Listen To Yourself!

Go ahead, just listen. Listen to the radio ad you have, really *watch* the TV ad you paid for. Read those automated marketing emails.

Do they sound ok? Are you comfortable with the image that these things project of your dealership? If you said yes, then go get someone else to listen, watch, or read these things, and see if they agree.

Now, find out the dealerships in your area with the worst reputations and compare your marketing efforts to theirs. Find out what image you are projecting vs the Bad Guys.

The reason I venture into this topic today is because of an email I got from a high-end franchise dealer over the weekend. I’m not going to name names, because after reading the email, I have decided that this dealership has already embarrassed itself enough.

Quick back-story: I *can* change my own oil, but prefer that this dealership does it, simply because they have a great reputation for excellence and professionalism, and they wash the car as part of the deal. Best part is, I don’t have to spend my Saturday rolling around on my driveway in the heat and dirt and finding ways to dispose of the used oil myself. It also helps that their price is just a small bit more than my cost of doing it myself. Note that one of the cars in my driveway is an older 2001 Honda CRV. It’s an adequate car with good insurance rates for my 20-something college student.

So, College Boy gets the oil changed at the dealership last week, and then I get an email from the dealer’s marketing bots:

“My General Manager noticed your 2001 HONDA while you were in for service and would like to acquire that vehicle from you! We have quite a few customers looking for a vehicle like yours and are wondering if you have any interested in selling it to us or trading it in and looking at a newer vehicle for yourself?”

Really? At a dealership whose average unit price is above $40,000, you have “quite a few” customers in your Prospecting system who are pining away for an eighteen-year-old compact SUV with over 200K miles?

I also own Nissan and Buick marks, and they all go to this dealership. I have to drive past the Nissan, Honda, and Buick dealers to get to my chosen service department. I even drive past a couple of Quick-Lube type places, and three tire stores who change oil. Why? Because of their reputation. Because of the professionalism that my chosen place offers that the others just do not match.

All that image is tarnished now, because they lied to me. They also came off sounding desperate and that they would say anything to get me into the showroom.

Do not misunderstand me, there is NOTHING wrong with expressing your desire as a business owner to earn the trade of the citizens in your demographic market. Keep in mind, though that customers who were polled overwhelmingly preferred car dealers whose marketing was informative, honest, and respected their intelligence. Dishonesty, sirens in your ads, and screaming deceptive terms may grab you a few customers, but by and large they are not loyal customers, and you end up having to up the sleaze to generate the leads. Honest, intelligent marketing just keeps working.

The following suggested email would have gone worlds farther to me as a customer:

“Thank You for trusting us to service your 2001 HONDA. We would like to discuss trading you out of it for a newer vehicle, and would appreciate an hour of your time one day for a member of our Sales Team to show you what we have available, or to gather your requirements and see what can be found. Please call John Smith at 202-555-1234 or email John.Smith@FranchiseDealer.com to arrange an appointment that fits your schedule.

Thanks again for your service business, and we hope you give us the opportunity to earn your sales trust as well. ”

See that? It’s sincere, honest, and humble. It recognizes that I am a service customer, expresses appreciation for that, and requests some of my valuable time to talk. It is respectful of me as a consumer and potential sales client. Close by again expressing gratitude, and asking for an opportunity.

Consumers love to be respected. Customers love to hear appreciation. Buyers with money to spend and referrals to spare HATE being lied to. Contrary to what some of you car dealers believe, yes, they can tell. After all, some of you make it so obvious.

See you next time. Thanks as always for visiting and reading.

ARE YOU AN INFORMED CAR DEALER?

Yes, many of you are “informed” in that you know how and when to buy cars, what price to sell them, and know “the business” fairly well.

But there is more to it than just moving units.

I wrote a post called Where Are The Snakes?. In that post, I asked you to revise your Situational Awareness to identify the hazards in your industry, and to make a plan to deal with them.

Let’s touch on that a little more. I got a call from a dealer (let’s call him Bill) recently who had a title application rejected because he did not charge enough sales tax. Seems the county surcharge went up and he was unaware of it. Cue the angry music as he asked, in all seriousness: “Why didn’t your company tell me about this?”

