Despite the economic hardship that has hit Arizona, one Phoenix-area dealership has remained strong. Michael Crawford, general manager and 20-percent owner of Peoria Kia, said the dealership managed to perform even better in this market than it did in 2006.

With the S&P/Case-Shiller Home Price Indices reporting Phoenix home prices down 18.2 percent in January, and the Arizona Department of Revenue reporting retail sales — a telling indicator of consumer confidence levels — down 10.2 percent the same month, it's difficult to maintain a positive outlook on business. But not for Crawford, who remains optimistic about what lies ahead for his dealership.

"We are definitely in an economic slowdown, but it is a great opportunity to prove how good of an operator you really are," he says. He is confident that his dealership's strengths in F&I — structuring deals and lender relationships — and overall focus on the customer will secure continued success even in the downturn.

Optimism like that is admirable in an area where auto sales were down 8.4 percent in 2007, per Department of Revenue figures, and with 11,700 people dropping out of the labor force in February 2008. And on top of all this, financing is getting trickier as consumers' debt-to-income ratios rise and credit scores get clobbered by mortgage defaults and foreclosures.

But Crawford has a good reason for his positive outlook. Peoria Kia's overall sales revenue was up $1 million and F&I revenue was up $500,000 in 2007. Some might say Crawford has an edge over other dealers in the economic slump because he retails Kia vehicles, which are known for their affordability. But even among Kia dealerships Peoria Kia excels, ranking first in Arizona and sixth in the Western U.S. region for overall profit in 2007.

Intelligent Deal Structuring

Peoria Kia has a team of four finance managers, all of whom are trained in all aspects of F&I, from special finance to Internet sales. The team is led by finance director Michele Kemeri, whose extensive background in banking has served her well in indirect lending.

Crawford says it's this team's "intelligent understanding of how to structure a deal" that has allowed them to be aggressive while still getting deals bought.

"I was talking to a dealer the other day and he was telling me they were having a tough time; they ended up unwinding 60 to 70 deals at the end of the month because they got aggressive," Crawford says. "Meanwhile, we had zero unwinds last month, and that's with deals with FICO scores in the 300s."

In order to structure deals well, finance managers must be properly trained in reading credit bureaus, Kemeri explains. Beyond reading the credit score, "we go through the credit bureau line by line to see what credit issues they have," she says. Details of delinquencies, tax liens and bankruptcies can all be buried within a report, she adds, and should be brought out and discussed in the finance interview.

The customer interview is the next critical step in the dealership's process. Kemeri says it's important not to get hung up on the score when discussing the report with the customer, as the upsides are what lending institutions need to know about. "Look at the past," she recommends. "So they're a little high on their credit card ... How long have they had that credit card and how long have they been paying well on it?"

With lower-credit customers in particular, the finance manager asks for information that shows financial stability. How long have they lived at their current residence? How long have they had their current job and how well does it pay? Do they have a second job or income source? Do they have a trade-in with some equity in it? Is there a family member who can cosign or help out? "You have to find the positive in every deal, and nine times out of 10 you can find it," Kemeri says.

"You have to get all the facts to make the lenders understand that this is a person and not just a score, and build a case for the customer," Kemeri continues. In fact, she will often call the lender’s analyst to talk him or her through the deal she has just submitted. That’s because Peoria's finance team often needs to build a case for their customers, many of which have FICO scores that average between 550 and 625. A growing number, she adds, are also slipping below 550. "The lower end is growing," Crawford says.


Lender Relationships

Peoria's finance team has the mindset that a good finance manager doesn't just represent the customer, he or she also acts as an intermediary between the customer and lender. "It's a matter of understanding both sides and bringing the two together — explaining to the bank the customer's situation and explaining to the customer where the bank is coming from," Kemeri explains.

Kemeri doesn't believe in "shotgunning," or shooting deals out to multiple finance sources for the best rate. She maintains strong ties with her lending partners by giving them consistent business and a good mix of deals. "A lender is more inclined to help me with a marginal deal if they know they’re getting my better credit," Kemeri says. "So rather than taking a deal that I can send to another lender for a little more profit, I'm going to send it to that lender that I have a relationship with because I know they’re going to be there to help me out on the more marginal deals."

Having strong relationships with lenders will be all the more important in the coming year as many look for ways to cut expenses, Kemeri says. "They will have to look dealer by dealer and ask, 'Are we getting business from this dealership?'" Kemeri believes lenders will be closely examining look-to-book ratios and cutting off dealerships from which they have looked at 100 applications, for example, but have only gotten five deals.

Respecting Customers

Crawford also believes that the dealership's motto and policy of "treating every customer like it’s the last customer of the day" paves the way for success in today’s economy.

To that end, Kemeri tries to stop by the finance box and meet every customer, making herself available for questions or clarifications. "We treat everybody like they’re 700 credit," she says.

Finance managers will even try to stop customers from buying cars they really can’t afford, even if the deal could be made. "The customer is usually happy when they walk out of here and realize they didn’t bite off more than they could chew," Kemeri says.

Peoria Kia enjoys a diverse customer base thanks to Michael Crawford's radio ads, which air on a variety of radio stations. His slogan, "Just remember: Michael Crawford wants to SEE ya in a KI-a," has become a household chant among adults and children alike. Customers often come into the dealership to meet the man behind the catchy phrase.

Alan Algan, CEO and executive director of the Automotive Dealership Institute, says Peoria Kia's customers appreciate Crawford's accessibility and interaction with them.

"Michael is always right in the thick of things," Algan says. "He actually meets every single customer, or, if he's not there, calls them the next day. He doesn't try to pressure the customer into a sale but just wants to make sure customers feel they are treated well, whether they buy a car or not. Being able to meet the dealer makes customers feel valued, and they remember that."