Those of you who have been reading this blog have hopefully found it usefull, amusing, or maybe both. Thanks for your support,
For the new year, I've taken a new approach to things. Someone recently asked me what I do for a living, and when I told him I consulted with auto dealers, he responded by saying, "Oh, you're one of those guys who go into a business and tell them everything that is wrong!"
The more I though abouth that statement, the more it seemed to ring true. So, for 2008, I'm changing what I do for a living. I'm no longer a consultant; now I'm a COACH!
Coaches tell you how to improve the things you are doing, to make you better. They don't criticize, they work along side you. That's what I intend to do.
In making this change, I decided to change this blog as well. You will now be able to find future articles at http://subprimecoach.blogspot.com/.
I look foward to seeing you there soon!
For YOUR success,
Geoff
Thursday, January 31, 2008
Wednesday, January 16, 2008
“Subprime” Voted 2007 Word of the Year by American Dialect Society
Jan 07, 2008 Chicago — In its 18th annual words of the year vote, the American Dialect Society voted “subprime” as the Word of the Year. As ADS defines it, subprime is an adjective used to describe a risky or less-than-ideal loan, mortgage or investment. Subprime was also winner of a brand-new 2007 category for real estate words, a category which reflects the preoccupation of the press and public for the past year with a deepening mortgage crisis.
Presiding at the Jan. 4 voting session were ADS Executive Secretary Allan Metcalf of McMurray College and Professor Wayne Glowka, Dean of Arts and Humanities of Reinhardt College, chair of the New Words Committee of the American Dialect Society. Wayne edits the column “Among the New Words” in the society’s quarterly journal American Speech.
“When you have investment companies losing billions of dollars over something like bundled subprime loans, then you have to consider whether it’s important,” Professor Glowka said. “You probably also want to think about paying off that third mortgage.” Word of the Year is interpreted in its broader sense as “vocabulary item”—not just words but phrases. The words or phrases do not have to be brand-new, but they have to be newly prominent or notable in the past year, in the manner of Time magazine’s Person of the Year.
The vote is the longest-running such vote anywhere, the only one not tied to commercial interests, and the word-of-the-year event up to which all others lead. It is fully informed by the members’ expertise in the study of words, but it is far from a solemn occasion. Members in the 118-year-old organization include linguists, lexicographers, etymologists, grammarians, historians, researchers, writers, authors, editors, professors, university students, and independent scholars. In conducting the vote, they act in fun and do not pretend to be officially inducting words into the English language. Instead they are highlighting that language change is normal, ongoing and entertaining.
In a companion vote, sibling organization the American Name Society voted “Betray Us” as Name of the Year for 2007 in its fourth annual contest. Other notable recognitions included the Most Useful “green,” designating environmental concern; the Most Creative word in Googelganger, which describes a person who put his or her name into Google’s search engine; and “Happy Kwanhanamas” was deemed Most Unnecessary, as it is intended as a “happy holiday” greeting that covers religious holidays Kwanza, Hanukkah and Christmas
Presiding at the Jan. 4 voting session were ADS Executive Secretary Allan Metcalf of McMurray College and Professor Wayne Glowka, Dean of Arts and Humanities of Reinhardt College, chair of the New Words Committee of the American Dialect Society. Wayne edits the column “Among the New Words” in the society’s quarterly journal American Speech.
“When you have investment companies losing billions of dollars over something like bundled subprime loans, then you have to consider whether it’s important,” Professor Glowka said. “You probably also want to think about paying off that third mortgage.” Word of the Year is interpreted in its broader sense as “vocabulary item”—not just words but phrases. The words or phrases do not have to be brand-new, but they have to be newly prominent or notable in the past year, in the manner of Time magazine’s Person of the Year.
The vote is the longest-running such vote anywhere, the only one not tied to commercial interests, and the word-of-the-year event up to which all others lead. It is fully informed by the members’ expertise in the study of words, but it is far from a solemn occasion. Members in the 118-year-old organization include linguists, lexicographers, etymologists, grammarians, historians, researchers, writers, authors, editors, professors, university students, and independent scholars. In conducting the vote, they act in fun and do not pretend to be officially inducting words into the English language. Instead they are highlighting that language change is normal, ongoing and entertaining.
In a companion vote, sibling organization the American Name Society voted “Betray Us” as Name of the Year for 2007 in its fourth annual contest. Other notable recognitions included the Most Useful “green,” designating environmental concern; the Most Creative word in Googelganger, which describes a person who put his or her name into Google’s search engine; and “Happy Kwanhanamas” was deemed Most Unnecessary, as it is intended as a “happy holiday” greeting that covers religious holidays Kwanza, Hanukkah and Christmas
Selling Value to Your Subprime Customers
I tend to think that the one thing that universally seems to motivate people are pictures of Washington, Lincoln, Hamilton, Jackson, Grant and Franklin. These are the guys that appear on our money.
Value is what a customer looks for. Build value in what you can do for them. In Subprime, the value is more than just getting a vehicle. There is substantial value in a customer’s ability to rebuild their credit. You have to show them how credit problems can affect not only their auto loan but may also have an impact on their:
• Car insurance - Some companies base auto insurance premiums on credit scores.
• Cell phones - Providers increasingly rely on credit scores to sort the good risks from the bad credit.
• Elective medical procedures – Some doctors pull credit to see if you qualify for the monthly payment plan.
• Employment –Many companies will check credit before they decide to hire a candidate.
• Education – Low credit scores can disqualify applicants for university and federally funded student loans.
• Housing - Rental property owners may reject tenant applications with poor credit scores.
• Marriage - You can't marry your way out of a bad FICO rating. A married couple does not get a combined credit score.
• Utilities - Slow credit indications may require a sizable security deposit before utility service can be established
Many customers don’t realize that bad credit can affect almost every aspect of their life. What’s the value in helping them fix it? How many “presidential portraits” can they save by improving their credit? We probably are talking about hundreds, if not thousands of dollars, in their pockets.
Value is what a customer looks for. Build value in what you can do for them. In Subprime, the value is more than just getting a vehicle. There is substantial value in a customer’s ability to rebuild their credit. You have to show them how credit problems can affect not only their auto loan but may also have an impact on their:
• Car insurance - Some companies base auto insurance premiums on credit scores.
• Cell phones - Providers increasingly rely on credit scores to sort the good risks from the bad credit.
• Elective medical procedures – Some doctors pull credit to see if you qualify for the monthly payment plan.
• Employment –Many companies will check credit before they decide to hire a candidate.
• Education – Low credit scores can disqualify applicants for university and federally funded student loans.
• Housing - Rental property owners may reject tenant applications with poor credit scores.
• Marriage - You can't marry your way out of a bad FICO rating. A married couple does not get a combined credit score.
• Utilities - Slow credit indications may require a sizable security deposit before utility service can be established
Many customers don’t realize that bad credit can affect almost every aspect of their life. What’s the value in helping them fix it? How many “presidential portraits” can they save by improving their credit? We probably are talking about hundreds, if not thousands of dollars, in their pockets.
Tuesday, January 15, 2008
Forbes Magazine lists the 10 Best and 10 Worst Selling Models for 2007
The Forbes lists are based on sales reported from January through October 2007 and are compared to sales from the same period in 2006.
In the columns below the models are listed in the order found in the Forbes Magazine article. Next to each is the number of units reported sold for 10 months of 2007. The percentage up or down is the comparison of those reported sales with the same period in 2006.
2007 Best Selling Models:
1. Ford F-Series 588,952 -12.5%
2. Chev Silverado 526,575 -2.4%
3. Toyota Camry 398,868 +6.4%
4. Honda Accord 332,815 +10.2%
5. Toyota Corolla 317,796 -4.0%
6. Honda Civic 278,764 +2.2%
7. Chev Impala 270,504 +12.6%
8. Nissan Altima 239,800 +26.6%
9. Dodge Ram 214,569 -29.3%
10. Honda CR-V 184,003 +34.9%
2007 Worst Selling Models:
1. Cadillac XLR 1,525 -42.7%
2. Mazda B-Series 2,363 -35.3%
3. Isuzu Ascender 2,523 -40.3%
4. Jaguar X-Type 2,599 -44.2%
5. Jaguar S-Type 2,973 -44.3%
6. Audi A8/S8 3,092 -27.2%
7. Porsche Boxer 3,148 -21.5%
8. Lexus SC430 3,311 -33.2%
9. Isuzu i290/370 3,575 +21.1%
10. Jaguar XJ 3,637 -11.2%
In the columns below the models are listed in the order found in the Forbes Magazine article. Next to each is the number of units reported sold for 10 months of 2007. The percentage up or down is the comparison of those reported sales with the same period in 2006.
