cash down and co-signers will be easier to come by after you establish a relationship with a customer and land them on a “finance appropriate” vehicle.
32. Only have a phone number or incomplete information? Still follow up. Many prospects that provide incomplete information are smart enough to not have everyone pull their bureau. With “hand holding”, they can become great customers.
33. Know the answers, before the questions are asked. Customer questions and concerns are not unique. Keep a list of Frequently Asked Questions and train your staff by them.
34. Follow up quickly and be persistent in setting appointments. As hours pass, your chance of selling the customer diminishes. It may take 6-8 phone calls. Persistency and consistency will sell more vehicles.
35. Sell the appointment not the vehicle. You are in the loan origination business. Explain the process to the customer and set an appointment “to finalize the details of their approval”.
36. Keep the barrier of entry low. If you initially ask a customer to bring in every necessary stip, while your competitor asks for only a few stips, the customer may never show for your appointment.
37. Set appointments at 15 minutes before & after the hour. Create urgency. Assume today when setting appointments. Vary the times of your recall schedule if you miss someone the first time.
38. Have a manager call back to confirm your scheduled appointments. A call from a manager improves your show ratio by making the customer feel more important.
39. When confirming appointments, ask customers “How are you going to be getting to the dealership?”
If directions are needed, provide them. If transportation is needed, provide it.
40. Define a strategy for your customer’s arrival. Greet, collect stips, manager’s credit interview and “land the car on the customer”. Ask for referrals after the sale.
41. Track and continue to work your prospects... this can add 20% plus to your bottom line. Immediately call missed appointments. Future opportunities actually buy vehicles. A no-sale today is not a no-sale tomorrow.
42. Advertise specifically for Subprime sales. Re-active business (desk turns) comes from lot traffic. Pro-active business comes from advertising that targets Subprime customers.
43. Your dealership’s website home page needs a link for “Good Credit, Bad Credit – Click Here”. Have that link land on a page with pre-qualifying information plus a link and/or toll free number to get pre-approved.
44. The majority of your Subprime advertising should be “blind”. Blind advertising engages prospects in a credit (not product) decision, expands your market share across franchise lines and protects your dealership’s reputation.
45. “John Q Public” advertising reaches the whole market by Internet, Television, Print, Radio, Inserts, Billboards and follows normal Subprime metrics (100/50/25/10 rule).
46. “Targeted” Direct Mail advertising pre-screens prospects based on actual credit filters and improves your Subprime metrics.
47. What advertising will work best for your dealership? It depends upon your capacity which iså defined by the strength of your staff, lender pool or ability to fund the customer, inventory and business processes.
48. Measure your R.O.I on advertising. Determine what lead type brings your dealership the best ROI. A lower lead cost doesn’t necessarily translate in a lower cost per sale.
49. Get an analysis of your market. If the goal is gain market share, you need to know what percentage of your market is Subprime vs. Prime. Learn how to target the better quality Subprime prospects.
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