Training » 5 Critical Success Factors

1. Dedicated subprime department/personnel:

Properly sold, subprime business is handled completely backwards from your prime business and should be separated from it. This staff “owns” subprime. They are trained for it and paid solely off the sales from subprime, which brings accountability. They know your lender’s programs and niches and how to control the customer to maximize gross profit.

2. Proper lender relationships:

Proper mix of subprime lenders that purchase contracts covering the full spectrum of “B through D” paper. Typically dealerships should be working with 6 to 10 lenders, including some “deep” lenders with higher discount fees. No one lender will buy it “all”, but securing every possible approval is necessary to maximize profit for the department. Your staff must properly manage lender relationships including Look to Book (submissions cost lenders money), Time to Fund, CITs, Bank Fees and more.

3. Appropriate inventory:

Driven by the average income in your market. Vehicles should be inventoried to match not only your customer’s income and budgetary constraints, but also your lender’s underwriting guidelines. The majority of marginal credit customers need to purchase used vehicles due to budget limitations. Vehicles need to be purchased far enough “behind book” to afford discount fees and yet still enjoy significant profit. Typically, they are program or auction vehicles, not retail trade-ins. Some new vehicles with factory rebates also structure well.

4. Efficient business systems:

Managing a subprime department requires administrative work. A central log to track the dealership’s subprime traffic separate from your A and B traffic. Ability to capture and keep customers involved solely in a credit decision until you are ready to move them to a product decision. Processes and systems to work the customer: Initial Callbacks, Setting Appointments, Prioritizing Workflow, Interviews, Stip Collection, Income Verification and more. 100/50/25/10 rule – also referred to as Subprime metrics - For every 100 workable leads, you should be presenting approximately 50% of them to your lenders. Of the 50% presented to lenders, you should be seeing an approval rate of approximately 50%. Of the net 25% approved, you should deliver between 40-60% resulting in a net 10-15% delivery ratio. Desking software - very helpful for structuring deals and maximizing profit.

5. Marketing:

A system to consistently generate and capture a high quality of lead and measure results! “John Q. Public” - Television, Print, Inserts, Radio, Billboard –advertising reaches the whole market and follows the 100/50/25/10 rule. “Targeted” Direct Mail advertising pre-screens prospects based on actual credit filters and improves your subprime metrics. Both work well. Lead quality and quantity are variables that need to be balanced to match your dealership’s capacity and optimize your ROI. Goal is to gain market share, and where and when possible, to sell across franchise lines to do so.