"Why Do Sub Prime Departments Fail or Never Exceed 25 Units Per Month?" While attending one of the many sub prime conferences a few months ago I realized that dealerships still do not really understand sub prime therefore in many cases failure occurs or at best they deliver 25 or less units per month. As I attended workshops and spoke with dealers and special finance managers from across the country it became obvious that most were more concerned with fancy software packages promising to increase profits and streamline the process or marketing programs that drive additional traffic. I am not saying these products are not important and in most cases necessary what I am saying is when I have consulted with dealers who failing or not delivering an adequate number of units each month it is normally because the special finance department put more emphasis on technology and marketing than properly working customers or managing inventory. We all know that better than 50% of the buying public over 18 years old has some type of credit problem and that will continue to grow as we see more layoffs, downsizing, divorces and overspending on credit cards. This being the case maybe we should consider paying attention to the strategies that have proven successful since 1993 when dealers realized that additional money could be made by selling cars to consumers with less than perfect credit. Successful dealers continue to focus on commitment, proper inventory, professional interviews, strong relationships with lenders and daily operating reports that insure success. In 1994 I developed a tracking system to monitor calls, appointments made and actual show ups from the appointments. When used daily, this system continues to help special finance departments increase deliveries and gross by simply paying attention to the numbers. I have seen cases were dealerships contact less than 25% of the people who call their 800 credit lines! That is ridiculous, especially given the fact this is an event driven call, these people want to buy a car and are making the call in an attempt to do so! Dealerships that treat special finance as an important part of their overall business plan consistently manage by the numbers daily and insist on reaching benchmarks that have been tried and proven for over five years. I have listed a number of areas that may lead to failure or in most cases low volume: 1. Lack of Commitment and Planning, dealerships often fail to review numbers daily such as number of calls, show up appointments, delivery percentage of appointments and advertising results. Management must inspect what it expects. 2. Inventory, in many cases stocking vehicles that meet income demographics for your market will increase sales. If 75% of the inventory finances at $425 per month and the average income for your market is $1700 per month customers cannot buy even if they like the vehicle because of lenders payment to income ratios. Is inventory ready for sale? Are vehicles being wholesaled that could compliment the special finance inventory? Has management set unrealistic expectations on per unit gross that could result in customers buying elsewhere because management will not sell if deal is below the expected "average"? 3. Lenders, often dealerships try to work with too many lenders, which in most cases results in poor overall relationships. Lenders want and need to buy loans however they refuse to deal with applications that have been sent to numerous sources or applications that have not been reviewed for accuracy. Are loan packages clean and correct for funding? What is your approval rate with each lender? Has management with lenders to discuss funded to approved and loss ratios? These are very basic things that successful dealers do every month to insure great relationships with 3 or 4 lenders who do not have overlapping programs. 4. Training, why this is so hard to accomplish is beyond me! When visiting dealerships it is obvious in the ones who are not successful, that the staff has no clue how to properly handle credit-impaired customers. Sales persons show vehicles before they know any pertinent information and in many cases special finance managers never conduct interviews and try to get loans approved without even reviewing the customer application! This makes no sense, given the cost of advertising to bring people in why not handle each one professionally and look for ways to make deliveries. Are systems in place to handle leads from toll free credit applications? Is each customer contacted until they come in or do we simply pull a credit bureau and decide they can't buy? Successful dealerships have solid business plans for special finance that includes lender selection, proper advertising that attracts customers who can buy, correct inventory for their market and weekly training for all staff members. These dealers also insist on daily operational reports, save a deal meetings, contracts in transit reports on each lender and insist that each customer be treated with respect regardless of credit status. Technology and powerful software are very important as are direct marketing campaigns and infomercials however none of these will sell more vehicles to credit-impaired customers if the basics are not in place or if leads are not followed up on. I have been asked hundred's of times "how can I break the 25 unit mark and be successful like other dealerships are?" The answer to this is simple, develop a solid business plan using the above items and remain focused each day on getting customers approved but more importantly making deliveries after the approval is received! Often special finance departments have an abundance of approvals but because of incorrect inventory or the fact they never asked for a down payment commitment during the interview delivery is impossible. Too many times when customers are finally reached they have purchased from another dealer who handled the entire deal more professionally and maintained control. 2001 will be a great year for special finance provided you plan for the growth now! I hope you enjoyed N.A.D.A, it was good to see so many of our dealer friends in Las Vegas. I hope this article helps you increase business and profit during 2001! Good Selling, Paul Snider President CreditIQ, Inc./VOISYS Systems Corporation Clearwater, Florida paul@getvoice.com