It’s Tax Season

Except for those individuals who filed for bankruptcy and now have trustees holding their money to pay off debts, the vast majority of special-finance customers will receive tax refunds. To get you revved up for what could be a joyous time of the year, here are eight tips to get you ready to move the metal.

1. Recognize Your Customer’s Situation

Did you know that more than a quarter of all U.S. consumers have a FICO score of 599 or less? Well, that’s what Fair Isaac Corp. reported back in July. That’s why it’s important to take the time to understand your customer’s situation and take on more of a counselor’s role when working with your credit-challenged prospect.

And when you’re creating a marketing plan for tax season, make sure your ads don’t send the wrong message. The last thing you want is for your potential customers to think you’re out to seize their refund check. You’re simply offering a service to help them get into a vehicle with as little of their refund as possible.

2. Be Targeted With Your Direct-Mail Campaign

Remember: It’s quality, not quantity. Rather than running a 20,000-piece mailer, consider reaching out to 10,000 of your customers twice. This will emphasize that your dealership is there to help them find transportation. Taking this tact also may go a long way toward building trust with your potential customer.

3. Mine Your Database

You’ve heard dealership experts say it before, but when it comes to special finance and tax season, mining your database is an essential step. Get in there, dig up your e-mail addresses and create a targeted e-mail campaign. Best of all, these types of campaigns are relatively inexpensive to produce and allow your dealership to reach a large number of customers.

If you don’t have the time or the manpower, consider a third-party marketing company. These companies can contact customers multiple times, if needed, to ensure a good response. Just make sure the company you choose is familiar with your state’s advertising laws and be sure you approve anything sent out on your behalf.

4. Call the Tax Man

Your greatest marketing tool might very well be the local tax service company. So, get on over there and see if they’ll help be part of your marketing efforts. You may even want to sweeten the pot by offering incentives, such as agreeing to pay tax preparers commissions whenever they send one of their customers to the dealership. Once you have them onboard, load them up with dealership fliers and brochures they can hand out on your behalf.

Another effective strategy is to partner with an online tax preparation company and offer your customers an in-dealership refund service. These companies usually make money from the refunds they prepare, which minimizes the cost to you.

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5. Offer Cash Incentives to Customers

Offering to match a customer’s down payment puts a little more of your dealership’s skin in the game and demonstrates to customers that you are willing to work with them. Some dealerships will even offer matches of up to $1,000.

6. Get the Right Inventory

Tax season is coming earlier and earlier every year, so hopefully you’ve already started seeking out inventory. But there’s another reason you need to have your inventory in place before the end of the year: See, auction prices tend to drop every year during late November and December, as dealers look to cut their inventories at the end of the year.

That’s not the case in January, however. In some cases, the difference between buying in December and January can be $1,000, so get going. A good place to look for the right vehicle is on classified Websites like Craigslist.org. There you’ll find sellers looking for some extra Christmas cash.

7. Prepare the Lenders

You will be sending your lenders a lot of business over the next three to four months, but you also will be asking for some favors to get the hard deals done. This is a good time to make sure your lender relationships are strong. So, get on the horn with your reps and find out how your portfolios are performing.

Additionally, make sure you have a proper lender spread, because it’s important to have different lenders that buy all tiers of credit (prime, nonprime, subprime, equity and niche). This allows you to capitalize on every opportunity that walks through the doors.

8. Maintain Your Underwriting Fundamentals

Maintain your underwriting standards during tax season to avoid unnecessary delinquencies and losses. So, if you’re in a position where you need to stretch on deals during tax time, make sure the customer has a big down payment and minimize any exceptions. Think of it this way: If you have to repo a car, at least the bigger down payment will help offset the loss you’re going to take.

Rob Hagen is founder and president of Next Generation Dealer Services, a Houston-based consulting firm specializing in special finance training. E-mail him at [email protected].