There are three types of people — those who make things happen, those who watch things happen, and those who wonder what the heck happened. I’m not sure who originally came up with that statement, but it’s very true. If you think about it, you can place everyone you meet into one of those three categories. We’ve been through some trying times over the last two years and a lot of us wonder what the heck happened, but now is the time to make things happen.
Although it’s hard to get a clear reading on the degree of the recovery, most economists agree that 2010 will be a year of recovery. What we do know is statistics show that the average credit score has dropped dramatically, and that there are more people that fall in the subprime and near-prime credit ranges than ever in recent history. We also know that there are significantly less dealers that are equipped to help the new special finance consumer. Those dealers who have kept their special finance departments are enjoying continued devotion to staying on top of the game. Many are even adding buy-here, pay-here operations. Even better, lenders are coming back and are once again looking to add dealers. Next year has the potential to be a banner year for dealers who are ready to get their piece of the action. To help you prepare, here are four items to consider.
1. Rebuild Your Lender List
The success of any special finance department revolves around having the right group of lenders. Many of today’s active lenders have found their niche and only buy specific paper. This means you will likely need to have more lenders than you did in the past. Now is a good time to start interviewing lenders to find out what they buy. For example, bankruptcies are on the rise and could hit an all-time high. There are lenders out there that specialize in this area, such as Friendly Finance Corporation, which has done so for more than 60 years, as well as Prestige and Tidewater.
Many dealers are also finding that regional lenders are buying more paper than national lenders, but that doesn’t mean you shouldn’t look to some national lenders. Americredit, CPS, and Santander (Drive) have all recently announced expansion plans. Don’t forget your captives, too, since they realize that serving the subprime segment will be key to helping them achieve their goals.
2. Find New Avenues for Outsourcing Cars
Once you have the right group of lenders, you need to look at their buying guidelines to ensure you have the right inventory to match their criteria. And don’t just look at the usual sources to find inventory. Check the classified listings in your local paper. There are still a lot of people out there who need to sell their vehicles just to come up with some quick cash.
3. Create a Marketing Plan
Your selection of lenders will determine the best marketing programs for your dealership. Once a credit profile for your lenders is defined, you can build a highly targeted direct mail promotion that will bring the right customers to your dealership. According to the post office, direct mail usage is way off. That’s a good thing for you since your message will have a lot less competition. Response rates are on the rise, which proves that this theory works.
You will also find that the price for Internet leads has dropped dramatically over the last 18 months. This can be attributed to the current supply-and-demand situation, as fewer subprime dealers means less bidding for leads. This situation is likely to change later next year, so you need to act fast to get those leads at a great price.
4. Get the Right People, Processes and Systems in Place
You need to have the right lenders, inventory, marketing, processes and systems, but without the right people you will likely fail. Your employees need to have a thorough understanding of what your lenders are looking for. They also need to have the pig-headed determination to contact every lead and do everything possible to convert those leads into showroom visits. You need to have processes in place to make sure every lead is worked to maximize your marketing efforts. Having the right software systems will ensure that you can track all efforts and match your prospects to the right lender and the right vehicle.
If you made it this far through the article, there’s a good chance that you’re one of those people who make things happen, so your success is almost guaranteed. Next year will be a great year for those who are ready. I wish you a happy and prosperous New Year, and, as always, good luck and good selling!
Denny Long is senior vice president of Dealer Marketing Services. E-mail him at dlong@special-finance.com.