2007 Best Selling Models:
1. Ford F-Series 588,952 -12.5%
2. Chev Silverado 526,575 -2.4%
3. Toyota Camry 398,868 +6.4%
4. Honda Accord 332,815 +10.2%
5. Toyota Corolla 317,796 -4.0%
6. Honda Civic 278,764 +2.2%
7. Chev Impala 270,504 +12.6%
8. Nissan Altima 239,800 +26.6%
9. Dodge Ram 214,569 -29.3%
10. Honda CR-V 184,003 +34.9%
2007 Worst Selling Models:
1. Cadillac XLR 1,525 -42.7%
2. Mazda B-Series 2,363 -35.3%
3. Isuzu Ascender 2,523 -40.3%
4. Jaguar X-Type 2,599 -44.2%
5. Jaguar S-Type 2,973 -44.3%
6. Audi A8/S8 3,092 -27.2%
7. Porsche Boxer 3,148 -21.5%
8. Lexus SC430 3,311 -33.2%
9. Isuzu i290/370 3,575 +21.1%
10. Jaguar XJ 3,637 -11.2%
Thursday, January 10, 2008
Researchers Explain Why Subprime Loans Default
by Jennifer Reed, Editor, Subprime Auto Finance News, January 10, 2008
CAMBRIDGE, Mass. — A recent report from the National Bureau of Economic Research analyzed the trends of subprime auto defaults at a large U.S. financial institution The data taken into account during the analysis included applications and sales from June 2001 through December 2004. This information was combined with records of loan payments, defaults and recoveries through April 2006.
"This gives us information on the characteristics of potential customers, the terms of the consummated transactions and gives the resulting loan outcomes," officials indicated. "We have additional data on the loan terms being offered at any given time as a function of credit score, and inventory data that allows us to observe the acquisition cost of each car, the amount spent to recondition it and the list price on the lot," they continued.
Overall, the researchers said there were more than 50,000 applications in the sample period. The average applicant was in his mid-30s with the monthly household income of $2,411. "Just over one-third of applicants purchase a car," the writers reported. "The average buyer has a somewhat higher income and somewhat better credit characteristics than the average applicant. In particular, the company assigns each applicant a credit category, which we partition into high, medium and low risk. The applicant pool is 26 percent low risk and 29 percent high risk, while the corresponding percentages for the poof of buyers are 35 and 17. Furthermore, the officials pointed out, "A typical car, and most are around three to five years old, costs around $6,000 to bring to the lot. The average sale price is just under $11,000 (negotiated price rather than list price). The average down payment is a bit less than $1,000, so after taxes and fees, the average loan size is similar to the sales price."
As many would suspect, researchers indicate that many purchasers would rather put down less of a down payment instead of more. "Forty-four percent make exactly the minimum down payment, which varies with the buyer's credit category, but is typically between $400 and $1,000. Some buyers do make down payments that are substantially above the required minimum, but the number is small. Less than 10 percent of buyers make down payments that exceed the required down payment," according to the report.
Moreover, the paper discovered that more than 85 percent of the loans had an annual interest rate of more than 20 percent, with about half of the loans showing the state-mandated maximum APR. Researchers highlighted that the most states, according to the data, had a standard 30-percent cap. "Our data ends before the last payments are due on some loans, but of the loans with uncensored payment periods, only 39 percent are repaid in full.
Moreover, loans that do default tend to default quickly," the analyzers found. In fact, they said, "Nearly half of the defaults occur before a quarter of the payments have been made, that is, within 10 months."
Another commonly known trend identified in the paper was the fact that demand for subprime auto loans tend to occur in a certain season, closely around the time tax rebates are released. "Overall, demand is almost 50 percent higher during tax rebate season than during other parts of the year. This seasonal effect substantially varies with household income and with the number of dependents, closely mirroring the federal earned income tax credit schedule," officials said. According to the report, applications are 23 percent more common in February than in other months, with the approval rate coming in at 40 percent, as opposed to 33 percent during the rest of the year. "These seasonal patterns cannot be attributed to sales or other changes in the firm's offers. In fact, required down payments are almost $150 higher in February, averaging across applicants in our data, than in other months of the year," the paper said. "Indeed, we initially thought these patterns indicated a data problem until the company pointed out that prospective buyers receive their tax rebates this time of year," officials mentioned.
Breaking it down further, the analysts discovered that households with monthly incomes below $1,500 and at least two dependents, meaning the rebate could be about $4,000, the number of applications doubles during February, with the number of purchases tripling. On the other hand, for households with incomes above $3,500 and no dependents, meaning the rebate is likely zero, the number of applications and purchases shows no increase whatsoever. "About 65 percent of February purchasers make a down payment above the required minimum, compared to 54 percent in the rest of the year," writers said. "Moreover, we estimate that after controlling for transaction characteristics, the desired down payment of a February buyer is about $300 higher than that of the average buyer. This is an enormous effect given that the average down payment is under $1,000.
"Second, we find that the demand is highly responsive to changes in minimum down payments. A $100 increase in the required down payment, holding car prices fixed, reduced demand by 7 percent. In contrast, generating the same reduction in demand requires an increase in car prices of close to $1,000." The paper found that a $1,000 increase in loan size ramps up the rate of default by more than 16 percent. "This alone provides a rationale for limiting loan sizes because the expected revenue from a loan is not monotonically increasing in the size of the loan. We find that borrowers who are observably at high risk of default are precisely the borrowers who desire the largest loans," the researchers described.
"The company we study assigns buyers into a small number of credit categories. We estimate that all else equal, a buyer in the worst category wants to borrow around $200 more than a buyer in the best category, and is more than twice more likely to default given equally sized loans," they pointed out. The analysts found that risk-based pricing can only help a lender within "observably different risk groups."
"We also look for, and find, evidence of adverse selection within risk groups driven by unobservable characteristics. Specifically, we estimate that a buyer who pays an extra $1,000 down for unobservable reasons will be 8 percent less likely to default than one who does not given identical cars and equivalent loan liabilities," the writer explained.
Offering a word of caution, the paper highlights, "So, while there are limits to what we can conclude with data from a single lender, we think that our results highlight the empirical relevance of informational models of consumer credit markets."
Returning to the company at hand, the officials said, "Almost all buyers finance a large fraction of their purchase with a loan that extends over a period of several years. What makes the company an unusual window into consumer borrowing is its customer population." More specifically, the customers are generally low-income workers, and most are subprime borrowers. Fewer than half of the company's applicants display a FICO score above 500, the paper noted. Furthermore, given the low credit quality of many of the applicants, researchers indicated that the company has invested heavily in proprietary credit-scoring technology.
Turning to another fact, researchers wrote, "Within credit category, buyers who have higher incomes, have bank accounts, do not live with their parents and have higher raw credit scores are all less likely to default. However, the fact that these characteristics predict default and are not directly priced does not necessarily imply a serious adverse selection problem in financing choices. "For example, buyers who live with their parents tend to make larger down payments, but have a greater likelihood of default later
CAMBRIDGE, Mass. — A recent report from the National Bureau of Economic Research analyzed the trends of subprime auto defaults at a large U.S. financial institution The data taken into account during the analysis included applications and sales from June 2001 through December 2004. This information was combined with records of loan payments, defaults and recoveries through April 2006.
"This gives us information on the characteristics of potential customers, the terms of the consummated transactions and gives the resulting loan outcomes," officials indicated. "We have additional data on the loan terms being offered at any given time as a function of credit score, and inventory data that allows us to observe the acquisition cost of each car, the amount spent to recondition it and the list price on the lot," they continued.
Overall, the researchers said there were more than 50,000 applications in the sample period. The average applicant was in his mid-30s with the monthly household income of $2,411. "Just over one-third of applicants purchase a car," the writers reported. "The average buyer has a somewhat higher income and somewhat better credit characteristics than the average applicant. In particular, the company assigns each applicant a credit category, which we partition into high, medium and low risk. The applicant pool is 26 percent low risk and 29 percent high risk, while the corresponding percentages for the poof of buyers are 35 and 17. Furthermore, the officials pointed out, "A typical car, and most are around three to five years old, costs around $6,000 to bring to the lot. The average sale price is just under $11,000 (negotiated price rather than list price). The average down payment is a bit less than $1,000, so after taxes and fees, the average loan size is similar to the sales price."