I reminded Bill (nicely) that his state Department of Revenue does not notify us about these changes. They do, however, notify everyone (that includes you, Bill) with a Sales Tax Registration about these changes, and do so typically a number of months before the change will take effect. I asked Bill if he remembered getting such a letter or notification. He sputtered a bit before declaring that he “doesn’t have time” to read everything that comes from the State, because he has a business to run! Well, yes, but reading those notifications from the State are PART of running your business. If you are going to ignore the state in a business that is very heavily regulated by the state, then you are NOT running your business.

A few years ago, a dealer (we’ll call her Linda) scanned and emailed to me the letter she got from her state that informed her that they were moving to an Electronic Titling System, and it would take effect six months or so from that letter. She asked me if we were ready (we nearly were, in fact) and how we planned to notify the dealers that it was in place in the software. We did send out an email to the dealers a month in advance of the date, and let them know it was ready.

Cut to two weeks after the cutoff. My phone rings, and another Dealer from that state is angrily asking why he cant take his title app down to the tag office anymore. Seems he went there that morning and they told him to process it electronically. He wants to know how to do this. I asked him why he did not get prepared when he got the notice six months ago, and at the very least, six weeks ago when we, the DMS software company, sent him an email saying that we had his state’s electronic titling ready? Well, you see, he was “too busy running his business” to read emails or open letters from the state. I gave him the web page and phone numbers to get started. Because of his delay in getting that process going, he was late filing the title, and paid an extra fee. He told me later on he did not think it was “fair” to punish him for something he did not know about. I reminded him he had at least two chances to check into it, and surely he overheard talk in the used car community about it? Well, he admitted he had heard “something” about it, but again, “too busy running a business” to find out about it.

I will repeat this: If you are “too busy” running your business to pay attention to the governmental units regulating your business, then you should not be in business.

Over my years in this chair, I’ve seen the notices of fines about sales taxes, and the letters from the DMV reminding the dealers to process the titles. Most states require the dealer to do both. I’ve seen the levy notices from the IRS because dealers filed income taxes wrong, and the penalties from State Department of Finance for overcharging interest. These are almost always accompanied by a dealer saying “I didn’t know.” In these situations, I can usually find the information within mere moments available on the internet, not only from the State or Federal websites, but also from industry advisers discussing it.

Make time to run your business. Set aside a time each week to open and review all State Notifications. When you see an Effective Date, open your calendar and set the date, and set a reminder a month and a week in advance. Be ready.

Set aside another time each week to review the regulations for your business. Find and talk to an experienced consultant that knows your business. We’ve talked before about having an attorney and a CPA that knows the industry well. Join the business associations that can keep you informed. In our case, it’s usually your state’s Independent Auto Dealer Association. Go to https://www.niada.com/ and find your state under the “Membership By State” links. Membership is dirt cheap considering all the information they will give you. (Disclosure: I am not a member of the NIADA or any State IADA, nor do I get anything if you join.)

So, do you want to run your business, or do you want to pay fines?

Thanks for reading, see you next time.

What is a Related Finance Company?

Reminder: I am not a CPA or an attorney. None of the information in this article should be considered qualified legal or financial advice. It is your responsibility as a business owner or manager to obtain and retain licensed, qualified advisors for your business. Make sure you get the people who know your area of business. See THIS article.  

A Related Finance Company (RFC) is simply a second company or corporation set up to collect receivables. It is either captive, meaning it only buys notes from the sister car dealer corporation, or it is open, which means it can and usually does buy notes from any dealer. Due to licensing requirements, it is not a Point-of-Sale finance operation, in other words, it does not directly offer loans to the public, nor does it make decisions on which loans can be offered. It can set limits on which loans will be purchased, and the dealer(s) are free to offer only loans to the public keeping those limitations in mind. But all in all, the dealer must initially finance the note, and in states where a Finance License is required for BHPH, hold the license to do so.

