Auto Credit Express Blog
April 7, 2008
Adjust your subprime inventory now
Now is a good time for special finance managers to look at their inventory mix and adjust it to fit new bad credit auto loan buying patterns…
Bad credit buying patterns are changing
Here at Auto Credit Express, we like to take advantage of new trends in the auto industry. And although the recent downturn in the economy and the high price of gas hasn’t been fun for anyone, changes in consumer car buying habits have begun to work to the advantage of special finance managers.
According to a recent article in Automotive News, the buying shift to small cars has happened even more quickly than most manufacturers were anticipating. In an article titled “Downsizing arrives – with a vengeance”, Amy Smart points out the 23.8% drop in Ford F-150 sales and the corresponding 24% increase in sales of the Ford Focus – the smallest car that Ford builds.
Looking at sales reports for March as well as year to date, smaller cars are up across the board for most manufacturers. The only models that aren’t doing as well this year are the Chevrolet Aveo, Chevrolet Cobalt and the Pontiac G5. Almost everything else is up, many significantly, over last year.
Improving the special finance sales process
For subprime departments, smaller cars have always been an important part of the model mix. Even when they were popular, sport utility vehicles carried higher payments and were more of a distraction to the selling process. Not only did you have to sell the customer on the idea of rebuilding their credit as opposed to buying a vehicle, you had to begin the process by letting them know that the Blazer/Explorer/Durango that they wanted was going to be too expensive. With the switch to small cars, the subprime sales process should go even more smoothly by eliminating the need to “switch” the customer to a small to midsize car.
Take a close look at your inventory
Now would be a good time to cut down on the number of sport utility vehicles and large pick up trucks and begin building an inventory of smaller, more fuel efficient sedans. Pay close attention to the auction reports and concentrate on the small to midsize cars that can be purchased back of book. The one obvious downside to switching to cars versus sport utility vehicles is the inability to bury as much negative trade equity in vehicles with lower margins. To help alleviate the problem, look for vehicles you can purchase behind book as well as new cars with dealer and customer cash.
The Bottom Line
The more gas prices rise, the greater the chance of being buried in light truck and sport utility inventory. If these vehicles aren’t working for you, give them 60 days then send them to auction, take your loss and put the money back into inventory that you can turn.
