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Attracting the Unattractive

September 2009, F&I and Showroom - Feature

by Denny Long

While some dealers have closed or greatly reduced their special finance departments, others feel that special finance is alive and well. The truth is, the average credit score across America is at its lowest level in years, which means special finance will be a key component to the economy’s rebound from the worst recession in decades. So, is your dealership ready to take advantage of the opportunities that will be available in the coming months?

A number of prominent special finance lenders have recently announced that they are starting to rebuild and add dealers again. Money is starting to flow back into the system, which means it’s just a matter of time before consumer confidence rebounds as well. Most experts agree there is a tremendous pent-up demand for vehicles. So where are the immediate opportunities?

Open Chapter 7 Bankruptcies

There are a number of lenders that are currently buying open Chapter 7 bankruptcies (Tidewater and Prestige for example). The number of consumers filing bankruptcy is increasing. This is a recipe for success for the dealer who is ready with the right lenders, the right vehicles, and the right marketing programs.  

I have talked to a number of these lenders and the message is clear: Financing these consumers is much easier than most think. Direct mail is by far the best, easiest, and typically least expensive method to contact these consumers in need of your service. Depending on the size of your market, you will likely need to send only a small amount of mailers each month. I would recommend that you hit this group two or three times after filing. You can do this by hitting a group of filings in the last 90 days, and you can do this once per month. You will also have new people joining the group each month, while older filings will fall out the other end. I call this the revolving method, and it represents a great opportunity.

Recently Discharged Bankruptcies

This is another group that is fairly easy to get financed. After all, in most cases these consumers have just walked away from many of the debts that were eating up any discretionary income. I know of a number of dealers who send mailings every month to all bankruptcies discharged in the last 12 months, and they tell me the return on investment is fantastic. This wasn’t true 12 to 24 months ago when every dealer in the country was targeting this group. It’s likely you’ll find that you have a lot less competition for these consumers right now, especially since, as mentioned previously, many dealers are not focusing on this highly profitable group.

Low Credit Scores

If you are one of the dealers that’s seen the light and kept your special finance department rolling, you need to take full advantage of the intelligent decision you made. A couple of years ago it seemed like every dealer was targeting this group, but now you may be all alone. You can easily select the credit score range (say 520 to 599) and ZIP codes within a reasonable radius of your store. You may also want to add a few other filters, like no repossessions in the last 12 months and no multiple repossessions on file. These are typically deal killers, so it doesn’t make sense to target anyone you can’t place. On the other hand, there are a number of regional lenders that do buy these consumers. Make sure you know what your lenders have to offer before ordering your direct-mail program.

In-the-Market Leads

Did you know you can target consumers that had their credit bureau pulled for auto financing purposes? If you are the one progressive dealer in your market that is still serving special finance consumers, this is the best way to take advantage of your situation. After all, your competitors are likely telling these consumers their credit isn’t good enough. Imagine how excited they will be when they receive a phone call or letter from you, telling them that you can help. The response rates on this type of program are through the roof!

There are a number of ways to help the economy, the local population, and most importantly, your dealership. Good luck and good selling!

Denny Long is senior vice president of Dealer Marketing Services. E-mail him at

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