The big issue with car dealers is that since 1986, companies that hold an inventory for profit must use the Accrual method for income taxes. Prior to that, car dealers who did Buy Here Pay Here would simply use the Cash Method of taxation, allowing them to only pay taxes on the profits when collected. Accrual method has the dealers paying taxes on the sale price profits in the year of the sale. The idea, then, is to utilize an RFC to defer those taxes by selling the note with a loss. The dealer offsets current year profits with the loss, and the RFC will pay taxes on the profits later.

In most situations, the RFC purchases the note from the dealer at a discount. For example:  a Deal with 10,000 amount financed, @28% APR, 36 Months gives a total payment stream of $ 14,891.04. The dealer would sell this account to the RFC for about 55% of the Total Balance, if Precomputed, or 80% of the Principal (10,000). The RFC writes a check to the dealer for 8190.07 (55% of 14,891.04).

  • The IRS requires that such purchase agreements be in writing, reasonable, and customary for the area. Each dealer needs to get a qualified quote from at least three companies who purchase receivables. The average rate or percent paid, quoted is the basis for the RFC-Dealer purchases. A qualified quote means that the dealer shows the note purchaser his portfolio, and gets a specific quote based on his accounts.  

The Discount here is the difference between actual Principal (10,000) and the RFC purchase price (8,190.07 ) — $1,809.93. The dealer declares this a loss on the sale, and the Finance Company uses this as a (potential) profit basis. Hopefully, the dealer has made a little profit on this deal, even after only collecting the 8190.07. The RFC will incur taxes on this profit later.

The RFC is now the lien holder and the customer makes payments to the RFC instead of the dealer. Most dealers simply collect the payments on behalf of the RFC.

  • States typically require that the RFC file as Lien holder on the Title. If you have a captive RFC, try to do this at the time you print the title application.

Remember that the RFC *must* pay for the note. The IRS requires, among many other things, that the RFC be financially capable of conducting business, and that all transactions between the Dealer and RFC be at “arms length.” This also means that the RFC must be incorporated or otherwise registered legally as a business, have a state license where required, local business license if required, and a “presence.” Presence means existing. The RFC should have a phone number, its own bank accounts, its own files, at least one employee, and a physical place to conduct business.

The dealership should have a Contract of Sale for the Sold Notes, and make copies of the relevant contract paperwork for the RFC to have as it’s records. These records must be maintained separately from the dealership. Remember that the IRS requires the dealer to deal with the RFC on an  “arm’s length” relationship. Treat the RFC the way you would treat any third-party Finance company buying your notes.

The NIADA published a guide that uses information from an IRS Field Guide the IRS Agents use to audit a car dealership with an RFC.

There are many rules and conditions to having an RFC. Loss of recognition of your RFC can lead to an assessment on the claimed losses, and potential penalties. Add to that the money already spent setting it up and maintaining it, and the dealer can be out a lot more than if he had not bothered with it in the first place.

An RFC is not a simple thing, nor is it to be entered into lightly. It *can* be used to defer taxes on profits, but should be dealt with as that. It is not a tax dodge.

Once again, consult with an experienced CPA and an attorney before taking this on.

WHERE DO YOU STACK UP?

The NIADA analytics for 2015 had some interesting statistics.

By and large, BHPH dealers are spending more on cars, and getting less down. A quick comparison to just 4 years ago(2012) shows that the average BHPH unit cost is up almost $1400. At the same time, the average down payment is down by about $125.

The good news is that average percent of accounts past due from 2012 to 2015 slipped from 28.6% to 17.6%, a significant drop of eleven percent. However, reflecting the higher costs as mentioned above, the average charge off per vehicle is up by $800. Bad debt as a percentage of sales climbed from 18% in that timeline to 25%.

Here’s the meat of this matter: Even though there are less past due accounts, dealers have higher bad debt ratios. This could simply mean that you are repossessing or managing the receivables more.

Are you in the Sub-prime business? Most say yes, but analyze your average credit score. Experian Scorex puts sub-prime at credit scores between 550-619. Anything below 550 is considered Deep Subprime.

What “business” you are in should be a determining factor as to how you manage it.

The deeper into subprime you get, the worse your collections will be. This is just simply the nature of it. People don’t have poor credit because they pay on time. Understanding and accepting this is part of the deal. The trick is how to work with them.

