The Road Map to Success Part II

Last month we started a review of the road map to Special Finance Success.  We discovered that there were 16 mile markers on that road and we covered the first nine in detail.  This month we want to look at the other seven in detail.  The first nine were:

1) Hire the “right” person – the right person for the Special Finance position needs to have these talents.
2) Always ask the million-dollar question.
3) Take a complete detailed and accurate credit application.
4) Keep telephone conversations brief and scripted (No exceptions)
5) Handle every deal with a sense of urgency.
6) Turn finance declines into approvals.
7) Be the MASTER of overcoming objections
8) Follow-up
9) Effective Advertising

10) Inventory

Inventory is a significant mile marker on the sub prime market road. The national monthly payment average for a Special Finance loan is $350 per month. Your majority of your sub prime inventory should consist of vehicles in this payment range. To be in this payment range, it is not necessary to watch miles, but the amount financed and the term you can get approved for a particular vehicle. It is also a good idea to keep a mix of vehicles that appeal to various customers.  Here is a good mix to use:

Department unit volume (10) x 1.5 units in inventory=15 units

  Let’s say you keep 30 cars specifically for Special Finance.
  The mix of units you would need to keep is:
  3 SUV’s (4x2 and 5-speed)
  4 Small Trucks (4 cylinder, 5-speed) 4x4 and 4x2
  3 Base Full Size Trucks (6 cylinder, 5-speed) 4x4 and 4x2
  4 Base Vans
  5 $200 to $250 monthly payment cars
  5 Mid size cars (i.e. Taurus, Malibu, Mitsubishi Galant)
  3 Full size cars (i.e. Impala, Bonneville, Maxima, Camry)
  3  $250 to $350 sporty cars

You will also sell from your regular inventory, but this will allow the tough deals to have a good selection to pick from. You will also get conventional retail deals out of this inventory.

A rule of thumb to use when purchasing Special Finance inventory is to buy it at least $1,000 back of NADA average trade after you deduct/add for options, miles and deduct for any potential repairs and reconditioning costs.

  Net NADA Average Trade
  - $1,000 (Minimum)
  - Estimated cost of repairs and reconditioning

Mileage table for figuring payments:
Miles  Suggested maximum ACV

< 50,000   $13,000

  50,000   $11,000

  60,000   $10,000

  70,000   $ 8,000

< 80,000   $ 8,000

  90,000 to 100,000 plus  $ 6,000

To give the Special Finance department a good selection of vehicles to work with, purchase vehicles based on the above mileage and maximum dollar ranges.  This is not an exact guide! Each vehicle must meet mileage and value restrictions as well as be at least $1000 under adjusted NADA trade value.

11) Use technology to maximize time usage

Remember the days when we did not have a printer and computer to print loan documentation and the mountain of paperwork we are required to do? We had to hand-write all of these forms. I used to set aside an hour to complete a set of loan documents and transfer forms.  Today, we do it in 10 minutes. Without technology, we could not grow our departments. Dealerships need a good desking tool for Special Finance. Desking software takes the customer’s purchase structure and payment requirements then matches every unit in inventory to the lenders parameters on loan to value, rate and term within seconds. Without this technology, a Special Finance department is faced with hand booking every vehicle in stock and trying to match the customer to finance parameters and the best inventory to maximize gross while meeting the customer’s needs.  Without desking software, customers leave the dealership frustrated after spending several hours searching inventory then go to the dealer down the street that utilizes one that gives them options and has them on the road with signed contracts in hand in 30 minutes. DON’T BE PENNY WISE AND DOLLAR FOOLISH—give this department a desking tool that works.
 

12) Track your performance

See Exhibit A for sample form

We see variations in performance numbers from one dealer to the next, but there is consistency from one successful dealer to the next. If you track your department’s performance, it is easy to see where issues may need to be addressed or what might have been more effective. Always look at the black and white numbers; they will not lie to you. If the Special Finance department is getting 100 applications per month and they are only delivering 10 cars, you have some issues somewhere. The issues could range from weak closing, to inventory, to bad lead sources to handling the telephone calls improperly. When you track the numbers, you know when there is an issue. A smoke and mirrors show is not necessary, just good old fashioned due diligence to figure out what the real culprit of your low sales closures are. 

13) Delegate

Delegating job duties is a important mile marker on your road to success. Clerical duties should be the first thing you delegate to and “assistant”.  These mundane chores will tie a talented Special Finance person down, not allowing them to focus on what makes everyone happy—making more deals and consequently more money.

14) Let the second face handle the customer

One of the first lesson’s I learned as a sales manager was that I could hold more gross if I let the sales people handle the customer through to the last pass. My grosses doubled when I pulled out of the process until we were all in (or so the customer thought). Don’t underestimate the second face ability to hold gross and close a higher percentage.

15) Hold Gross Profit

In Special Finance we cringe when a sales person prices a car. Just the other day, I was training in a store where the sales person had priced the vehicle we were selling to the Special Finance manager (thank goodness not the customer). The selling price was $10,995 per the sales person, however  the lender approved the line three advance of 115% plus tax, title and license—that raised the maximum selling price to $11,655—leaving $600 on the table. We closed the customer on the higher price, but if the price had been quoted, that $600 would have been a figment of my imagination. DO NOT PRICE YOUR INVENTORY until you know how the deal needs to be structured. This will give you the opportunity to sell off line three advances, which will usually add to your profit and consequently, you will probably be working payments. Isn’t that the way we have been taught?

16) Attend a training class twice per year

I love going into a new store, I know even a green pea will stumble on something I never knew and teach me something. Get outside exposure – even one thing learned will help you put another deal together. If you have a sharp Special Finance person, invest in training to further their knowledge.  Exposure to outside ideas and education will challenge your staff and improve your department’s p