Random Thoughts From The Road

Flashback – Some things Bear Repeating: Recently, as Special Finance has begun to make a serious comeback, I have started to hear some of the same old excuses for not being involved in this very profitable area of the automobile business.  Many, such as a lack of available capital, are somewhat valid.  Acquiring and maintaining the inventory to succeed in Special Finance operations remains a challenge.  But the one I still hear that makes the hairs on the back of my next bristle, is “I’m not sure I want to deal with that type of clientele.”

Here is an article that I wrote five years ago that, aside from some of the dated references, still holds true today.  Read it and think about how it may impact your bottom line.

Random Thoughts From The Road

Recently, I drove an automobile back from Florida to Michigan for a friend who was unable to make the trip.  I looked forward to spending a couple days alone with my thoughts while taking in what sights can be seen at 65MPH on Interstate 75.  Given the smaller gasoline tank capacity of today’s cars, as well as the diminished ability of my body to sit in one position for any length of time, the trip included many “pit stops.”

It was during these stops that I discovered a phenomena that I don’t usually see as I travel for business.  Maybe it was because this was a leisurely trip as opposed to the work-a-day commutes, which are necessary evils to get from one appointment to another.  And just maybe, in the bright sunshine of that southern environment, I was paying more attention. In any case, what I observed, at almost every stop were closed (as in boarded up) Used Car lots.  And the common factor, among all of them, was a prominent sign that proclaimed WE FINANCE or BAD CREDIT OK or even NO CREDIT CHECK.   The assumption, in my mind anyway, was that these stores had all catered to the bad credit buyer.   And your point, sir?  Well, the obvious conclusion is that the used car market in those areas was bad.  But maybe there is more to it that that!  Follow along for a minute.

Remember back, in the early days of our craft, when the Special Finance department was a trailer on the back end of the used car lot?   We used to lead folks with bad credit, with their heads hung low, back to see if the Bad Credit Guy could do anything at all for them.  Worse yet, after telling them that their credit was “no good” we might just send them back.  As if we were too good to make that walk ourselves.   And in that Bermuda Triangle of auto finance, operated the Sub-Prime specialist.

Sounds ridiculous, today, doesn’t it?  But some places still run their Special Finance department like a poor farm.  Just in case you are too young to remember, that was the place, pre-welfare, that housed poor folks and allowed them to work for their room and board.  I guess that I don’t have to tell you that prospects with less than perfect credit resent that sort of treatment.  That would be the reason that most profitable, mainstream Special Finance departments now sit up front with the big kids.  Most are either in the Used Car department or part of the dealership Finance Department.  Many operations have realized the value of these special customers and the Special Finance operations areas boast amenities equaling the GM’s office.   Even if you are on a small independent lot operating out of an ancient trailer, you can make it seem comfortable and inviting and, perhaps even, eclectic.

That brings me back to those closed stores.  If you had “bruised” credit, would you want to be seen going into a dealership whose very storefront trumpeted the fact that they dealt with BAD CREDIT?   Of course not!   Can you imagine being unemployed and having to shop at a store, on Main Street in your hometown, that boasted a huge banner that said WELFARE FOODS?  Many would go hungry first. Special Finance prospects want to maintain their dignity, as you and I would, and prefer to deal with the person or company who provides them with the best service and at the same time, downplays the fact that they have screwed up their credit.  After all, isn’t that why we call it Special Finance instead of something like The Crappy Credit Center?  If the majority of these prospects had their way, they would handle the transaction anonymously.  That is the reason that the automated 800 Credit Hotline has long been so successful.  Talking to a computer means that the prospect does not have to confess his/her sins to a real live person.

Those empty lots were empty because they advertised that the people who shopped there had bad credit.  And those people chose to do business somewhere else.  I know that is a simplistic explanation, but that was the explanation that I formed as I drove along the highway, my ample body encased in a leather-trimmed perch.    Even if I am only half-right, it is reason enough to look at your own Special Finance operation.

How do you treat your Special Finance prospects?   Someone, much wiser than I, said, “If we don’t learn from our mistakes, we are bound to repeat them.”   Maybe you and I can learn from the obvious misfortune of these former used car dealers, as well as lessons from our own experience.  The only thing better than learning from our own mistakes is learning from someone else’s folly.   Do we view the Special Finance prospect as an opportunity or as a problem?   The way that we develop our relationship with these potential customers will greatly affect the profitability of this particular transaction and our operation as a whole.

Some sage person, I admit that I cannot remember whom exactly, once asked a group of dealers; “Would you rather make $1000 selling a new Chevrolet Impala to a GM employee or $2500 selling the same vehicle, slightly used, to a prospect with bruised credit.  The answers were less than unanimous.  Many chose the new car because: “There will be fewer problems.”   As I recall, none could list more than one or two, avoidable, “problems.”  Several indicated that they had no choice since they don’t do Special Finance because; “We don’t want those people in our store.”   But those who indicated that they would rather do the Special Finance deal, replied enthusiastically.   They understood that the $2500 profit was just the beginning of a profitable relationship with “those kind of people.”

While we may advertise for prospects with bruised or less than prime credit, our approach to these people should be no less enthusiastic than a conventional customer.  And the last thing that we should do is put up signs branding those who walk through our doors as poor credit buyers.  Once this prospect is in your building, treat him/her with all the pomp and circumstance that you reserve for your best customer, since they probably will be just that.   And remember, just because you weren’t able to sell a prospect a car today, doesn’t mean that they are no longer a prospect.  If you are doing your job right, and you can’t get them bought, chances are that nobody else will either.  That customer, as well as friends and relatives, will buy a car.  Where are they going to shop?  At a store that lets the world know that they are credit problems or your store where they are treated with dignity, respect and confidentiality.

Our industry has made mistakes in the way we approach Special Finance prospects.  Learn from those mistakes and don’t repeat them.  Treat your prospects as if they are the best and most profitable customers in your dealership.  They probably are!

Just my two cents worth!

About the author
Dick Hassberger, of Lake Orion, Michigan is a veteran of over 50 years in the Automotive Financing and Leasing industry, starting his career with the former Wayne Oakland Bank in September 1960.  Dick is National Sales Director for VOISYS.  He has held executive positions with Major Banks, Lending Institutions and Leasing companies and has accumulated a vast store of knowledge in the automotive financing industry, which he regularly shares with his client dealerships as well as readers of this blog.  Dick was a regular author for World of Special Finance Magazine.

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