With the November 2007 purchase of the former Dick Scott Kia in Waterford, Mich., Rich LaLonde and Jerry Doute became the proud owners of their first dealership. In their first year, the partners renamed the store Summit Place Kia, acquired a second location in nearby Canton and became their OEM’s No. 1 dealer in Metro Detroit.
Their success was hardly a case of beginners’ luck. In the decades leading up to the acquisition, LaLonde and Doute spent thousands of hours in hundreds of dealerships across the United States.
“Several years ago, when I worked as a Certified Public Accountant, my main client base was dealers, and I fell in love with the business,” LaLonde says. “My first opportunity to get into the car business directly was as a controller at a large dealership. That’s when I realized that I was much more excited by the finance aspect than I was by sales.”
LaLonde then broadened his experience by taking a general manager position at a Detroit-area Jeep-Eagle store, then worked as a regional vice president for Agency Rent-A-Car. It was in these positions that LaLonde began to realize many dealers were falling short in one particular area: special finance.
“When I was at Agency, we developed relationships with GE Capital and Credit Acceptance Corp.,” he says. “To sell the rental units, we needed to find a way to finance customers with derogatory credit. This was back in the early ’90s, when subprime auto finance was new. But with GE and Credit Acceptance backing us, over the next 12 months, we caught fire, just retailing from our small Detroit lot.”
Realizing the untapped potential of the subprime market, LaLonde left Agency Rent-A-Car in December 1993 to start his own consulting firm. He sought out dealers who were willing to take a chance on special finance. After running several successful, week-long “Bankruptcy Super Sales,” LaLonde says his clients began to ask for a more long-term strategy.
“We started by placing special finance managers in each dealership for 60 days,” he says. “They would set up the department, go to work on the inventory, do the meet-and-greet and collect stips. Eventually, we also began placing our people in dealerships on a permanent basis.”
At that time, Jerry Doute was the used-car manager at North Brothers Ford in Westland, Mich. He heard about LaLonde’s work through a colleague and decided to give the ACE Group a try.
“We asked Rich’s company to place an SF manager at North Brothers, and it worked,” Doute recalls. “Not long after, I was offered a general manager position at a smaller dealership, and I was sure I could use that experience to ramp up their subprime sales.”
Like many other dealers, however, Doute’s new boss was wary of breaking into special finance.
“Until I realized the full potential of subprime, I was fearful of it myself,” Doute says. “But I couldn’t convince the owner to even try it. Despite the potential, he was not willing to change. After seven months, I called Rich to see if he had anything for me.”
Doute went to work for ACE, learned the intricacies of the program and began working with dealers. Within a few years, he had risen to the position of vice president of field operations, overseeing ACE’s crew of special finance managers.
A few years later, both men would get the chance to practice what they’d preached, this time at their own store.
Reaching the Summit
In July 2007, Dick Scott approached LaLonde to discuss the possibility of placing an ACE manager at one or both of his Detroit-area Kia franchises. It was in the course of these talks that the idea for a sale was broached.
“In my consulting days, I had always said that if I was ever going to own a dealership, it would be a Kia store,” LaLonde says. “I jumped at the opportunity. And by that time, Jerry had been with us for 12 years. He had the perfect résumé for the general manager position, and I wanted to get him on board.”
“I was passionate about subprime, and I liked the idea of working in my own dealership,” Doute says. “I felt fortunate that Rich asked me to invest. It’s his spirit and passion for special finance that drives the business. Me, I’m the Energizer Bunny. I’m still a car salesman, whatever my title, and together we knew we could make it work.”[PAGEBREAK]The pair took over Scott’s Waterford store on Nov. 1, 2007, and wasted no time in putting their processes in place. “We started from scratch,” LaLonde says. “We hung signs and banners. We brought in the collateral, lined up our lenders, purchased subprime leads … Once we flipped the switch, we were able to drive traffic immediately. Special finance now represents 60 percent of our overall sales.”