As many would suspect, researchers indicate that many purchasers would rather put down less of a down payment instead of more. "Forty-four percent make exactly the minimum down payment, which varies with the buyer's credit category, but is typically between $400 and $1,000. Some buyers do make down payments that are substantially above the required minimum, but the number is small. Less than 10 percent of buyers make down payments that exceed the required down payment," according to the report.
Moreover, the paper discovered that more than 85 percent of the loans had an annual interest rate of more than 20 percent, with about half of the loans showing the state-mandated maximum APR. Researchers highlighted that the most states, according to the data, had a standard 30-percent cap. "Our data ends before the last payments are due on some loans, but of the loans with uncensored payment periods, only 39 percent are repaid in full.
Moreover, loans that do default tend to default quickly," the analyzers found. In fact, they said, "Nearly half of the defaults occur before a quarter of the payments have been made, that is, within 10 months."
Another commonly known trend identified in the paper was the fact that demand for subprime auto loans tend to occur in a certain season, closely around the time tax rebates are released. "Overall, demand is almost 50 percent higher during tax rebate season than during other parts of the year. This seasonal effect substantially varies with household income and with the number of dependents, closely mirroring the federal earned income tax credit schedule," officials said. According to the report, applications are 23 percent more common in February than in other months, with the approval rate coming in at 40 percent, as opposed to 33 percent during the rest of the year. "These seasonal patterns cannot be attributed to sales or other changes in the firm's offers. In fact, required down payments are almost $150 higher in February, averaging across applicants in our data, than in other months of the year," the paper said. "Indeed, we initially thought these patterns indicated a data problem until the company pointed out that prospective buyers receive their tax rebates this time of year," officials mentioned.
Breaking it down further, the analysts discovered that households with monthly incomes below $1,500 and at least two dependents, meaning the rebate could be about $4,000, the number of applications doubles during February, with the number of purchases tripling. On the other hand, for households with incomes above $3,500 and no dependents, meaning the rebate is likely zero, the number of applications and purchases shows no increase whatsoever. "About 65 percent of February purchasers make a down payment above the required minimum, compared to 54 percent in the rest of the year," writers said. "Moreover, we estimate that after controlling for transaction characteristics, the desired down payment of a February buyer is about $300 higher than that of the average buyer. This is an enormous effect given that the average down payment is under $1,000.
"Second, we find that the demand is highly responsive to changes in minimum down payments. A $100 increase in the required down payment, holding car prices fixed, reduced demand by 7 percent. In contrast, generating the same reduction in demand requires an increase in car prices of close to $1,000." The paper found that a $1,000 increase in loan size ramps up the rate of default by more than 16 percent. "This alone provides a rationale for limiting loan sizes because the expected revenue from a loan is not monotonically increasing in the size of the loan. We find that borrowers who are observably at high risk of default are precisely the borrowers who desire the largest loans," the researchers described.
"The company we study assigns buyers into a small number of credit categories. We estimate that all else equal, a buyer in the worst category wants to borrow around $200 more than a buyer in the best category, and is more than twice more likely to default given equally sized loans," they pointed out. The analysts found that risk-based pricing can only help a lender within "observably different risk groups."
"We also look for, and find, evidence of adverse selection within risk groups driven by unobservable characteristics. Specifically, we estimate that a buyer who pays an extra $1,000 down for unobservable reasons will be 8 percent less likely to default than one who does not given identical cars and equivalent loan liabilities," the writer explained.
Offering a word of caution, the paper highlights, "So, while there are limits to what we can conclude with data from a single lender, we think that our results highlight the empirical relevance of informational models of consumer credit markets."
Returning to the company at hand, the officials said, "Almost all buyers finance a large fraction of their purchase with a loan that extends over a period of several years. What makes the company an unusual window into consumer borrowing is its customer population." More specifically, the customers are generally low-income workers, and most are subprime borrowers. Fewer than half of the company's applicants display a FICO score above 500, the paper noted. Furthermore, given the low credit quality of many of the applicants, researchers indicated that the company has invested heavily in proprietary credit-scoring technology.
Turning to another fact, researchers wrote, "Within credit category, buyers who have higher incomes, have bank accounts, do not live with their parents and have higher raw credit scores are all less likely to default. However, the fact that these characteristics predict default and are not directly priced does not necessarily imply a serious adverse selection problem in financing choices. "For example, buyers who live with their parents tend to make larger down payments, but have a greater likelihood of default later
Wednesday, January 9, 2008
Do You Know Where Your Special Finance Leads Have Been?
by Jim Wagner.
Have Your Special Finance Leads Been Around the Block?
As you probably know, special finance leads have become big business. The other day I was talking to someone very involved in the automotive lead business who told me that there are over 1.5 million leads generated every month. That, he believes, is a conservative number. Four or five years ago there were only a handful of players in the auto lead business. Now there are over two dozen.
A side effect of this expansion is that marketing firms not primarily associated with automotive leads are entering the space. They are generating leads that are not necessarily genuine auto shoppers, but consumers who are initially interested in other products. These leads are being disseminated on the wholesale market. With the average cost of leads currently over $20, it pays to learn how to distinguish genuine auto shoppers and leads from people not primarily looking for auto loans. How do you go about doing so? In an article you’ll never find in a trade magazine, we’re going to tell you how.
The Wholesale Lead Network
Most of the leads that you’ve been purchasing are generated when a consumer starts searching for alternate finance options on the internet. Most of the time, these shoppers will use a search engine, such as Google, and use keywords like “auto loan” or “car finance“. Special finance lead generators pay big money to ensure that their landing pages, like the one below, come up high on the page when these terms are submitted.
If your lead provider is sending 100% of these leads to you, then you’re getting what you were promised. Of course, you’re not going to close every one of these leads, but at least you’re getting your money’s worth.
Wholesale Leads and Coregistration
When you sign a contract with a lead generator and ask for 150 leads a month, his goal is to organically produce these leads on his own landing pages. Let’s call him Generator A. However, he may have several dealerships in your area. Or, you may exist in a lead scarce market. If that’s the case, and he does not have enough “inventory”, then he’s going to look to the wholesale market for more leads to meet your demand.
Generator A will have pre-arranged partnerships, let’s say with Generator B and Generator C, where he can buy leads when his inventory runs out or sell when he has excess leads. This takes place automatically, so nobody feels the difference. As long as he’s done his homework about his wholesale partners and has investigated their lead quality, everyone wins. He gets the supply he needs and you are a happy paying customer.
However, the demand for leads has put pressure on everybody to source more and more volume. Let’s say, responding to this demand, A decides to start two new partnerships, with Generators D and E. Let’s also assume that D is in the payday loan business, and E is in the prepaid credit card business. Those leads are going to perform differently than the others because they are not organic auto shoppers. How does D and E generate auto leads if they are not in the auto business? Through a process called coregistration.
Coregistration
Coregistration is a common tactic online marketers use to generate many leads from a single customer. Simply put, a coreg lead is generated when a consumer, interested in a particular offer or product (such as the payday and credit card examples) is asked to “opt in” on related offers. If they agree, and choose “auto loans”, then a special finance lead is generated, sent through the wholesale network, and sold as a special finance lead to a dealership.
Before you panic and call your lead generator, understand that not all coreg leads are the same. For example, a consumer who subscribes to a free credit report service in order to prepare for an automobile purchase is a genuine auto shopper. This lead will perform as well as any other. I would feel good about buying these leads.
How can you ensure that the leads you buy are genuine auto buyers? How do you protect your close rate and maximize your return on investment? Unfortunately, there is no simple answer. You’re going to have to do your homework.
Have Your Special Finance Leads Been Around the Block?
As you probably know, special finance leads have become big business. The other day I was talking to someone very involved in the automotive lead business who told me that there are over 1.5 million leads generated every month. That, he believes, is a conservative number. Four or five years ago there were only a handful of players in the auto lead business. Now there are over two dozen.
A side effect of this expansion is that marketing firms not primarily associated with automotive leads are entering the space. They are generating leads that are not necessarily genuine auto shoppers, but consumers who are initially interested in other products. These leads are being disseminated on the wholesale market. With the average cost of leads currently over $20, it pays to learn how to distinguish genuine auto shoppers and leads from people not primarily looking for auto loans. How do you go about doing so? In an article you’ll never find in a trade magazine, we’re going to tell you how.
