Who would have thought that online car marketing would be on pace to reach $4 billion by 2010? Ten years ago, only 47.1 percent of dealers surveyed by the National Automobile Dealers Association (NADA) said their dealership had an Internet presence. In NADA’s 2006 study, that percentage grew to 95.4 percent. Fifty percent of those dealers said they now employ a separate department dedicated to the Internet. So why is this important to a professional F&I manager? Online shopping will continue to increase, but credit quality won’t.
Today, nearly half of all Americans can be considered non-prime borrowers (borrowers who have credit scores below 660). Climbing interest rates and debt, as well as declining home prices and stricter personal bankruptcy laws, are likely to increase that percentage. Lender guidelines are also tightening, putting the squeeze on the subprime customer segment. This is where the opportunity lies.
Dealers need to acknowledge that a large number of customers, especially subprime customers, are actively surfing the Internet on a daily basis. That’s because the Internet allows customers with impaired credit to privately secure a loan in the privacy of their own home. The potential embarrassment or judgment of walking into a dealership and being turned-down is one of the reasons why online shopping has become a popular avenue.
The challenge is to harness this flow of leads and turn them into sales. Utilizing a company that serves as a connecting point between these consumers and dealers is an important part of a successful Internet leads department. A change in attitude toward the Internet and nonprime customers is also required.
Understanding the Conditional Buyer
Buyers are busy and do not have the time nor the desire to go from one dealership to another, which is why the Internet has quickly risen in importance in the automotive retail industry. Often times, when the GM or GSM discusses leads generation, F&I managers balk at the idea of creating an Internet leads department. Many believe such a department will only foster credit-challenged customers. However, that’s not always the case.
Some of the most successful finance managers in the country are now encouraging management to acquire leads, because this customer is a conditioned buyer, making the entire F&I process easier. Online shoppers tend to understand the value of GAP, warranties and other products offered in the F&I office. Why? Simply because the Internet offers customers the ability to research these products online, which helps them understand the value proposition. For F&I managers, this situation allows them to quickly address objections and jump into the sale since the customer is already familiar with the products offered.
Online shoppers responding to online advertising or direct mail are normally more conditioned leads who know what they want and what to expect. They are therefore easier to work and more likely to be receptive to interest rates and products.
F&I managers today face a more difficult job, and play a larger role in dealerships because today’s customers have more financing options. That being said, how do you convince F&I managers to change from “We’ve never done it that way before” to “Lets find new ways to increase sales and profits by taking advantage of changing consumer-buying habits?” [PAGEBREAK]
Dealership Takes on the Internet
Kings Ford in Cincinnati embraced this new strategy three years ago by adding a special finance department. The move has added 50 to 60 car sales a month for the dealership — a 30-percent increase in sales, as well as a substantial increase in profit. Finance Manager Tim Tucker started in the business in 1993. He joined Kings Ford three years ago to help establish a separate special finance department. It now accounts for 30 percent of the dealership’s car sales.
Tucker started by producing and airing a very simple infomercial. It produced more than 1,000 calls in the first week, some from more than 200 miles away. He now spends between $8,000 and $10,000 on broadcast advertising, which produces approximately 800 leads per month. Including himself, the department is made up of a single salesperson and a part-time assistant. Despite the high volume of leads the department receives, Tucker employs CallCommand to send automated voice messages in cases where his staff can’t immediately investigate leads. For leads with no telephone numbers, Tucker will send out a follow-up letter. Most leads will result in a return call within 72 hours.
According to Tucker, about 1 in 10 end up in a good lead. And out of the 800 leads he gets, about 60 end up on the books. Once contacted, about four out of five who show up for an appointment drive off with a car.
“The hardest thing is getting them in the door. We’re in a tri-state area and pulling from 150 miles away. It’s tough to get them to drive two hours to our place, passing up many dealerships on the way. We have to make sure we handle them right on the phone and not tell them the loan is approved, otherwise they might go somewhere else,” Tucker commented.
Tucker operates with a monthly advertising budget of about $12,000. About $8,000 goes toward on-air promotions, Internet leads, direct mail and “In the Market” leads from CIQ Inc./Voisys. The In the Market program gathers information on all potential car buyers who have applied for financing within a 24-hour period. It then sends a tailored direct-mail piece to each customer. The lead is produced once the customer responds by calling Voisys’ 1-800 number.
Tucker’s department deals mainly in late-model cars from 2001, or vehicles with between 50,000 and 60,000 miles. Tucker and his salespeople deal with the sale and the assistant breaks down deals and helps get them funded.
“I don’t get paid until the deal gets funded, and that’s how subprime should work,” Tucker said.
Working the Customer
Once Tucker’s team gets the lead, a phone call is made to the customer and a credit application is completed over the phone. Using DealerTrack, the dealership gets an answer on the loan application within five minutes.
“Once we have all the information, I take a few minutes to look at the whole picture and make sure they are qualified. So I don’t call them right away, because I don’t want them to drive an hour and then find out I can’t help them,” he explained. “Typically, the customer comes in and we go over what payment he or she can afford, as well as his or her available budget. Most want an SUV for $250 a month, so we have to set realistic expectations for them.”
Tucker said he keeps it simple, using just one person to handle the deal. “I believe it’s most successful if the special finance manager deals with the person and no one else,” he explained. “If two or three people get involved in the transaction, the person gets upset and won’t return. You have to understand that this type of customer has probably shopped around and has probably received poor treatment due to his or her credit.
“The key is to treat them with respect and give them the right attention,” he added. “Fifty percent of my business is repeat business and referrals. So if you treat them right, they will send you their friends and family.” n
Michael Snider is National Sales Manager with Voisys (www.voisys.com),Complete Lead Generation Experts, offering the automobile industry marketing programs specifically geared towards the special finance industry. He can be reached at (800) 438-8642 x102 or [email protected].