We said it before, you can’t just look at the score, you have to look at what makes up the score.

I’ve heard so many dealers complain bitterly about 50-60% collection ratios, but the same dealers are the ones with “Everybody Rides” posted out front in huge letters. I’m not saying you can’t have expectations, but again, you have to temper the expectations based on the customer.

I am a firm believer in working with people instead of screaming at them or threatening them.  If you tell them a car is going to cost $500 a month, and they hesitate, then take that as a cue to ask more questions. Ask yourself, can I accept $425 for 42 months instead of $500 for 36 months?

Point is, find out what works for the people you have chosen to do business with. Ask. Large companies spend huge amounts of money targeting their bases. They take the demographics and desires, and retool advertising and stock to meet the needs and wants of the chosen base. There are so many BHPH dealers out there who simply stumble on the business, but make no real effort to determine what business they are in. This is a major reason why so many BHPH lots are here today and gone tomorrow.

If you realize you are in the wrong business, then it’s worth a little money to remake that business into the niche you want it to be, because you will profit rather than spend a few years losing money until you are bankrupt.

 

 

Collections

If you are a BHPH Dealer, you have to have a Collections Plan.

To start that plan, you need to decide where the boundaries are.

It is also vital that you understand your own underwriting processes. I’ve said before, Poor Underwriting leads to Poor Loan Performance.

Two questions:
1. Do you run a Consumer Credit Report on each customer applying for credit? 2. Do you know how to read and understand the report? If the answer to either of those is “No,” then we have identified the first major issue.

If you read this blog regularly, you may have seen my entry about “Everybody Rides.” The “No Credit Check” signs are a large problem. You simply cannot make an informed credit decision about a consumer from his last two pay stubs.
Look, you have two choices as a BHPH dealer. Do you want your business model to collect the payments, and make a profit, or do you want to be in the repossess and re-sell business? Underwriting is the key to the first option. Lack of it inevitably leads to the second. By the way, those who make the second choice usually aren’t around very long.

Next question is, do you know how to ascertain a consumer’s availability to make a payment? Simply put, how do you find out how much money is going to be available for a payment, and how often? This is a huge key to payment collections. It is hard to collect what they do not have.
Be realistic here, and leave them some room. If your payment puts them at the absolute edge of their solvency, then any small unexpected emergency for them means you don’t get paid.

Lastly, have you sold them a car they *want* to pay for? Now, this question is not a trick. Go read (or re-read) my topic on Right Sizing The Customer. Click Here.  Also read the Happy Customer entry, found here.

Once you sell the car on a contract, the next bit is collecting the contract. On paper, that sounds simple, but in the BHPH industry, that is when the road gets bumpy.

First, since your customer is sub-prime, then you have (hopefully!) already understood that this person has a problem with credit obligations. I am not saying it is unreasonable to expect on-time payments, but I will say it will not be the norm.  

Most BHPH customers are actually not Sub-Prime, since this designation is typically for borrowers with FICO scores from 580-670. This is the designation for Fair Credit risk. Most of these customers can get loans from institutions, albeit at a higher rate. 

Those with scores below 580 are considered Deep Sub-Prime, and the credit risk is considered Poor. Quote from Investopedia.com: “Experian reports that 27% of Fair Credit category borrowers and 62% of Poor Credit category borrowers are likely to become seriously delinquent.” (Emphasis added.) 

Put bluntly, that means three out of every five of your Deep Sub-Prime customers WILL be very late with one or more payments. 

Learn More about Credit Scoring at:  https://www.experian.com/blogs/ask-experian/infographic-what-are-the-different-scoring-ranges/

Some of these people work well with an early reminder or two. If your DMS has an email system that can reference the due date, schedule a Friendly Reminder for about a week in advance.
So you have to set policies for “how late is too late?” and stick to them.

Picture a square area. The people inside this area are within the boundary of your payment tolerance. Make two or more larger lines outside that.

The first area between the sheltered harbor of your patience and the next line out is the “Ok, you are late, and let’s deal with it” area. Blow the whistle, ring the bell, and try to get them to wander back into the inner area.

Across that line, straying further, is the “make or break” area. Have enough rope to wrangle those strays back into one of the first two areas. The boundary to this area, once crossed, is hard to get back across.