The Wholesale Lead Network
Most of the leads that you’ve been purchasing are generated when a consumer starts searching for alternate finance options on the internet. Most of the time, these shoppers will use a search engine, such as Google, and use keywords like “auto loan” or “car finance“. Special finance lead generators pay big money to ensure that their landing pages, like the one below, come up high on the page when these terms are submitted.
If your lead provider is sending 100% of these leads to you, then you’re getting what you were promised. Of course, you’re not going to close every one of these leads, but at least you’re getting your money’s worth.
Wholesale Leads and Coregistration
When you sign a contract with a lead generator and ask for 150 leads a month, his goal is to organically produce these leads on his own landing pages. Let’s call him Generator A. However, he may have several dealerships in your area. Or, you may exist in a lead scarce market. If that’s the case, and he does not have enough “inventory”, then he’s going to look to the wholesale market for more leads to meet your demand.
Generator A will have pre-arranged partnerships, let’s say with Generator B and Generator C, where he can buy leads when his inventory runs out or sell when he has excess leads. This takes place automatically, so nobody feels the difference. As long as he’s done his homework about his wholesale partners and has investigated their lead quality, everyone wins. He gets the supply he needs and you are a happy paying customer.
However, the demand for leads has put pressure on everybody to source more and more volume. Let’s say, responding to this demand, A decides to start two new partnerships, with Generators D and E. Let’s also assume that D is in the payday loan business, and E is in the prepaid credit card business. Those leads are going to perform differently than the others because they are not organic auto shoppers. How does D and E generate auto leads if they are not in the auto business? Through a process called coregistration.
Coregistration
Coregistration is a common tactic online marketers use to generate many leads from a single customer. Simply put, a coreg lead is generated when a consumer, interested in a particular offer or product (such as the payday and credit card examples) is asked to “opt in” on related offers. If they agree, and choose “auto loans”, then a special finance lead is generated, sent through the wholesale network, and sold as a special finance lead to a dealership.
Before you panic and call your lead generator, understand that not all coreg leads are the same. For example, a consumer who subscribes to a free credit report service in order to prepare for an automobile purchase is a genuine auto shopper. This lead will perform as well as any other. I would feel good about buying these leads.
How can you ensure that the leads you buy are genuine auto buyers? How do you protect your close rate and maximize your return on investment? Unfortunately, there is no simple answer. You’re going to have to do your homework.
Thursday, December 27, 2007
New FICO Score to be More Understanding
New FICO Score to be More UnderstandingDec 26, 2007 Consumers caught in the subprime mortgage crisis may find some relief with Fair Isaac’s new FICO 08. Aside from providing a more accurate risk assessment of consumer credit, the new formula also aims to reward customers for keep other credit accounts up to date.
“The main thing we tried to do with the score was to make sure it was in tune with current consumer behaviors,” said Fair Isaac’s Craig Watts. “We changed the formula to improve the predictiveness.”
The new formula takes into account consumer credit behaviors in all credit areas rather than focusing on accounts that have gone delinquent. Now, consumers who’ve fallen behind on one account could be rewarded for remaining in good standing with other credit accounts.
“If a person has a repossession or foreclosure on their credit score today, that casts a shadow over everything else. They are scored along with other people with serious delinquencies,” explained Watts. “But this new formula looks at not just serious delinquencies, but also at whether consumers have other accounts with positive credit histories. The consumer’s score is not penalized as much for serious delinquencies that are uncommon to his or her credit behavior.”
Although a consumer’s credit standing will vary from lender to lender, the new formula may present more opportunities for F&I managers to get consumer loans bought.
“Our expectation is that lenders will reduce the amounts of defaults on loans by 5 to 15 percent in certain demographic groups. It really helps with consumers who already have serious credit problems, those who are new to credit and those who are seeking credit.”
“The main thing we tried to do with the score was to make sure it was in tune with current consumer behaviors,” said Fair Isaac’s Craig Watts. “We changed the formula to improve the predictiveness.”
The new formula takes into account consumer credit behaviors in all credit areas rather than focusing on accounts that have gone delinquent. Now, consumers who’ve fallen behind on one account could be rewarded for remaining in good standing with other credit accounts.
“If a person has a repossession or foreclosure on their credit score today, that casts a shadow over everything else. They are scored along with other people with serious delinquencies,” explained Watts. “But this new formula looks at not just serious delinquencies, but also at whether consumers have other accounts with positive credit histories. The consumer’s score is not penalized as much for serious delinquencies that are uncommon to his or her credit behavior.”
Although a consumer’s credit standing will vary from lender to lender, the new formula may present more opportunities for F&I managers to get consumer loans bought.
“Our expectation is that lenders will reduce the amounts of defaults on loans by 5 to 15 percent in certain demographic groups. It really helps with consumers who already have serious credit problems, those who are new to credit and those who are seeking credit.”
Wednesday, December 26, 2007
The Tax Man Cometh…Only He Might Be A Little Late This Year
Late changes to the alternative minimum tax (AMT) provision of the IRS Rules could leave refunds delayed or worse. The AMT was originally intended for the wealthy few when it was created nearly 40 years ago. But because Congress never indexed for inflation the amount of income exempt from AMT and because it disallows a lot of popular tax breaks, tens of millions of middle-class taxpayers could get hit.
Early filers may be forced to submit amended returns in order to comply with any changes. The IRS needs at least seven weeks to analyze any changes in the tax laws, write the necessary software codes and test it. In addition, the IRS needs time to notify all tax professional and others affected. As such, IRS deputy commissioner Richard Spires has warned of a significant backlog in processing returns, as well as the ensuing confusion for taxpayers.
“There are a lot of people that file early and a lot of people that rely on getting those refund checks in that early February time frame,” Mr. Spires said in an interview. “If we’re not able to process those returns for them, we believe it will have a significant impact on them.”
New 1040 and 1040A tax booklets and instructions have already been printed. But 12 related tax forms, including one for the AMT and others for a variety of tax credits, must be revised and put through a new printing cycle if Congress approves new legislation. The credits include those for education expenses and for child and dependent care expenses.
What does this mean for auto dealers? Typically, taxpayers who expect refunds tend to file earlier than others. For tax year 2006, 103 million filers out of 135 million got refunds averaging $2,259 Consumers who traditionally rely on their tax return money for down payments may be forced to wait for their returns longer than usual. The rush of customers who file early to receive quick refunds may be delayed until the IRS sorts this all out.
Early filers may be forced to submit amended returns in order to comply with any changes. The IRS needs at least seven weeks to analyze any changes in the tax laws, write the necessary software codes and test it. In addition, the IRS needs time to notify all tax professional and others affected. As such, IRS deputy commissioner Richard Spires has warned of a significant backlog in processing returns, as well as the ensuing confusion for taxpayers.
“There are a lot of people that file early and a lot of people that rely on getting those refund checks in that early February time frame,” Mr. Spires said in an interview. “If we’re not able to process those returns for them, we believe it will have a significant impact on them.”
New 1040 and 1040A tax booklets and instructions have already been printed. But 12 related tax forms, including one for the AMT and others for a variety of tax credits, must be revised and put through a new printing cycle if Congress approves new legislation. The credits include those for education expenses and for child and dependent care expenses.
What does this mean for auto dealers? Typically, taxpayers who expect refunds tend to file earlier than others. For tax year 2006, 103 million filers out of 135 million got refunds averaging $2,259 Consumers who traditionally rely on their tax return money for down payments may be forced to wait for their returns longer than usual. The rush of customers who file early to receive quick refunds may be delayed until the IRS sorts this all out.
Friday, December 21, 2007
Appropriate Subprime Inventory
A far too common objection heard when discussing Special Finance is, “We just don’t have any Subprime inventory!” or “All our used cars are out of the book!” By far the most difficult part of special finance can be to get the “right vehicles”. The list seems to change daily.
Obviously, any vehicle that can be obtained “behind book” is the right vehicle. Current year program cars, which can be sold from like invoice, are good units to have. Typically, the best vehicles are trade-ins, since these are the units you tend to own best. Keep in mind that SFI vehicles don’t have to be movie stars. If they run good, this can overcome some objections to minor imperfections (a dent or a ding) and if done correctly, Special Finance is about selling the loan, not selling the vehicle, Sell the concept of rebuilding credit. Qualify for a loan and then get a car!
