Proper Qualifying  Produces Profitable Results

I spend the majority of my time working with F&I people in dealerships. Let me tell you, there is some pent-up frustration in their offices right now. These F&I people are getting the wrath of dealers and other management coming down on them. Not only are their numbers running lower than they have in years, but they are not getting the deals bought that they once could.

Yes, a lot of this is due to finance companies pulling back and tightening up; however, the cold hard fact is the desk manager should be yelled at much more than the F&I personnel. Desk managers continue to pencil and structure deals that have little chance of approval. They shove the deal into finance and expect a miracle to occur; if the miracle doesn’t happen, its finance’s fault. In rare situations when finance is able to get the deal bought, chances are the margins are slim with no opportunity to make any additional income on the back end. Tensions are at an all-time high. Stress is off the charts. So what’s the answer?

While I don’t claim to have an answer to all the problems hitting our industry today, I do have a good idea on how to alleviate some of the strain. These answers lie in the processes. Imagine the surprise of a finance manager when I tell him I can fix his low margin problems and it has nothing to do with him/her. They don’t have to change their process and procedures in the finance office. Think about it; here is a person who has been beat down and yelled at (sometimes threatened with their job), and I walk through the door and tell them I can double their production (and paychecks) and they don’t have to change a thing.

The next time I show up, they are inviting me to lunch. Basically, what happens in this situation is, I look at the processes the dealership is using. Over 90 percent of the time the problem falls back into a certain realm—qualifying! The most important step in the special finance sales process is to identify the creditworthiness of the customer at the beginning of the sales process. This means do not spend one to two hours with customers to bring them in, get them committed, run a bureau and then try to hammer the deal through. This will not work!

Salespeople need to find ways to know what type of credit the customer has by inserting a simple, non-offensive question or two. The goal is to single out the customers who have credit issues. Instead of following the standard road to a sale, veer off course with these customers and get them qualified financially. Ultimately, the focus shifts from presenting and selling a car to qualifying for financing and then presenting cars for which the customer qualifies. I always recommend having the desk manager pull the bureau and giving the salesperson three vehicles to choose from. Unit number one is the highest gross and most profitable deal, unit two is a lesser unit than what the customer is after and unit three is an old-age unit that must go away. Chances are they are going to land on the most profitable unit.

This process sounds simple enough, right? I can tell you from experience that the only way a process like this truly works is to have constant training systems in place. When these processes are trained and used on a consistent basis, the results can be astounding. I have literally seen back-end grosses go from $300 per copy to $1,800 per copy with the finance manager using the same selling process.

With the economic downturn we are experiencing, it is imperative that each and every opportunity be maximized when selling a vehicle. We can’t afford to do business like we did in the past. Special finance has been harder hit than any other segment in this downturn; with this in mind, if the deal is not structured properly up front and/or the customer is landed on the wrong car, you are blowing a great opportunity. In this market, we don’t get many second chances, if any at all.

Special finance is not just about advertising “guaranteed financing” or “bad credit, no problem” on your Web site. Special finance is about running a system to facilitate customers in purchasing an auto no matter what their past credit experiences are. The real question is whether a dealership wants to facilitate profitably. Dealerships cannot react to the customer as they did in the past. They must be proactive. This includes a lot of very important processes, but I can assure you none of them are more important than good qualifying.

Give your store (and your F&I person) an opportunity to seize every chance to be profitable. Teach your salespeople how to qualify properly and follow the correct steps when a special finance customer is uncovered. You will be amazed at how a few simple components can swing the pendulum in a store when it comes to special finance profitability.