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5 Ways to Target Nonprime Customers

January 2008, F&I and Showroom - Feature

by Mike Tamas - Also by this author

One thing credit analysts agree on is the pool of credit-challenged customers will increase in 2008. That’s why it’s imperative that dealers have the right processes in place to handle their nonprime and subprime customers. Not only will dealers need to change the mindset of their front-end departments, but they will also have to manage the expectations of these customers throughout the entire transaction.

Looking at 2006 statistics from Manheim Consulting, new- and used-vehicle loans amounted to $400 billion, with 7 percent of the borrowers falling into the 680 or above FICO range. Thirteen percent had scores between 620 and 679. The rest fell into the less-than-perfect credit range, which insiders predict will grow in 2008.

The key to maximizing the opportunities that lie in these consumer segments rests in a dealership’s front-end personnel. They must understand that mobility is critical to how these customers endure the financial challenges they face. Doing so will not only get more customers into affordable vehicles, but it will also create long-term customer relationships.

Identifying these customers before they land on a vehicle is first and most important. This will help the front-end department understand the customer’s credit situation, which allows dealership personnel to quickly target a vehicle that fits the customer’s needs. Let’s review the five critical components to handling those credit-challenged customers:

1. Early Identification

Identifying a customer’s credit situations early in the process will eliminate the disappointment and embarrassment he or she will feel when it comes time to close the deal. The key is to ask the right questions.

An easy way to be non-confrontational in identifying a customer’s credit situation is by approaching him or her with a list of the dealership’s special offers. Ask the customer if he or she is at the dealership for a special promotion. Then, tell the customer about promotions that the dealership is offering, such as incentives, clearance offers, and any information related to how your dealership can help that credit-challenged customer finance his or her next vehicle. This should be done with all customers, regardless of their credit score.

Another way to qualify customers is to ask whether they intend to trade in their current vehicle. If they do, it is highly likely that they still owe on the vehicle. This is a good time to ask them who holds the certificate of ownership for the vehicle. Knowing who the customer’s previous lender is and the customer’s relationship with that lender will tell you right away whether that customer has had problems with the lender. It will also further clue you in to the customer’s current credit situation.

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