The ideal vehicle is 3-4 years old, with less than 50,000 miles. Look for family type vehicles, i.e. 4 door sedans, SUV’s and minivans. Base pickups are good units as well. Stay away from the high lines and sports cars. These have limited appeal and tend to be tough to insure. Remember that the cost of insurance can make or break a deal – and the down payment for full coverage may have to come out of the gross. Don’t necessarily overlook the need to have some older, higher mileage units on the lot. These units don’t need the full reconditioning but need to be safe and functional. They are perfect for those deeper lenders as well as customers who simply need basic transportation. Create a “Credit Corral” to supplement standard Sub prime inventory. These are units that might typically be wholesaled but, with a minimal shop investment, can be made saleable and turn what might be a wholesale loss into retail profit. This can result in a few extra units sold each month.
Be flexible. Having a wide spectrum of used cars is a safe bet. The worst scenario is to have an approval without a vehicle to show. Make sure there is an adequate amount of used car inventory on the lot. As a general of thumb is a sales-to-inventory ratio of 2:1. For example having 60 vehicles available for sale is typically what is needed to sell 30 subprime units. Keep a good mix of vehicles on the lot to have the ability to land the right cars on customers.
Make sure the Used Car Manager knows what’s hot and what’s not with lenders. Certain vehicles may be restricted (limited advance) or ineligible (unable to finance) with a particular lender. Keep the used car manager up to date on model year change-over as well (when the lender considers current year models to be 1 year old and so on down the line.) The Used Car Manager is the inventory lifeline. Take a short deal on a 60+ day old unit every now and then, especially on a short deal, to help level out the used car inventory.
Check the lot everyday for new arrivals. Used Car Managers should lets the Special Finance department know what was bought or traded for in the last few days. Book out every retail unit to determine which ones have the best loan to value. (Loan to value or LTV is the cost of the unit versus the book value.) A unit with a strong book has a loan value significantly higher than its cost, which generates higher profit or allows the absorption of negative equity or high discount fees. Remember that, while most lenders use NADA trade for their book values, some lenders use Kelly Blue Book for their valuations.. Be careful not to “power book” a vehicle (add options that are not on the vehicle). Lenders may verify the equipment with the customer during their interview, and will seek to chargeback any over-booking they find.
Many dealerships have software to book out your inventory. Dealer Track and Route One both have modules available for this purpose. Keep a binder on your desk, with a sheet for each vehicle on the lot that is “retail ready”; these sheets can be used as part of the funding packages. Update this book daily, removing sold or wholesaled units and adding in fresh trade-ins or purchased units. There’s nothing worse than structuring a deal on a unit that is no longer on the lot. In addition, by having the inventory booked out in advance, it is easy to find which units have the greatest markup potential which helps overcome major negative equity for a customer as well as turn substantial profits.
Don’t be afraid of new vehicles in a franchised dealership. Vehicles with substantial dealer cash (not consumer rebates, but money paid by the manufacturer directly to the dealership if it meets sales objectives on a particular model) may allow a structure on a new car deal which makes it very attractive to a lender. Use any manufacture’s rebate as part of the down payment. Often, with a minimal customer down payment, a deal can be structured at 80% loan-to-value (the amount of the loan versus the invoice of the vehicle), which is that magic number which gets a lender’s attention. Keep up to date on incentives, as they may get better as the month goes on.
Obviously, any vehicle that can be obtained “behind book” is the right vehicle. Current year program cars, which can be sold from like invoice, are good units to have. Typically, the best vehicles are trade-ins, since these are the units you tend to own best. Keep in mind that SFI vehicles don’t have to be movie stars. If they run good, this can overcome some objections to minor imperfections (a dent or a ding) and if done correctly, Special Finance is about selling the loan, not selling the vehicle, Sell the concept of rebuilding credit. Qualify for a loan and then get a car!
The ideal vehicle is 3-4 years old, with less than 50,000 miles. Look for family type vehicles, i.e. 4 door sedans, SUV’s and minivans. Base pickups are good units as well. Stay away from the high lines and sports cars. These have limited appeal and tend to be tough to insure. Remember that the cost of insurance can make or break a deal – and the down payment for full coverage may have to come out of the gross. Don’t necessarily overlook the need to have some older, higher mileage units on the lot. These units don’t need the full reconditioning but need to be safe and functional. They are perfect for those deeper lenders as well as customers who simply need basic transportation. Create a “Credit Corral” to supplement standard Sub prime inventory. These are units that might typically be wholesaled but, with a minimal shop investment, can be made saleable and turn what might be a wholesale loss into retail profit. This can result in a few extra units sold each month.
Be flexible. Having a wide spectrum of used cars is a safe bet. The worst scenario is to have an approval without a vehicle to show. Make sure there is an adequate amount of used car inventory on the lot. As a general of thumb is a sales-to-inventory ratio of 2:1. For example having 60 vehicles available for sale is typically what is needed to sell 30 subprime units. Keep a good mix of vehicles on the lot to have the ability to land the right cars on customers.
Make sure the Used Car Manager knows what’s hot and what’s not with lenders. Certain vehicles may be restricted (limited advance) or ineligible (unable to finance) with a particular lender. Keep the used car manager up to date on model year change-over as well (when the lender considers current year models to be 1 year old and so on down the line.) The Used Car Manager is the inventory lifeline. Take a short deal on a 60+ day old unit every now and then, especially on a short deal, to help level out the used car inventory.
Check the lot everyday for new arrivals. Used Car Managers should lets the Special Finance department know what was bought or traded for in the last few days. Book out every retail unit to determine which ones have the best loan to value. (Loan to value or LTV is the cost of the unit versus the book value.) A unit with a strong book has a loan value significantly higher than its cost, which generates higher profit or allows the absorption of negative equity or high discount fees. Remember that, while most lenders use NADA trade for their book values, some lenders use Kelly Blue Book for their valuations.. Be careful not to “power book” a vehicle (add options that are not on the vehicle). Lenders may verify the equipment with the customer during their interview, and will seek to chargeback any over-booking they find.
Many dealerships have software to book out your inventory. Dealer Track and Route One both have modules available for this purpose. Keep a binder on your desk, with a sheet for each vehicle on the lot that is “retail ready”; these sheets can be used as part of the funding packages. Update this book daily, removing sold or wholesaled units and adding in fresh trade-ins or purchased units. There’s nothing worse than structuring a deal on a unit that is no longer on the lot. In addition, by having the inventory booked out in advance, it is easy to find which units have the greatest markup potential which helps overcome major negative equity for a customer as well as turn substantial profits.
Don’t be afraid of new vehicles in a franchised dealership. Vehicles with substantial dealer cash (not consumer rebates, but money paid by the manufacturer directly to the dealership if it meets sales objectives on a particular model) may allow a structure on a new car deal which makes it very attractive to a lender. Use any manufacture’s rebate as part of the down payment. Often, with a minimal customer down payment, a deal can be structured at 80% loan-to-value (the amount of the loan versus the invoice of the vehicle), which is that magic number which gets a lender’s attention. Keep up to date on incentives, as they may get better as the month goes on.
Monday, December 10, 2007
Mailing Lists and Pre-approved Credit
In the days of direct marketing, businesses prepared a single mail piece, sent it to virtually everyone, then waited for consumers to buy. Today, most companies develop a description of their ideal customers and then tailor unique sales offers to fit those customers’ needs. This approach is called target marketing.
The right mailing list helps a business reach only those consumers who are likely to be most interested in its products and services. Target marketing reduces “junk” mail – advertising mail that does not relate to their interests or needs.
The right mailing list helps a business reach only those consumers who are likely to be most interested in its products and services. Target marketing reduces “junk” mail – advertising mail that does not relate to their interests or needs.
By eliminating consumers who don’t fit a specific description, a company can mail fewer but more effective offers.
How consumers get on a mailing list
There are three main ways a name might get on a mailing list:
Magazines, credit card companies, clubs and organizations, charities, manufacturers, and retailers make lists of their subscribers, customers, members, and donors available to other businesses for a rental fee.
Companies purchase information from various public and private sources to develop consumer databases for specific marketing purposes. These companies are called list compilers. Nearly everyone’s name appears on compiled lists.
Credit reporting agencies (including Experian), under legally specified conditions, provide lists of creditworthy consumers for companies to offer credit. These are called prescreened lists.
Why consumers receive pre-selected credit offers
From a credit grantor’s perspective, prescreening is a cost-effective way to secure new customers who are most likely to use credit wisely and repay their debts on time. It allows a credit grantor to define an “ideal” consumer, decide how much credit to give that potential customer, and then send a pre-selected offer to thousands or even millions of consumers who match this description.
