Auto Credit Express Blog
November 6, 2007
Special Finance Car Sales “ Recipe for Success”
To maintain long term success in sub prime auto sales focus on improving the Critical Success Factors: Lenders, People, Business Process, Technology, Inventory, and Advertising.
Sub Prime Lenders
More and more sub prime auto lenders are trying to edge their way into the conventional finance office. As a result, these same lenders are not buying as deeply as they once used to. Make sure your lender mix contains lenders that approve a wide variety of subprime credit scenarios. In addition, to reduce your risk, place your loans with numerous lenders. If you only use one or two lenders and they run into troubled times, you could be left with contracts in transit that you will have to place with other lenders.
People
In many stores the only person that knows anything about subprime is the special finance manager. You can protect your special finance car sales profit by ensuring that the appropriate personnel within your store receive special finance sales training; this includes the conventional F & I manager, office personnel and sales personnel.
Business Process
If your sales process for sub prime sales mirrors your traditional sales process you are likely limited to a handful of sub prime car sales each month. The sub prime sales process starts with a “Meet and Greet” and ends when your contract is cashed and the funds are deposited in your bank account.
Technology
There are three satisfying steps to every car deal: the customer needs a payment and down payment that they can afford, the dealer needs to make a profit and move inventory, and the lender needs a deal that fits within their stated guidelines. Without the use of sub prime desking software, satisfying all three parties is not only time consuming, it can also be frustrating. Special finance desking software allows you to evaluate hundreds of inventory and lender combination for a specific customer scenario in seconds.
Inventory
Profit in sub prime auto sales is most often made when you buy the car, not when you sell it. Special finance lenders base their advance on the NADA, Kelley Blue Book or Black Book value of the vehicle. The further back of book you can buy inventory, the better off you are. Vehicles that work best have less than 50,000 miles, and hover in the $9,000 to $12,000 ACV range; for example: popular sedans, SUV’s, and minivans that have a high supply and low demand.
Advertising
You have to make your market aware of the services you offer. When starting out, I recommend a budget of $5,000. After a few months increase the budget based on production, for example, $250 per unit sold or 10% of revenue.
