Get Your Game On!

industry. I won’t bore you with chronicling the events—everyone who has anything to do with the industry knows them by now. During the downturn and at our 2008 Special Finance Convention in August, I was warning dealers, based on what I saw coming, that I felt it was time to be lean, mean, nimble and cautious. It was like the perfect storm coming. Unfortunately, I was right.
 
I also said that I expected the bottom to take place between Thanksgiving and Christmas, and I expected the first quarter of 2009 to be about 10 percent better than the last quarter of 2008. As I write this, it is hard to say if my prognostication will be correct, but I am happy to report that dealers I work and communicate with all over the country are reporting their business for the three weeks since December 26, 2008, has certainly improved, particularly for special finance.

If you have been sitting on the SF sidelines, like many dealers I know have been, it is time to get in the game. Business is out there. Credit is easing, and dealers are reporting solid SF business, just as you would expect this time of year.

So where do you start?

To no surprise, I always focus first on inventory. To do that, however, you need to look at your dealership’s credit demographics. Survey the credit scores you have had in your dealership or department over the last 30 days. Determine the percentage of scores that are subprime. Mind you, scores themselves don’t determine credit tiers. Depth of file, job time and income (among other things) do, but you can use the scores to at least determine the approximate percentage of your business which is subprime. Then you can approximate which scores will go with which finance companies. In the end, you will be able to say X percent will be approved by a certain tier of finance companies, Y percent by another tier, and so on. (Many dealers will also find a percentage of customers who have such poor credit that they will not be able to be approved through any finance source.)

As you drop down the credit tiers, the required inventory tends to become older, higher mileage, and less expensive. In order to take advantage of all credit tiers, it is important to stock inventory at the necessary levels to fit the credit demographics you are attracting to your department. I can’t stress how important it is to have inventory that will match up with your credit tiers, salable with monthly payments under $400, and of course owned at values that provide sufficient spread to earn gross profits.

Next, to get in the game, you need to attract your share of the market. What is working? Depending on their size, dealers report seeing results with everything from Internet leads and direct mail all the way to broadcast media. I am not suggesting that you become a spendthrift. You must be prudent, but to be in the game now, you must engage, lest you become a self-fulfilling prophecy. This is income tax refund time. It won’t be as big as it has been in years past, but older cars are still breaking down and customers who haven’t bought in recent months seem to have more confidence and are still in the market. With fewer dealers and fewer SF departments in business, by getting in the game, your market share can actually be larger than what it has been in years past.

Finally, to be in the game, you have to execute. That means sharpening telephone skills to turn leads into showroom visits. It means using proper sales techniques to determine whether they are a green balloon or red balloon, and then performing a good credit interview in order to turn the customer from a paper application into a living, breathing human a credit analyst wants to approve.

All this requires well-trained personnel. Did you lose staff during the downturn? Most did. Did the training continue for those who remained? Many have found themselves stretched thin and training seems to be the first thing to go. Go back to the basics. Start from square one. Train, coach, measure and manage. Departments had to be proficient to succeed when times were good. Do you think when times are tough you can get by with less?

The first quarter of 2009 can make or break the entire year. You either can get off to a good start or spend the entire year trying to make up for a bad start. Right now, the choice is yours.

Until next month,
Get in the game!