Seven Pillars of Subprime: Maximize Today's Opportunity - Joshua Blevins Robert Cole
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Seven Pillars of
Subprime: Maximize
Today's Opportunity
Joshua Blevins Robert Cole
GM Financial GM Financial
Arlington, TX Arlington, TX
Joshua.Blevins@GMFinancial.com Robert.Cole@GMFinancial.com
(817) 525-6245 (817) 525-9773
The views and opinions presented in this educational program and any accompanying
handout material are those of the speakers, and do not necessarily represent the views
or opinions of NADA. The speakers are not NADA representatives, and their presence
on the program is not a NADA endorsement or sponsorship of the speaker or the
speaker’s company, product, or services.
Nothing that is presented during this educational program is intended as legal advice,
and this program may not address all federal, state, or local regulatory or other legal
issues raised by the subject matter it addresses. The purpose of the program is to help
dealers improve the effectiveness of their business practices. The information presented
is also not intended to urge or suggest that dealers adopt any specific practices or
policies for their dealerships, nor is it intended to encourage concerted action among
competitors or any other action on the part of dealers that would in any manner fix or
stabilize the price or any element of the price of any good or service.
2
Purpose
This workshop is intended to provide a foundation for dealers to build an understanding
about the subprime auto loan industry. Upon completion of this workshop you will be
able to:
Explain today’s auto finance industry as it pertains to the auto dealer
Recognize challenges the dealer faces in working with the subprime customer
Summarize the Seven Pillars of Subprime
1
Contents
Today’s Reality ................................................................................................................ 3
Subprime Challenges ...................................................................................................... 4
The Seven Pillars of Subprime ........................................................................................ 5
1. Plan Your Approach ................................................................................................ 6
2. Establish Roles and Responsibilities ....................................................................... 8
3. Be Prepared .......................................................................................................... 10
4. Execute Your Process ........................................................................................... 12
5. Manage the Customer Experience ........................................................................ 15
6. Create Opportunity ................................................................................................ 16
7. Inspect What You Expect ...................................................................................... 17
2
Today’s Reality
The landscape of our economy has changed dramatically over the last ten years. Take
a look at today’s reality:
There are approximately 242 million adults in the US
41 percent of this population is subprime
This translates to about 99 million potential customers
Only one of them is important – the customer in front of you
Describe the “one” subprime deal you missed recently:
3
Subprime Challenges
Let’s take a look at a few of the subprime challenges you may see every day. In the last
30 days have you missed a customer because:
They were in the wrong car?
You couldn’t get them to the desired payment?
There was not enough information up front?
A step was skipped in the sales process?
The customer was pre-qualified or over-qualified?
The lender wouldn’t purchase a deal?
27 percent of all loans originated in 2013 went to sub-620 customers (Equifax) $145.6
billion in subprime auto originations Q1 2014.
How does your floor traffic look compared to these numbers?
How much money are you missing when the subprime customer walks out the door
without a purchase?
4
The Seven Pillars of Subprime
By following the Seven Pillars of Subprime you can increase the opportunity to get more
subprime deals. These pillars are:
1. Plan your approach
2. Establish roles and responsibilities
3. Be prepared
4. Execute your process
5. Manage the customer experience
6. Create opportunity
7. Inspect what you expect
Let’s take a closer look at each pillar on the following pages.
5
Pillar Number 1
1. Plan Your Approach
The first step in increasing your subprime success is identifying the opportunities that
already exist at your dealership. What do the following look like?
Current floor traffic:
Your competition:
The market demographics in your area:
6Pillar Number 1, continued
In planning your approach, you need to define subprime. Think about your customers
and what their typical credit profile looks like. Now decide how deep you want to go.
What category did you decide you will target?
Nonprime Subprime Deep Subprime
Subprime
Do Nothing Open Floor
Department
Subprime department The open floor
– Pros – Pros
Many people with one focus Everyone is focused on the same
Process driven and scalable result
Easily track trends Fewer missed opportunities
More seamless customer experience
– Cons Promotes legal compliance
Time and resources
Potential for conflict with prime department – Cons
Potential for missed opportunities Ability is magnified
Time commitment for training and
coaching
7Pillar Number 2
2. Establish Roles and Responsibilities
To improve your opportunity for success, everyone needs to know their role and
responsibility in working with the subprime customer.
Do your employees know:
Yes No
What to do?
When to do it?
How to do it?
How it will impact them?
The consequences for not doing it?
If you checked “no” for any of these questions, what can you do to change that?
Answer the following “who” questions:
Who is considered subprime in your dealership?
Who will complete the customer interview?
Who is in charge of vehicle selection?
Who will submit the application?
8Pillar Number 2, continued
Who will ask for the documentation?
Who is responsible for missing documents?
Take a further look at responsibilities and answer the following:
What happens when the customer is identified as subprime?
When will you complete the customer interview?