If a consumer receives a pre-selected credit offer, all that has to be done to accept it is sign and provide a few other limited pieces of information. The responding consumer will be given a line of credit provided they still meet the predetermined criteria. However, the federal Fair Credit Reporting Act allows creditors to review credit history when a consumer accepts the offer. If the consumer no longer meets the criteria, the application may be denied.
Protecting consumer rights
The entire process of ordering lists, generating mailing labels and sending offers to consumers is automated by the use of computer tapes and computer processing. Large numbers of names – from a few thousand to many million – are processed at one time.
Marketers don’t review individual records. In fact, they rarely even see consumer names. Third-party companies generally print mailing labels, attach them to the advertising mail and take the mail to the Post OfficeTM.
The prescreening process contains additional consumer protections:
Consumer credit information is summarized and coded for confidentiality.
Federal guidelines require that consumers who are selected by the prescreening process receive a “firm offer” of credit or insurance.
Federal law requires credit grantors to extend credit in a fair and consistent manner. They cannot consider such factors as your sex, marital status, race or religion.
Wednesday, November 28, 2007
When You Think Your Leads Are Terrible, Remember This...
The quality of these leads hasn't changed. It's the circumstances these people face that is different.
The subprime mortgage crisis effects subprime customers the most! Many of them are "victims" of these subprime mortgage loans and are unsure of what their mortgage payment will be when their rate goes up!
These same people that were banking on the equity in their home continuing to rise and many took out equity lines or second mortgages and now don't have the equity left to support these loans.
The housing market is down, and many of the people who work in it are feeling the pain. The construction worker, carpenter, framer, electrician, plumber, etc. all were riding high when the new housing market was in full swing. Now, many of them, if they are still employed, have gone from 70-80 hour weeks making big overtime to 40 or less hours a week with no overtime. Income is way off, so many of them don't have down payments available.
Remind yourself that now is when you can really shine. Most finance guys would walk away from this market because it's too hard to do the business. Don’t be one of them
The subprime mortgage crisis effects subprime customers the most! Many of them are "victims" of these subprime mortgage loans and are unsure of what their mortgage payment will be when their rate goes up!
These same people that were banking on the equity in their home continuing to rise and many took out equity lines or second mortgages and now don't have the equity left to support these loans.
The housing market is down, and many of the people who work in it are feeling the pain. The construction worker, carpenter, framer, electrician, plumber, etc. all were riding high when the new housing market was in full swing. Now, many of them, if they are still employed, have gone from 70-80 hour weeks making big overtime to 40 or less hours a week with no overtime. Income is way off, so many of them don't have down payments available.
Remind yourself that now is when you can really shine. Most finance guys would walk away from this market because it's too hard to do the business. Don’t be one of them
Tuesday, October 30, 2007
Beware of Who Is Selling for YOU!
This showed up in my inbox this morning. Seems like I get something like this on a regular basis!
State reaches settlement with Washington car dealer and ad agency over deceptive marketing
Dealer group was accused of using a series of deceptive tactics to lure customers
(10/30/2007)
The Washington Attorney General’s Office announced settlements with a car dealer and an out-of-state advertising firm accused of using deceptive promotions to sell cars.
The settlements resolve a civil lawsuit filed against Bruce Titus Automotive Group and Level 10 Marketing, based in Slidell, La. The defendants did not admit any wrongdoing but agreed to pay civil penalties and comply with injunctive provisions concerning their marketing practices.
The Attorney General’s Office alleged the defendants advertised cars without disclosing all terms, including stating how many vehicles were available at a specific price, that they suggested that financing could be guaranteed regardless of a consumer’s credit history, and used “simulated checks” and contest promotions that could mislead consumers. Those actions violated at least three of Washington’s consumer protection laws.
According to the complaint, the defendants sent ads that offered misleading prices and made it appear that the cars were substantially discounted. They also allegedly charged undisclosed fees and advertised vehicle lease and financing terms without all mandated disclosures. Some promotions were sent in envelopes labeled “OPEN IMMEDIATELY – TIME DATED MATERIAL” that resembled official certified mail. Other mailers looked like checks and included the words “PAY TO THE ORDER OF” but were actually ads. And some vehicle ads included statements such as “credit problems – no problem.”
The dealership group will pay $5,000 in civil penalties plus $30,000 in attorneys’ fees and legal costs.
Level 10 will pay $15,000 in attorneys’ fees and legal costs. They also agreed to pay $10,000 in civil penalties, which will be suspended provided they comply with the settlement terms.
More often that not, out of state marketing companies don't seem to know your laws. Google any lead generator or marketing company's name followed by the word "lawsuit" and see what you get, before you sign up. Attorney generals throughout the country are cracking down on "deceptive marketing practices" by out of state companies holding staffed events or doing mailers for automobile dealerships.
State reaches settlement with Washington car dealer and ad agency over deceptive marketing
Dealer group was accused of using a series of deceptive tactics to lure customers
(10/30/2007)
The Washington Attorney General’s Office announced settlements with a car dealer and an out-of-state advertising firm accused of using deceptive promotions to sell cars.
The settlements resolve a civil lawsuit filed against Bruce Titus Automotive Group and Level 10 Marketing, based in Slidell, La. The defendants did not admit any wrongdoing but agreed to pay civil penalties and comply with injunctive provisions concerning their marketing practices.
The Attorney General’s Office alleged the defendants advertised cars without disclosing all terms, including stating how many vehicles were available at a specific price, that they suggested that financing could be guaranteed regardless of a consumer’s credit history, and used “simulated checks” and contest promotions that could mislead consumers. Those actions violated at least three of Washington’s consumer protection laws.
According to the complaint, the defendants sent ads that offered misleading prices and made it appear that the cars were substantially discounted. They also allegedly charged undisclosed fees and advertised vehicle lease and financing terms without all mandated disclosures. Some promotions were sent in envelopes labeled “OPEN IMMEDIATELY – TIME DATED MATERIAL” that resembled official certified mail. Other mailers looked like checks and included the words “PAY TO THE ORDER OF” but were actually ads. And some vehicle ads included statements such as “credit problems – no problem.”
The dealership group will pay $5,000 in civil penalties plus $30,000 in attorneys’ fees and legal costs.
Level 10 will pay $15,000 in attorneys’ fees and legal costs. They also agreed to pay $10,000 in civil penalties, which will be suspended provided they comply with the settlement terms.
More often that not, out of state marketing companies don't seem to know your laws. Google any lead generator or marketing company's name followed by the word "lawsuit" and see what you get, before you sign up. Attorney generals throughout the country are cracking down on "deceptive marketing practices" by out of state companies holding staffed events or doing mailers for automobile dealerships.
PIN Reports Days-to-Turn for 2005 Used Models
By Jennifer Reed, SubPrime Auto Finance News Editor
October 29, 2007
WESTLAKE VILLAGE, Calif. — When looking at how quickly 2005 model-year vehicles are selling at stores, Power Information Network saw an interesting trend come to light.
"The fastest-turning used 2005 model-year vehicles bear one clear similarity with the fastest-turning new vehicles: Both groups are dominated by imports," officials indicated.
Reviewing 12 used vehicles with the lowest turn rate, PIN discovered that 11 were foreign brands. All imports covered Toyota, Nissan or Honda models, executives highlighted.
"Also, 10 of the 12 models are light trucks but in contrast to new-vehicle trends, only one of the fastest-turning used trucks (Murano) is a crossover," officials said.
10 Fast-Turning 2005 Models Include:
Toyota Sequoia: 26 days
Nissan Armada: 26 days
Dodge Sprinter: 28 days
Honda Odyssey: 29 days
Infiniti QX56: 30 days
Toyota Sienna: 31 days
Toyota Tacoma: 31 days
Nissan Murano: 31 days
Toyota 4Runner: 32 days
Infiniti G35: 32 days
Nissan Titan: 32 days
Lexus ES Series: 32 days
According to the company, data was gathered Jan. 1 though Oct. 21. Additionally, officials noted that more than 10 models were included because of ties. Results were based on sales at franchised dealerships.
October 29, 2007
WESTLAKE VILLAGE, Calif. — When looking at how quickly 2005 model-year vehicles are selling at stores, Power Information Network saw an interesting trend come to light.
"The fastest-turning used 2005 model-year vehicles bear one clear similarity with the fastest-turning new vehicles: Both groups are dominated by imports," officials indicated.
Reviewing 12 used vehicles with the lowest turn rate, PIN discovered that 11 were foreign brands. All imports covered Toyota, Nissan or Honda models, executives highlighted.
