- Commitment - Senior management must make the commitment to support the sub-prime profit center. This includes advertising, inventory, staff and training.
- Accountability - The sub-prime department must be held accountable daily. The amount of business available today requires reporting and tracking mechanisms that insure success.
- Separate Department - Successful sub-prime departments are separate from the F&I department and employ trained professionals who create another profit center.
- Training - The sub-prime arena is changing daily and training is imperative. To quote a very successful motivational speaker "If you think education is expensive…. Try ignorance!" Sub prime financing is different from traditional F&I and requires ongoing training for all staff members.
- Lender Selection - With the number of lenders demising it is more critical than ever before to select good lenders and build solid relationships. Lenders today track each dealerships progress and refuse to do business with dealers obtaining large numbers of approvals with a low percentage of funded loans.
- Customer Interviews - Most problems in sub prime could be eliminated if managers would take the time to conduct proper interviews! This is the time when every part of the transaction falls into place. Any time short cuts are taken and interviews not conducted the deal has problems. Often it is the deciding factor in getting a loan approved or funded. Remember "Speed Kills!"
- Shotguning of Applications - This method serves no purpose and only hampers the relationship between dealership and lender.
- 800 Loan by Phone - This is a great method of obtaining leads however dealers should not submit these applications to lenders until customer has been interviewed and qualifications are met.
- Inventory - Stocking the right inventory is the key to increasing deliveries. If the market place you are located has an average income of $1500 per month do not stock vehicles that require payments of more than $350. Lenders normally approve customers for 18% to 20% payment to gross monthly income.
- Advertising - Be careful what you wish for, it may come true! Advertising should be designed to attract qualified customers. It serves no purpose to have 100 prospects that do not qualify based on income and other factors. When dealerships attract customers through advertising that do not qualify it hurts the moral and sends a negative message about the sub-prime department.
- Funding - This can create serious cash flow problems if not managed properly. Employ a trained clerk to handle all funding. This person should be paid based on the number of days it takes to receive funds from lenders. Sub-prime managers need to spend their time working with customers and delivering vehicles. The cost associated with a trained funding clerk is nominal compared to the cost of money not collected. Dealers should review the contracts in transit for sub-prime daily with the funding clerk.
- Customer Delivery and Follow Up - When customers are explained equipment and delivered properly the probability of after sale problems decreases and the number of good referrals increases. Sub- prime customers can and will account for a high number of additional sales through referrals.
Obviously there are additional areas that impact success or failure however the ones listed serve as a great starting point and daily checklist. Sub-prime financing is here to stay and dealerships who make the commitment and pay attention to this department daily will reap the benefits of exciting new profit center.
Happy New Year,
See you at NADA!
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