At a time when consumers are being thriftier and automobile sales are being driven down by rising gas prices and a challenging economy, it can be difficult for a dealership to stay ahead of the game. But despite a tough market, McCloskey Dealerships in Colorado Springs and Pueblo, Colo., are seeing increases in profitability.
Joe McCloskey, owner of McCloskey Dealerships, has found a way to bring in compliance and full-spectrum financing to keep sales steady and maintain profitability during this economic downturn.
Matt Bitler of Southwest Dealer Services calls McCloskey Dealerships “hybrid dealerships” because of their ability to bring in all types of customers, from subprime to prime.
“They delve heavily into the special finance market, and they have the unique ability to do a great job with that business,” he explains. “But they also attract customers from the rest of the credit spectrum.”
This balance is part of the reason McCloskey Dealerships have remained successful over the last 20 years. “Diversification of our sales and loan portfolios has helped to sustain sales,” McCloskey says.
The Right Kind of Advertising
The secret to this ideal balance of customers is in the advertising. To maintain the image of the family-run business, McCloskey and his wife appear together in commercials and portray an approachable and friendly image while never bringing up the word “credit.”
And to ensure that the dealerships are still generating a good amount of subprime business, they do a lot of Internet marketing and leads purchasing. They also post the price or payment on the sides of
vehicles and carry vehicles that appeal to any type of customer, from affordable pre-owned vehicles for subprime consumers to higher-end
vehicles for prime buyers.
“We’re still seeing about the same mix of subprime and prime buyers,” McCloskey says. “But now the prime customers are more value-driven and are looking for a better buy. They are taking into consideration used vehicles, where before they were only looking to buy new.” So McCloskey makes sure he keeps a selection of high-end, pre-owned vehicles to offer those prime customers who are looking for more value.
But McCloskey Dealerships didn’t always have a handle on advertising that appealed to the perfect balance of customers. Once it advertised financing strictly for poor credit, and McCloskey saw his prime business dwindle. While researching financing on his own, McCloskey found himself skipping over the ads that emphasized “We finance everyone.” He realized that the key to bringing in the right mix of
customers was to advertise the best rates, not special financing.
“We run prime, subprime and buy-here-pay-here all on the same facilities,” he explains. “And we keep everything separated and segmented by that.”
But despite keeping those areas separate for customers, the dealerships’ staff is trained on all aspects of the business.
Training for Compliance and Profitability
Daily training for all staff members and twice weekly manager meetings help McCloskey Dealerships stay on top of changes in the business and develop new ways to accomplish goals.
“We are constantly trying to improve,” says Brandon Juenger, lead finance director at the dealerships. “We find what we’re missing and try to correct it.”
By ensuring that all employees are trained to achieve compliance and
profitability, constant improvement at the dealerships is guaranteed. Most of the F&I managers are certified by the Association of Finance and Insurance Professionals, and the whole staff is trained on using menus, which McCloskey attributes to much of the dealerships’ success.
He was hesitant at first to implement menus into the dealerships’ selling process, but McCloskey quickly realized the benefits of offering every customer every product every time.
“We’ve seen an increase in profitability and we can associate it with our menu selling system,” explains McCloskey. “Everyone is offered the same products in every sale and that has improved our penetrations. We moaned and groaned at first, but it has helped quite a bit.”
McCloskey attributes the success of menu selling in the dealerships to two reasons: keeping a good balance of products on the menu and training staff on selling based on each product’s advantage to the customer rather than focusing on the rate reserve.
“I meet twice a week with the finance managers and go over finance penetrations with live numbers,” McCloskey says. “Keeping those numbers in front of us on an ongoing basis has improved profitability.”
This day-to-day involvement is what has impressed Bitler. “Joe is highly involved, but he takes it to the next level by taking an active role in the training and the development of his staff.”
Training for Full-Spectrum Financing
Although the McCloskey dealerships are doing well, they still face some challenges. One ongoing challenge is to train the staff on both prime and subprime financing. Because each customer is different says Juenger, it is difficult to train the staff to make each customer as comfortable as possible with the process.
“We try not to deviate from treating every customer the same,” Juenger explains. “We use the same word-tracks and menu process with every customer so that everyone gets the same options.”
McCloskey spent years perfecting this balance, which was time well spent when he considers how well his business has weathered today’s economic downturn. “Some of the dealerships that are suffering most seem to be the ones that have not been in subprime financing and are just trying to get into it,” he says. “We’ve always had a 50/50 balance.”
Adjusting to a Difficult Market
Relationships with lenders are also crucial in financing. The biggest challenge facing McCloskey’s F&I departments is maintaining relationships with lenders, especially as more and more lending institutions consolidate and the dealerships’ contacts with those lenders change.
“These transitions have made it difficult for us to keep lenders close as business partners and friends in business,” says McCloskey.
Tighter lending standards is another challenge for McCloskey’s F&I team, especially when the market is being flooded with special finance customers. Colorado’s labor market continues to weaken and unemployment hit a high of 5.1 percent in June 2008, according to the Colorado Department of Labor and Employment. McCloskey, however, isn’t
“The key is to not become frustrated,” he says, adding that there is always a way to put a car deal together, whether it is working with the dealership’s lenders or establishing relationships with new ones. McCloskey even has a saying to describe such a situation: “It’s not a lack of financing resources; it’s a lack of resourcefulness.”
Maintaining a High Standard of Business
Despite the difficulties the automotive retail market is experiencing, the most important thing for McCloskey is to maintain high standards of business and to not allow deviation from those standards in the company. “Some lenders emerging onto the scene are anxious to do business,” explains McCloskey. “Our reputation as a straight-run store precedes us, so those lenders want to do business with us.”
And it’s not just the lenders who noticed the dealerships’ dedication to maintaining high standards of business. Leedom and Associates, a consulting firm that provides dealer Twenty Groups, named McCloskey
Motors the 2007 special finance dealer of the year. And, more recently, Hyper-Drive Technologies recognized McCloskey as the top special finance Internet retailer in 2008.
One of the secrets to McCloskey’s success with maintaining high standards of business is his top-notch management staff.
“Joe operates with a very light management staff, but a very powerful one,” explains Southwest Dealer Services’ Bitler. “The people he has are powerhouse people. That’s because he realized long ago that investing in people and processes would lead to increased volume and profitability.”