"Also, 10 of the 12 models are light trucks but in contrast to new-vehicle trends, only one of the fastest-turning used trucks (Murano) is a crossover," officials said.
10 Fast-Turning 2005 Models Include:
Toyota Sequoia: 26 days
Nissan Armada: 26 days
Dodge Sprinter: 28 days
Honda Odyssey: 29 days
Infiniti QX56: 30 days
Toyota Sienna: 31 days
Toyota Tacoma: 31 days
Nissan Murano: 31 days
Toyota 4Runner: 32 days
Infiniti G35: 32 days
Nissan Titan: 32 days
Lexus ES Series: 32 days
According to the company, data was gathered Jan. 1 though Oct. 21. Additionally, officials noted that more than 10 models were included because of ties. Results were based on sales at franchised dealerships.
Thursday, October 25, 2007
Who’s reading your mail?
I’d like to introduce you to a member of my family. Her name is Chooch, and she’s 14 years old. She doesn’t work, does not have a driver’s license or a Social Security number, and as far as I know, has no credit file.
Let me start out by explaining something. My home phone number is listed in Directory Assistance under Chooch’s name. If you haven’t figured it out by now, Chooch is my border collie. That’s right…my dog! I do this so, when someone calls my home during dinner and asks to speak to Chooch, I know it’s a telemarketer. So far, Chooch has gotten calls for magazines, insurance and political contributions.
But recently, something new has started to happen. Chooch has been pre-approved for credit cards, real estate auctions and most importantly, she started to receive mailers from auto dealers!
Let me start out by explaining something. My home phone number is listed in Directory Assistance under Chooch’s name. If you haven’t figured it out by now, Chooch is my border collie. That’s right…my dog! I do this so, when someone calls my home during dinner and asks to speak to Chooch, I know it’s a telemarketer. So far, Chooch has gotten calls for magazines, insurance and political contributions.
But recently, something new has started to happen. Chooch has been pre-approved for credit cards, real estate auctions and most importantly, she started to receive mailers from auto dealers!
One of the credit mailers Chooch recieved!
So, who’s reading your mail? Do you really know who your mail campaign goes to? Direct mail is not cheap, as we all know, and unless your piece is being opened and read by real consumers who need an auto loan, how effective can it be? In order to maximize the effectiveness of your advertising dollars in today’s market, you need to be sure that your marketing efforts are precise. After all, advertising dollars are limited, and, just like you teach your sales people, you have to sell value in order to sell your product.
Offering easy credit to customer with good credit is like trying to sell a compact to a family with six kids. It might work, but in reality, it’s going to be a hard sell. Make sure that the mailer you buy maximizes its impact on customers who truly need your credit offer. Using blind, targeted mail, with a genuine offer of credit, produces customers who want your help, not the gift or gimmick it offers. After all, how many gifts did your last mailer give out versus the number of cars it sold?
Tuesday, October 9, 2007
Maximizing YOUR Results
The question is "Out of the last ten potential customers that came in for a car, how many left without one?" Conservatively, dealerships are losing at least one Special Finance deal a day or 25-30 deals a month. An analysis of the lost opportunities enables a dealership to correct the processes that are losing these customers. With re-training in proper Special Finance processes a dealer can go from being simply average and frustrated in their Special Finance efforts to solidly and consistently successful.
What does that mean in real money? By recapturing the lost opportunities at $3,000 average gross per deal, an additional $75,000-90,000 in gross profit is added simply by correcting existing mistakes. By using a consistent process, we can look to add 18-22 additional units a month. This means, with a $3,000 average gross, consistent process adds $54,000-60,000 a month. Combining that with the customers recaptured from lost lot traffic, it is reasonable to add another $129,000-150,000 a month to the bottom line. That is $1,548,000-1,800,000 a year in a market that most dealerships are largely ignoring.
What does that mean in real money? By recapturing the lost opportunities at $3,000 average gross per deal, an additional $75,000-90,000 in gross profit is added simply by correcting existing mistakes. By using a consistent process, we can look to add 18-22 additional units a month. This means, with a $3,000 average gross, consistent process adds $54,000-60,000 a month. Combining that with the customers recaptured from lost lot traffic, it is reasonable to add another $129,000-150,000 a month to the bottom line. That is $1,548,000-1,800,000 a year in a market that most dealerships are largely ignoring.
TOP TEN REASONS YOUR LENDER SHOULD BUY THIS DEAL
TOP TEN REASONS YOUR LENDER SHOULD BUY THIS DEAL
10. IF YOU COULD ONLY SEE THESE PEOPLE, YOU’D BUY THEM
9. YOU’VE GOT TO HELP ME, IT’S THE OLDEST CAR ON MY LOT!
8. LOOK AT IT THIS WAY, HE CAN’T FILE BANKRUPTCY FOR ANOTHER SEVEN YEARS.
7. WHEN’S THE LAST TIME I ASKED YOU FOR A FAVOR?
6. YOU SHOULD ONLY HOPE THIS GUY GOES BAD, YOU’LL MAKE MONEY ON THE REPO!
5. NO, HE’S NOT A GYPSY – HE’S A ROOFER.
4. YOU DON’T WANT ME TO HAVE TO CALL YOUR BOSS, DO YOU?
3. COME ON, THIS GUY KNOWS THE OWNER.
2. YOU HAVE TO HELP ME; THE CAR’S ALREADY BEEN ON THE ROAD FOR TWO WEEKS!
AND THE NUMBER 1 REASON WHY THEY SHOULD BUY THIS DEAL…
OK – BUT THE REPO WASN’T WITH YOU!!!
10. IF YOU COULD ONLY SEE THESE PEOPLE, YOU’D BUY THEM
9. YOU’VE GOT TO HELP ME, IT’S THE OLDEST CAR ON MY LOT!
8. LOOK AT IT THIS WAY, HE CAN’T FILE BANKRUPTCY FOR ANOTHER SEVEN YEARS.
7. WHEN’S THE LAST TIME I ASKED YOU FOR A FAVOR?
6. YOU SHOULD ONLY HOPE THIS GUY GOES BAD, YOU’LL MAKE MONEY ON THE REPO!
5. NO, HE’S NOT A GYPSY – HE’S A ROOFER.
4. YOU DON’T WANT ME TO HAVE TO CALL YOUR BOSS, DO YOU?
3. COME ON, THIS GUY KNOWS THE OWNER.
2. YOU HAVE TO HELP ME; THE CAR’S ALREADY BEEN ON THE ROAD FOR TWO WEEKS!
AND THE NUMBER 1 REASON WHY THEY SHOULD BUY THIS DEAL…
OK – BUT THE REPO WASN’T WITH YOU!!!
Monday, October 1, 2007
Good Special Finance Managers Are Marketing Specialists First
Published by Jim Wagner April 14th, 2007 in strategy.
I’ve always believed that the most successful special finance managers are marketing specialists first. They look to find channels of business in every area possible. In addition to the traditional areas of marketing, like print and radio advertising and even internet leads, they’re constantly looking for new ways to drive more customers into their departments.
Here are two innovative ways to add incremental business to your department. If you execute consistently on them and have average traffic, these two tips can earn your department another $450,000 a year. That’s worth five minutes of your time, right? Read on.
Market to Your Customer’s References
When you’re looking at an approval from one of your subprime lenders, you probably love it when proof of income, residence and references are waived. I can understand your excitement over the first two items because they’re a pain to collect. But, if I were you, I’d be collecting ten references on each customer, regardless of whether or not it’s a requirement of your bank. I’d also be having your salespeople collect them up front, before you start trying to get them approved. That way you have them for approved customers and your turndowned customers. You’re going to talk to five times more people that you don’t approve, right?
References are great leads. They probably share the same demographic as the customer who gave them to you. Some of them are family members. Others are friends. If you treat all customers with respect and fairness, they’re going to spread the word to the people they interact with, the same people they gave you as references.
Every day, you should be sending out letters to each of the references you’ve collected from. Your call center or business development center could also give them a call. If you use a CRM tool be sure to load these leads into the system under the specific category of references so you can track your close rate.
Whichever approach you plan to take, your efforts to market to and close the references you collect can make you real money. If you talk to 100 people a month, and you collect ten references on each, that’s 1,000 good leads to work on. Even if you only close 1%, you’re going to see another 10 units a month. At 2,500 a copy, by thinking smart, you’ve made another $25,000 a month and $300,000 a year. Even if you don’t talk to that many people, I promise you’ll find substantial success and incremental profit by using this method.
