Special finance is the fastest growing market in today's automobile marketplace. Simply put, special finance is the segment of the market that does not qualify for conventional loans, people with bad credit. There are a lot of stereo types regarding special finance, more often than not these stereo types are a result of a poor special finance process within the store.
Some of the common myths regarding sub prime are, it takes a long time to get these deals done. Not true. The fact is the average time from initial contact to sale should be much quicker on a sub prime car deal than on a conventional car deal. These customers are less likely to shop your deal and you have greater control of the customer.
They are a waste of time; you have to work 10 customers to get one sale. Not true. Our system gets more deals approved and sold. Your sub prime contact to contract ratio should be higher than your conventional business.
The customer will have a higher interest rate and payment. True & False; Consumers that are able to get approved on the lowest tear via a captive lender often get better rates and terms through a special finance lender. On the other hand, if the customer has real bad credit, their only alternative is a higher interest rate.
The customer only qualifies for an old high mile vehicle, not true. Sub prime lenders that cater to consumers with bad credit prefer new or late model, lower mileage used cars.
The customer needs a lot of money for down payment. Again, not true. Our statistic show the average cash down payment is less than $600.
So how will you, as a sales person, F & I or sales manager benefit from subprime car sales?
- Your will sell more vehicles, both special and conventional
- By selling more cars you will gain a loyal and appreciative customer
- And if you treat your new customer's right they will send you referrals, lots of referrals.
So what in it for you? Simply put, a bigger paycheck, and if you're like me, a bigger paycheck means a better quality of life.
So how does the sub prime selling process differ from your conventional sales process? With a traditional car deal there is a meeting of minds between the car buyer and the car dealer. They agree upon a price, and the bank finances the consumer, rarely does the price of the car have to be negotiated with the bank separately.
With sub prime deal, on the other hand, there must be a meeting of minds between three parties, the car buyer, the lender, and the car dealer. To stream line the sub prime process, you must know what the lender will approve prior to negotiating with the consumer, and you must know the customers expectations prior to negotiating with the lender.
Just like a traditional sale the sub prime buyer must agree to: the sales price, the trade value, the cash down payment, the interest rate, and the monthly payment
The lender must agree to the loan to value or LTV, the sales price, the total down payment, the interest rate, and the monthly payment
And as always, your dealership must agree to the gross profit in the car deal.