That third area should be the last one they reach before hitting the wall that encloses your business model. The people in this area will almost never be good payers again. They reach this area for a reason. Whether it is their own decision, or the cruel hand of fate has pushed them into it (almost) doesn’t matter. They will hit that outer wall. That “wall” is the act of repossession.

So, what defines the areas? For most established first-tier finance operations, the Due Date of the payment is the first line. 10 days past due is usually the second line, and 30 days is the wall. For these companies, that Danger Zone is very thin.

For sub-prime customers, you may set your safe area line at 10 days past due. Second line is 20 days, and the Danger Zone is 21-30+. Your Danger Zone may be a bit wider than first-tier, and needs an observation post.
Is the customer simply meandering in the bad areas, or are they drifting slowly outward, or, are they at a full run prison-break style?

What is the whistle? Simple (but pleasant) reminder texts and emails.
Phone calls and more strongly worded emails are the rope you use to try to get them back into the fold. Remember that you own a business, and should be professional. Screaming, insults, threats, and foul language should never be used.

The faster or more determined they are about moving outward is the faster you use the tools at hand.

What about the repo wall? Here is they way I see it: It is a final wall. It should be. Repossession should not be an everyday collections tool. It should be a final admission that this loan did not work out. Remember that if you repossessed legally, then you are (typically) not required to reinstate the account. The customer has the right to accelerate the loan, and pay it off to retain the car.

Some dealers use a first temporary repossession as their rope to try to draw the customer back in, and to remind the customer of the consequences of going afoul of the payment agreement. I will hesitantly agree with this with a few conditions:

  • First, use your words. Make them understand your position and expectations.
  • Second, they get ONE temporary repo. The next one is final.
  • Third, there should be no profiteering (repo “fees”) getting tacked on. Remember that the laws usually allow you to recover your EXPENSES of repossession. I’ve yet to see a state or court that gladly allowed the BHPH dealer to profit from the act of repossession.

The final repossession should be a last resort.

Other tools are available. The first one is your own humanity.

Sit down with the customer, and, with an open mind, ask what the deal is. Remember that things change. Maybe the overtime the plant promised would last for a year suddenly dried up, and they are struggling under the lower income. Maybe they suffered another loss that occupied them and their disposable income for a bit. Be willing to work with people.

Maybe they don’t want to pay for a car they can’t drive because it is broken down. Work out a repair and payment plan for that.

Nothing requires you to keep extending your olive branch if they keep slapping it away, though. I asked you to be a human being, not a doormat.

 

 

The Snake House

First, re-read this article: Click Here. 

Let me give a couple of examples:

Dealer in Florida calls and asks me to help him remove the Sales Tax from his Dealer Fee. He says his CPA advised him that since delivering a car is a “service,” the fee is non-taxable.

According to the Florida Department of Revenue’s GT400400 (available here) they specifically state that Dealer Prep is a taxable item. I tried to give the dealer the link, even told him what page to find the wording on. He got angry, and told me that his CPA should know what he is talking about, and to just “fix it” so he is legal. I asked the dealer again to have his CPA read the GT400400, or at least have him call the Department of Revenue or guidance. He refused. I showed him where to remove the tax on the fee.

Same dealer calls me back 6 months later. The DOR sent him a notice that says he has underpaid his sales taxes, by the amount of tax on the Dealer Fee, and not only wants the money paid immediately, they have also penalized him. Now, the dealer wants to know if I am going to pay his penalties and taxes because, and I quote, “let him do it wrong.”

Short answer: No. I tried to get him to put on his snake boots, and told him that he was going to get bit. All he could see was saving a few bucks per sale.

Too many people let their greed blind them to the truth.