Follow Up With Your Turned Down Customers
Every bad credit customer you finance today probably could not be financed at one point in the recent past. Not too long ago they might have had open bankruptcies, recent reposessions, slow credit, an open judgement, or even mistakes on their credit file. Most special finance managers shake the hand of the turned down customer, tell them they’re sorry they couldn’t help them out, and move on to the next. Into the dead deal file goes your customer to be forgotten forever.
If you’re doing that, stop today. For every customer you get financed, there are at least five more that you did not. Why not take ten minutes or so to consult with your customer and help them put together a plan that will help them get back on track. Here’s an article I wrote on repairing bad credit. Feel free to print off the article. Or, use your own experience to talk to them about credit repair. Print off a checklist of credit repair methods with your contact info on it. If you do that, you’ll earn their loyalty.
When they’re qualified to buy a car in a year or so, you’ll be the first person they call. Do this with enough customers, and you’ll be moving your department to the next level. Plus you’ll be building your reputation.
If you’re a store delivering 25 special finance customers a month, you’re probably talking to about 100 customers who you could not finance. That’s 1200 a year. Even if you eventually close only 5% of those customers, you’re talking a lifetime value of over $150,000 per year on your turned down customers!
There. I’ve shown you how your department can make another $450,000 a year in profit. I don’t know your payplan, but based on even the weakest you’re going to increase your standard of living.
If you’re a special finance manager who wants more success, remember: you’re a marketing manager first.
I’ve always believed that the most successful special finance managers are marketing specialists first. They look to find channels of business in every area possible. In addition to the traditional areas of marketing, like print and radio advertising and even internet leads, they’re constantly looking for new ways to drive more customers into their departments.
Here are two innovative ways to add incremental business to your department. If you execute consistently on them and have average traffic, these two tips can earn your department another $450,000 a year. That’s worth five minutes of your time, right? Read on.
Market to Your Customer’s References
When you’re looking at an approval from one of your subprime lenders, you probably love it when proof of income, residence and references are waived. I can understand your excitement over the first two items because they’re a pain to collect. But, if I were you, I’d be collecting ten references on each customer, regardless of whether or not it’s a requirement of your bank. I’d also be having your salespeople collect them up front, before you start trying to get them approved. That way you have them for approved customers and your turndowned customers. You’re going to talk to five times more people that you don’t approve, right?
References are great leads. They probably share the same demographic as the customer who gave them to you. Some of them are family members. Others are friends. If you treat all customers with respect and fairness, they’re going to spread the word to the people they interact with, the same people they gave you as references.
Every day, you should be sending out letters to each of the references you’ve collected from. Your call center or business development center could also give them a call. If you use a CRM tool be sure to load these leads into the system under the specific category of references so you can track your close rate.
Whichever approach you plan to take, your efforts to market to and close the references you collect can make you real money. If you talk to 100 people a month, and you collect ten references on each, that’s 1,000 good leads to work on. Even if you only close 1%, you’re going to see another 10 units a month. At 2,500 a copy, by thinking smart, you’ve made another $25,000 a month and $300,000 a year. Even if you don’t talk to that many people, I promise you’ll find substantial success and incremental profit by using this method.
Follow Up With Your Turned Down Customers
Every bad credit customer you finance today probably could not be financed at one point in the recent past. Not too long ago they might have had open bankruptcies, recent reposessions, slow credit, an open judgement, or even mistakes on their credit file. Most special finance managers shake the hand of the turned down customer, tell them they’re sorry they couldn’t help them out, and move on to the next. Into the dead deal file goes your customer to be forgotten forever.
If you’re doing that, stop today. For every customer you get financed, there are at least five more that you did not. Why not take ten minutes or so to consult with your customer and help them put together a plan that will help them get back on track. Here’s an article I wrote on repairing bad credit. Feel free to print off the article. Or, use your own experience to talk to them about credit repair. Print off a checklist of credit repair methods with your contact info on it. If you do that, you’ll earn their loyalty.
When they’re qualified to buy a car in a year or so, you’ll be the first person they call. Do this with enough customers, and you’ll be moving your department to the next level. Plus you’ll be building your reputation.
If you’re a store delivering 25 special finance customers a month, you’re probably talking to about 100 customers who you could not finance. That’s 1200 a year. Even if you eventually close only 5% of those customers, you’re talking a lifetime value of over $150,000 per year on your turned down customers!
There. I’ve shown you how your department can make another $450,000 a year in profit. I don’t know your payplan, but based on even the weakest you’re going to increase your standard of living.
If you’re a special finance manager who wants more success, remember: you’re a marketing manager first.
Thursday, September 6, 2007
Doing the Math
Following up on unsold leads is like money in the bank. Take your blinders off and see the future. If you only manage to get 20% of your leads to turn into appointments, how many future opportunities does that leave you? If you only close 20% of your appointments, how many prospects does that leave you to follow up? And don’t forget the references that your customer’s provide. How many personal references does your dealership get from each subprime customer that comes into your dealership and completes a credit application? Isn’t each of them a future opportunity as well? Ask you customers if you can mention their name when you call these folks. Remind them that, even if they don’t buy a vehicle from you today, they can still refer customers to your dealership and get referral fee or “bird dog” for each one that buys a vehicle. Keep it personal, and soon the only place these folks will send their friends, family, co-workers, fellow church members, golf buddies, anybody they know, to buy a vehicle from is your dealership. Do the math and you’ll see how, with a little personal touch, you can sell a lot more vehicles!
Personally Speaking
The problem with some Special Finance Managers is that we tend to wear blinders. More often than not, we view a deal as “now or never”. The philosophy de jure is “If I don’t close them now, someone else will later.” We loose sight of the fact that every customer can’t be closed the first time around. We get caught up in the idea of an immediate sale, and never see future opportunities.
Every lead I get is a potential sale. Successful subprime dealers understand this, and realize that just because you can’t close the deal today it doesn’t mean you might not sell them tomorrow. Customers can’t buy for a variety of reasons – insufficient down payment, insufficient income, new job, new to the area; the list goes on and on. Whatever the reason, one thing is for sure. Whatever is holding them back today is bound to change in the future. Maybe there’s a raise on the horizon. A cosigner suddenly appears. The tax return check comes in the mail. Whatever the obstacle, if you keep in touch with that lead, when he’s able to buy, your dealership will be the first one he calls!
Every lead I get is a potential sale. Successful subprime dealers understand this, and realize that just because you can’t close the deal today it doesn’t mean you might not sell them tomorrow. Customers can’t buy for a variety of reasons – insufficient down payment, insufficient income, new job, new to the area; the list goes on and on. Whatever the reason, one thing is for sure. Whatever is holding them back today is bound to change in the future. Maybe there’s a raise on the horizon. A cosigner suddenly appears. The tax return check comes in the mail. Whatever the obstacle, if you keep in touch with that lead, when he’s able to buy, your dealership will be the first one he calls!
The "Big Event" Story
So the guy says, “We got this big event coming up this month! I love it because they bring guys in and all I have to do is stand to the side and they do all the work!” Does that mean that for the other 26 days of the month he do nothing? This guy was excited because at the last event they did 22 units in 4 days. The way I understand the math on most of these things is that they bring a group of guys in so they can take half your profit. They earned $100,000 and you only get $50,000. Not only that, but how long are they going to be able to advertise for “The Big Event” before their list of names to mail to gets stale?
Now, approach #2…you sell 22 cars in the month and get to keep your $50,000 and their $50,000. So, the guy that stood to the side (yea, stood, as in past tense, as in he should no longer be there) and lost your extra $50,000, should have considered an alternative method. Have a steady flow of leads every week so that your dedicated special finance staff can get into a rhythm. They need to learn how to sell the loan and establish long-term relationships with these potential customers. Who would have know working backwards would work so well for moving ahead.
When it comes to those Big Events, try to resist the temptation to pay another company half your profits. Oh, and keep your legal cost in mind!
Now, approach #2…you sell 22 cars in the month and get to keep your $50,000 and their $50,000. So, the guy that stood to the side (yea, stood, as in past tense, as in he should no longer be there) and lost your extra $50,000, should have considered an alternative method. Have a steady flow of leads every week so that your dedicated special finance staff can get into a rhythm. They need to learn how to sell the loan and establish long-term relationships with these potential customers. Who would have know working backwards would work so well for moving ahead.
When it comes to those Big Events, try to resist the temptation to pay another company half your profits. Oh, and keep your legal cost in mind!
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