When will you ask for the customer’s documentation?
When will the customer be allowed to take delivery of the vehicle?
Finally, as you consider how to wrap up the process, think about:
How will you conduct the customer interview?
How will you compensate your employees?
9Pillar Number 3
3. Be Prepared
Integrated Technology: Preparation is another key to your subprime success.
Integrated technology that will help in making sure the subprime deal is a good fit for
you and the customer includes:
CRM
DMS
Desking tool
Inventory-management software
Your People: Know your team’s strengths, weaknesses, and attitude.
Strengths and Weaknesses: Attitude:
Integrity A genuine “want to”
Attention to detail Sincerity
Process adherence Empathy
Listening skills Resilience
Communication skills Perseverance
o Written Personable
o Verbal
Ability to multitask
Inventory: What’s on your lot?
Segment
Price point
Age/spread
Year/miles
Dedicated
10Pillar Number 3, continued
Lenders: You have a lot of choices when it comes to lenders. Consider your lenders to
be part of your team. Since it’s important to know your team’s strengths and
weaknesses, you also need to know the lenders’ strengths and weaknesses, their
habits, and why you might be missing deals.
Compliance: Are you consistent in your sales process? How can you make sure you
are compliant? By completing the following steps:
1.
2.
3.
4.
11Pillar Number 4
4. Execute Your Process
Do you really have a process? Can you answer “yes” to the following?
Does everyone know the process? ___Yes ___No
Does everyone execute the process every time? ___Yes ___No
A successful subprime process will enhance your existing sales process. The subprime
process has several key elements that include:
Customer contact
Initial customer interview
Vehicle selection and demonstration
Overcome objections
Customer exit interview
Customer Contact: by focusing on what the customer wants you can accomplish what
is important to you.
Customer Wants
Reliable transportation
Value
Choice
Be clear on what you want to accomplish and how you intend to accomplish it. Think
like a lender and identify purchasing power.
Set an appointment
Control the conversation
Keep conversations brief
Consider a script or call guide
12Pillar Number 4, continued
Credit
Structure Stability
Collateral Ability
Credit: This is a snapshot of the customer’s demonstrated willingness to pay. Lenders
look at different aspects of the customer’s credit profile, such as time on file, number of
accounts, delinquency, late payments, and credit utilization.
Stability: Time on their current and previous jobs and time at their current and previous
residences paint a picture of how stable (and collectible) this customer might be.
Ability: The customer’s income in relation to any outstanding debts.
Collateral: Age, vehicle make and model, and mileage are weighed in the credit
decision.
Structure: Loan-to-value, term, and payment play a major factor in the risk the lender is
asked to assume should they approve the application.
13Pillar Number 4, continued
Vehicle Selection: We have determined that
value and choice are important to the
customer, but how do you ensure that the
deal will be successful for all parties? You
ensure success by managing the vehicle-
selection process. The customer interview
will lead the selection process. During the
interview, focus on the customer’s needs
versus wants.
How will you help manage the vehicle-selection process?
Presentation and Demonstration: When managing the selection process, it helps to
keep the focus off the dealership and onto the vehicles. Present new and pre-owned
vehicles. Build value in the fact that they could drive away with the vehicle today. When
everyone drives away with a vehicle, everyone wins!
Customer Exit Interview: When a customer requires additional actions, identify
the next steps. Make sure all additional requirements are written out and
agreed upon before the customer leaves. Finally, get a signature
before the customer drives off in their vehicle.
Shortening the Funding Timeframe: Making sure the customer understands the
process will help expedite the funding process. Obtain all required documentation for
the lender and keep the toll-free number handy for questions you might have. Follow the
funding checklist and pay close attention to detail to avoid delays and unnecessary
phone calls.
14Pillar Number 5
5. Manage the Customer Experience
Manager involvement is a must. Get off the desk and onto the selling floor to make the
biggest impact on your subprime sales.
List five more ways to improve your involvement with the customer:
1.
2.
3.
4.
5.
Create accountability on the team. Looking back at what was discussed earlier in this
workshop; everyone at the dealership should have clearly defined roles and
responsibilities and should understand the process.
How will you improve the customer experience by maintaining accountability?
15Pillar Number 6
6. Create Opportunity
Before you can sell a vehicle, you need opportunity. Look for opportunities in the
following places:
Blind website
Subprime blog
Search Engine Optimization (SEO)
Search (equipped) BDC
Credit clinics
Previously missed opportunities aren’t necessarily gone for good. What can you do to
reconnect with these customers?
Finally, communicate to your customer like they communicate. If they are on tweet,
chat, post and upload to reach everyone. Are you missing out on the social media
connection? List the groups you could join to connect:
16Pillar Number 7
7. Inspect What You Expect
If you expect results, watch for them. Tracking activity at your dealership can show you
where you are having success and where you need work. Identify what is working and
what is not working. What tools do you use to track your business today?
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