Photo courtesy Tax Credits
This is the final article in a six-part series chronicling the launch of a special finance operation at an established independent dealership located on the fringe of a major metro market. Names and locations have been changed to protect the company’s privacy. Our end goal for the new department was to reach a monthly sales volume of 70 deals at over $230,000 total gross by the end of the six-month launch period.
Month Five is in the books and we are sprinting toward the finish. But December in the special finance industry is never for the meek. Car buyers are using their available cash for Christmas presents, not down payments, making SF deals significantly more difficult to put together. Nonetheless, you can’t take the month off, so DealerStrong and the Red Team at Champion Motors made plans to have a strong and profitable month.
Some of the obstacles encountered in the fourth month rolled forward to the fifth; however, the team had plans established to work around them in the short term, and as the month moved forward, they were overcome. At month’s end, the sales volume, although not what we aimed for, was still very strong and very profitable, and we were well-positioned for the final push.
By the end of our six-month run, the Red Team desk manager had come into his own. Personally, I had some reservations when he was invited to join the team at the onset of the project. Since then, he has more than erased those doubts. He continues to work deals cleanly and profitably while allowing for a high closing rate and customer satisfaction. He absolutely has kept the store’s best interests in mind and has been a very pleasant surprise. We recommended that he be named desk manager for the entire store.
Our closing ratio of customers visiting the store improved — in a tough month to do so. We hit 34%, well above the benchmark of 28.6%, tallying 47 Red Team deals (a new high but a few units short of our goal of 50) out of 138 store visits.
We added Credit Acceptance as an additional finance company and they helped create some deals in Tiers 3 and 4 and “zero score” customers, as did Pelican Auto Finance and Exeter.
We successfully moved an unmotivated BDR employee out and onto the Red Team sales team. It was a win-win. She sold 8.5 units on the sales floor, effectively doing it in less than three weeks after going through training, and we replaced her with a strong performer in the BDC.
The Nation’s Premier Auto Dealer Program really hit its stride. On the same spend, it brought in 445 identifiable and unique phone prospects and the BDC, even not in full stride, brought 80 into the showroom. It was easily the largest source of business.
Focus Inc., the supplier of shared leads (between four dealerships) generated from TV infomercials, finally hit their stride. For the first four months, the leads had proven to overmatch the rookie BDC team members. While the percentage of leads that actually made it to the showroom was small, the Red Team delivered 50% of those that did. Additionally, it wasn’t until the end of the month that the team demonstrated their proficiency. We expect more success in January on those leads.
InterActive Financial Marketing Group, after a tough perplexing start in prior months, stood true to their word and delivered very good leads. While the quantity was relatively low, the quality was very high and not only was the BDC excited to work them, they resulted in four very cost-effective sales.
The surprising development of sales of near-luxury and luxury vehicles to SF customers continued. A high number of BMWs, Lexuses, Mercedes-Benzes and Volvos have been delivered, many of them at very good gross profits. While they are certainly older and a bit higher mileage, the customers are willing to come up with the needed down payment when they are buying something they can get excited about driving. Payment to income ratios are the key!
The best news is that, through our first four months, after all the special finance-related expenses we racked up — including personnel, advertising and credit bureaus — the dealership broke even in the first month and has since generated an additional $233,760 in net profits!
December hit. While the weather had been mild, the area was bombarded with a 12-inch snowfall on a Friday night early in the month, essentially eliminating Saturday, our biggest day of the week. With just four Saturdays in December, losing one is a major setback. Weather is just something dealers have to contend with, but it really was a disappointment to have it wipe out a weekend.
And then there’s the website. It is a broken record and a dismal failure. Worse yet, when I log into the back-end dashboards of other clients using the provider, I see that Champion is the only dealership not having terrific results. Repeated phone calls and emails have generated nothing, and the dealership has just managed to edge into the second page of Google search results, even when searching for its name. Even with a big broadcast budget, we finished December with 600 fewer website leads than we had originally forecast. We don’t expect it to improve in January, at this rate.
The BDC still does not have a BDC manager, but it is at least improving. While the 37% appointment show rate didn’t show any improvement, there were a few mitigating circumstances. First, we did get a quality replacement hired, and morale — which had floundered, unbeknownst to us, in the last week of November — soared. Second, in the last half of the month, the show rate jumped to 45%, indicating good progress. Finally, they easily put the highest number of showroom visitors in the store ever, and it was in December.
Other personnel issues arose. The top Red Team sales person, averaging nearly 20 units per month, was arrested — not at the dealership, but, unfortunately, not for a driving infraction. He was instantly terminated, leaving a gaping hole in the sales team. While it was relatively quickly filled, it nonetheless created a void while we were getting the new hire up to speed.
Another “broken record” occurred on the inventory front. While the owners and buyers have demonstrated that they can buy what they need, they simply aren’t doing it to the proper quantity, all the while overbuying for their Green Team. This is creating a massive inventory glut. It looks to be doubtful that this issue will change in time for it to make a significant impact in January.
Additionally, the bottleneck in the service department, where they were one service advisor short at the desk, still exists. They identified a solid person and thought they had them hired, but it didn’t pan out. Dispatching and parts sourcing are still slowing the reconditioning process immensely.
The Bottom Line
In spite of it being December, being bombed by weather, and experiencing the usual challenges of any dealership, the Red Team rocked it for 47 units, just three shy of the goal, and brought our net profit up to over $233,000. With the BDC falling in line, we said we would keep our fingers crossed with the January weather and eagerly look forward to our sprint to the finish!
If you have any questions on how our project might relate to yours, feel free to shoot me an email. Until then, good luck and good selling!
Greg Goebel is the CEO of DealerStrong and the nation’s leading special finance trainer since 1989. He is an 18-year former dealer principal and a highly sought-after speaker. [email protected].