By November 2008, the pair had increased subprime sales by 200 percent and had their eyes on Dick Scott Kia of Canton.
“Dick was ecstatic,” LaLonde says. “He had predicted we’d succeed, and it was that success that allowed us to take the Canton store off his hands as well.”
“The advantages are obvious,” Doute says. “The stores are only 30 miles apart, so we can share the inventory and advertising dollars. We’re about 10 weeks in now, and it’s already starting to happen in Canton.”
The focus is always on the customer at the ACE Group and Summit Place Kia, according to Doute. “We live by our core values,” he says. “We absolutely require our SF managers to treat each customer with respect. Everybody who walks in the door will eventually buy a car, and we want all of them to buy one from us. So we find a way to help them.”
To get them in the door, Summit Place Kia relies almost exclusively on Internet leads.
“We really don’t focus media dollars on subprime,” Doute says. “Success in special finance comes from the Internet. Our best leads are the folks who searched for ‘buy car bad credit’ on Google, MSN or Yahoo! and got a call from our BDC 10 or 15 minutes later. They’re astonished, not just that we called them so fast, but that we’re eager to work with them.”
“Because of our consulting background, we knew who the lenders were going in, but the landscape has changed in the past 12 months,” LaLonde says. “It’s a challenge right now for dealers to keep up with who’s out there and who’s buying. You’ve got to stay on top of the news and pay attention to the industry publications. Reach out to your regional lenders as well; they can be a great financing source.”
“It doesn’t end with the app,” Doute adds. “You have to talk with your lenders. That’s how deals get done.”
In the ACE philosophy, presenting the right vehicle with each deal is another key to developing lasting relationships with lenders.
“We get our inventory from a number of different sources,” LaLonde says. “The local auctions are great venues, especially the manufacturer-specific auctions, and we also buy a lot of vehicles from Enterprise Rent-A-Car. We’ve been getting ’06 Ford Fusions and Mercury Milans for about $8,500 apiece at auction, which is $3,000 back of book. The cost of the vehicle has to be conducive to a $300/month payment, which is what will make the deal work for the lender and the customer, and allow you to make a nice gross profit.”
To ensure continued payments, LaLonde takes full advantage of Summit Place’s extensive parts and service department.
“That department was already in place when we got here, and they’re a talented group,” he says. “They don’t treat the special finance units any differently. We sell quality cars. All our inventory goes through the same reconditioning.”
“Kia has made my job very simple,” LaLonde says. “The vehicles are five-star safety-rated, fuel efficient, and covered by the best warranty in the business. Now we’re growing dramatically, but Detroit is historically a tough market for imports. We only control 1 percent of Kia’s U.S. market. But they’ve been incredibly supportive so far. They’re an aggressive company, and if you’re willing to advertise, they will support you.”
“We’ve turned a few heads at Kia,” Doute says. “I’ve been in this business for 28 years, and I feel sure we couldn’t have picked a better partner.”
To stay in business, Doute and LaLonde plan to stick to the principles that worked for their clients at the ACE Group.
“I feel we’re just at the tip of the iceberg,” Doute says. “We’ve been able to adapt and change through unprecedented market conditions, and we’ll carry those strategies into the good times, which may take another six months or a year.”
“Now that we’re able to practice what we preach, it’s gratifying to see it work,” LaLonde says. “‘Stick to the process, and it works’ — that’s what we’ve always said. When the tail starts to wag the dog, it won’t be long before the whole thing crumbles.”
“For me, the key word is ‘culture,’” Doute says. “There have been a few dealers we’ve consulted with over the years who have allowed us to put the process in place only to let the old culture take over again once we left. The first thing to go is the sales team’s confidence. If the finance director says, ‘No bankruptcies,’ the salespeople will start to say the same thing. To make special finance work, you have to change the way you look at your customers. Our success with all the customers we’ve helped here at Summit Place proves it.”