Auto Dealer Monthly, February 2014

COLUMN K ICKER tomers dont understand how the price translates to their monthly payment Th ere are umpteen versions of the Corolla each of which will get your customers to work and their kids to school Car buyers love the look of the Infi niti G35 but a Maxima will drive just as well and last just as long Given the opportunity most subprime customers would prefer to buy a vehicle with a protection package particularly the service contract Th ey know their budget is maxed out by the monthly payment Every dealer knows that when the car stops working the customer stops paying Yes you can repossess the vehicle but the repo and reconditioning just add further costs Th e special fi nance sales process was designed to help customers make the right choice by pre qualifying their purchase Th at purchase should include a service contract and GAP coverage Without them your customer could wind up in a situation familiar to most creditchallenged drivers An unexpected repair theft or total loss leaves them with a vehicle they havent paid off cant aff ord to fi x and cant drive A protection package will keep them on the road protect their purchase and help them rebuild their credit GOOD PARTNERS One common misconception is that Tier 3 and Tier 4 fi nance companies just wont let you sell any back end products or will limit your income Yet youre still able to make 600 to 700 per vehicle through companies like Credit Acceptance and Westlake Financial It really comes down to where they draw the line What is the end result going to do to the monthly payment Even if you are limited in the upper tiers that is a small percentage of your deals On Tier 1 and Tier 2 deals with a proper menu presentation I see back ends of up to 2500 all the time If you think that sounds like a prime deal youre right Th e same rules apply If a prime customer qualifi es for a 500 monthly payment you do them a disservice if you show them a Mercedes that no matter what even with the best lease in the world they cant get into for less than 650 a month So if your next subprime customers income qualifi es them for a 400 monthly payment the salesperson should show them a vehicle that will line up in the 325 350 range From there just as in prime its just a matter of a good solid turn to F I If the F I manager does a great job with the menu presentation and the customer wants the products the callback will cover the payment 32 AUTO DEALER MONTHLY FEBRUARY 2014 Be it prime or subprime as long as youre not overselling the vehicle you will have the opportunity to do what you need to do Car buyers know they will be limited by what the bank says theyre qualifi ed for By and large they are looking for the smart choice Youre impairing customer satisfaction if you sell them something they cant afford Build the value in protection the same way you would in prime END OF THE MONTH I am fully aware of the pressure to move vehicles on the eve of their 30 60 or 90 day turn For some dealers its an ongoing issue Th e solution Dont wait until the end of the month You should be trying to move that distressed piece of merchandise all month long Match the car to the customer and the customers budget If the customer is looking for a full size vehicle show them the one you have had the longest or has the most gross profi t built in Either way youre happy the old one had to go away regardless But if you follow the same process consistently you wont wind up in those end of the month panics Will there be times when you have a unit you need to go away Yes Will there be customers who will say they want the G35 or nothing at all Sure But for the dealers I know who are making those signifi cant profi ts in F I those are excuses rather than reasons Th e time for excuses is over Until next month great selling Greg Goebel is the CEO of Used Car University and the industrys leading special finance trainer since 1989 He is an 18 year former dealer principal and a highly sought after speaker author and consultant V ehicle service contracts are for people who want to cover the car the whole time they have it Its not an exclusive club Your customers dont have to have high income or good credit to join What they do need is a dealer who is willing to step down to a less expensive vehicle in order to include a protection package Giving your F I team the opportunity to sell a service contract and GAP coverage will be of great benefi t to you your customers and your fi nance company partners My contacts at the banks and fi nance companies that serve lower credit tiers seem to agree that these contracts stay on their books for an average of about two years and three months Adding the service contract increases the time the customer holds the vehicle before they trade it in Following the process outlined in this article will make your deals stand out Finance companies know just as well as you do that if the car breaks down and the customer cant afford to fi x it the loan has a good chance of going sour Part of that responsibility falls on the fi nance company and they wouldnt fi nance the protection package if they didnt see the benefi t Those that specialize in Tier 3 and Tier 4 contracts certainly encourage it If your sales team is just stuffi ng people into cars and maxing out the payment to income and loan to value ratios your portfolio will not perform Service contracts help keep people in their cars and their loans on the books SELLING THE SERVICE CONTRACT ISTOCKPHOTO COM DHSUEH