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The Marketing Divide: Special Finance vs. BHPH

August 2009, F&I and Showroom - WebXclusive

by Denny Long

In today’s world, there is a fine line between marketing a special finance department versus a buy-here, pay-here operation. As a matter of fact, it is really an overlapping line. The number of banks that will buy subprime paper today has greatly diminished. Some are still buying, and buying deep, but without competition from other finance sources, these still-active companies are being more selective. This has opened up some opportunities for those dealerships with a BHPH operation. Let’s look at a few target audiences and the opportunities for both business models.

Bankruptcies: The number of households that have experienced a bankruptcy is growing rapidly. At one time, this was the favorite target audience for special finance departments. Since there are fewer special finance departments today, recently bankrupt individuals are less likely to be bombarded by offers like they once were. If you run a special finance department and aren’t targeting this group, you are missing the boat. There are a number of good finance sources that will still buy this paper. And since you’ve lost most of your competitors, you have a better chance of getting a response.

If you have a BHPH operation, you too can take advantage of the lower number of dealers going after this audience. For either group, it’s still a small investment that typically pays off.

Shoppers With Low Credit Scores: Yes, there are still plenty of people out there who want to buy a vehicle, but these people are being turned down by banks at a higher rate than in the past. That hasn’t stopped them from trying to make a purchase. They still want a vehicle, but their assumption is that all dealers are created equal. So, if one dealer can’t get them approved for financing, it is likely that no dealer can help. Now, we know better than that, right?

You can target shoppers in this segment with a special program commonly known as a “trigger.” When someone has his or her credit bureau pulled and is within a score range you desire, this will trigger an offer of credit to be mailed on your behalf. If you’re in special finance and know the score range you can get financed (say 550 to 630), then you should target that group. Whether your competitors can finance that credit range should also be considered.

For BHPH, we know that anyone shopping with a score below 550 should be shopping at your store. Does the consumer know that? Well, it’s your duty to tell them.

Depending on your local special finance competition (or lack thereof), you may want to consider targeting customers with scores of up to 600. The response rate for this type of program is typically five to 10 times on average, so the return on investment can be the best of any marketing program. The fact that this type of marketing is possible may be the best kept secret in the industry. Well, now the secret’s out, so take advantage of this great opportunity.

Internet Leads: Again, it’s great when you can target a group that’s actually shopping for a vehicle, and that’s what you get when you purchase Internet leads. Now, there are a couple of reasons why an individual would shop online for vehicle financing. One reason is that they are too busy; another is that they shop for everything on the Internet. But more than likely they are shopping on the Internet because they have credit problems.

Now, when it comes to Internet leads, there are benefits to both a special finance department and BHPH operation, but there’s also a 50/50 gamble involved. About 50 percent of these shoppers will not qualify for conventional financing regardless of how many banks a special finance department has available. That leaves the other 50 percent who have no choice but to go to a BHPH operation. Whether you are a special finance or BHPH operation, you will find that you can get a great deal on these leads right now since the supply is high and demand (number of dealerships competing for the leads) has dropped.

That’s just a small snapshot of the great marketing opportunities for the special finance department and the BHPH operation. Either way, the water is fine, so jump on in. Dealers that target these markets now will be the big winners in the race to higher profits. Good luck and good selling!

Denny Long is senior vice president of Dealer Marketing Services. E-mail him at dlong@special-finance.com.

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