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Preparing for Tax Season

December 2009, F&I and Showroom - Feature

by Rob Hagen

Unless you or your customer is getting a refund, tax time isn’t the most joyous time of year. 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 have historically received tax refunds. That’s why it’s critical you prepare now if you hope to cash in on what amounts to special finance’s version of Cash for Clunkers.

Considering the economic times we’ve experienced, the demographics of our customers will be a little different this year. “I think this tax season could be one of the most difficult and competitive years yet for subprime,” said Dustin Jones, finance director of Boch Honda in Boston. “Customer fear of being rejected for an auto loan is at an all-time high. Now, more than ever, families across America need their tax refund checks.”

And if you’ve been in the business for any length of time, you know that tax season always seems to come earlier with each passing year. A big driver of that is technology, which is why dealers like B.A. Nerison, owner of Wheel City Auto Sales in Sioux Falls, S.D., are getting an earlier start on tax season this time around.

“Be prepared, because it will come and go fast,” he said. “Customers are getting money sooner (via electronic filing). No longer can we count on two solid months of steady tax money.”

It’s also clear that dealers will have to compete for how that tax money is used. “Customers that are unemployed or have fallen behind on their bills will have their money spent before they even get it,” noted Nerison.

What that means is dealers will need to be a little smarter about their preparations than in past years. Consumers are struggling and dealers will have to compete with the perception that credit isn’t available.

“Preparations for this year’s tax season really started back at the end of September for us,” said Boch Honda’s Jones. “We really want to work on building the customer’s confidence and creating awareness that lending options are available. Our company is focused on meeting the customers’ needs.”

Marketing With a New Spin

Marketing is obviously an integral part of a successful tax season, as customers need to know that you are willing to work with them. However, Jones said dealers need to be cognizant of the stresses felt by consumers in this economic climate.

“Through our advertising, we want to portray that we are not looking to seize the customer’s refund check,” he said. “Instead, we want them to know that we can help them purchase a vehicle utilizing as little of the refund as possible. Taking more of a community service approach in aiding them in their purchase of a vehicle is our goal.”

It’s also important to have a firm understanding of a customer’s situation so you can properly communicate with him or her. Simply put, stress causes customers to lose sight of their goal, and in this scenario, their goal is to get a car. Dealerships like Lindsey Ford in the Washington, D.C., area, not only understand this reality, but they make sure their marketing plans reflect that awareness.

“We are taking a different approach in our advertising,” said Mark Law, finance director for the dealership. “For example, instead of doing a 20,000-piece mailer, we are mailing to 10,000 people twice to emphasize our message. Customers are embarrassed of their credit situation, especially people who have never had bad credit. You need to earn their trust first and we feel like that is best accomplished with a consistent message that we are here to help.”

Dealers also should consider other marketing strategies and mediums to relay their message, such as mining your customer database to create an e-mail campaign. Not only can you reach a large number of your customers, but you can do so rather inexpensively. Additionally, companies that offer these types of services will e-mail your customers several times to ensure a good response, so take advantage of what’s available.

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