A dealer called me once complaining that her state Used Car License Board is considering suspending or revoking her license. Why? Because she thought that when it is a Cash Deal, that you just hand the title to the customer, and let them process it, and pay the sales taxes. I asked her whether this topic was covered when she got her license, and she said “They may have touched on it.”
Even if the instructor lightly skimmed that bit, it is still important to know. If you are in doubt, ASK.  
The IRS requires used car dealers to pay income taxes on the Accrual Method on the sales of the cars. One dealer in the Southeast decided that a Buy Here Pay Here did not constitute a Sale, and decided to pay his taxes only on the amount he collected (Cash Method.)  Three returns later, the IRS realized what was going on and sent him a bill, plus interest, plus penalties. THey told him he could not get a break on the penalties or interest because he either should have known he was wrong, or failed to get qualified advice that would have shown him he was wrong. In other words, No Excuses.

The dealer was furious, but had only himself to blame. He was one of those who felt that he did not “need” a CPA.

These people ignored the dangers, and wandered off into the swamp without protection or the information needed. When someone tried to hand them information, they batted it away  like a nuisance insect.

Most responsible CPA’s would have welcomed seeing a state document that explained the tax question, and spelled it out.

Stop ignoring the warning signs. Start reading the rules, and follow them. You’ll only have more profits in the long run, and who doesn’t want that?

Thanks as always for the visit.

BTW: I’ve been asked if I take suggestions for topics. Yes. Send them in. I’d also appreciate any feedback on the blog.

WHO ARE YOU?

So, who are YOU? What’s your deal? What do you have to offer?

Those are the questions almost every customer wants to ask, but rarely does. See, many of them don’t consciously think about needing those answers, but the lack of answers leaves a hole in their confidence level of you as a dealership.

We’ve touched on this idea before, briefly, back on this topic. Now let’s dig a little deeper.

Most experienced sales professionals work the information into the presentation. As they “sell” the car, they also manage to “sell” the dealership. It is important to do so, because each customer needs to have two questions answered:

1. Why should I buy this car?
2. Why should I buy it from this dealership?

Unless you happen to have a specific one-of-a-kind unit, the customer has lots of places and similar vehicles to choose from in their search. The internet and smart phones made that search not only a lot easier, it also puts it into the palm of their hands.

So, you need to set yourself apart. How? By promoting those things that you do well.

Do you offer service?
Do you offer quality cars?
Do you offer better financing than most of the other dealers?
Do you offer better care after the sale? — More on this topic HERE.
How stable is your dealership?
This bit is important. People want to be assured you are not a here-today-gone-tomorrow business.

Confidence in the sale sells cars. Part of that confidence rests in the seller.

This is part of sales training.  Your sales staff needs to be aware of who you are. They need to believe in the owner, and buy into the process. That’s hard to develop in sales people if you do not own it.

We covered once the idea that your sales staff should be part of the dealership, and not feel like outsiders themselves. I’ll be honest, commission incentive aside, if your salesperson would not refer a friend to the lot, then they are going to have a very hard time convincing any other customer to buy from you.

I get it, having sold cars myself, the pay is the primary driver for most salespeople. Employment longevity in this industry is a rare thing, but there are those out there. What those sales people have in common is an honest belief that they are selling good cars for a good dealer.  You can not, and will not, ever buy that kind of loyalty. It must be earned. This is something that is built over time. It cannot be created out of thin air.

If you are a new dealer, then what you have to sell the employees on first is your commitment to them. Good cars to sell at good pay, good benefits (when you can,) and good conditions to work in.

I personally believe that the days of the “hired gun” are about gone. These are the kinds of sales people that float from one dealer to the next. They can sell a lot of cars to a lot of people, but too often, their games, lies, and cons run out. You may have enjoyed some short term profits, but the long term leaves you with complaints and a bad reputation.

This concept does not end when the ink dries. Customer Relationship Management teaches that customers who buy durable goods must be appreciated not only at the time of sale, but after the sale, as well.

If you look at the FTC Buyers Guide for used cars, there is a place on the back marked “See For Complaints.” This must be the name of someone at the dealership who is authorized ot hear and process complaints about the used car after the sale. I met a dealer once who hated putting a name there, because his position was that “As-Is Means NO COMPLAINTS.”  I went to another dealership once that kept copies of the signed “As-Is” Buyer’s Guides in a desk drawer close to the door. He explained that was so that they could pull them out and show anyone complaining about a car to remind them they weren’t entitled to complain. As I stood at this dealership, a lady who had bought a car just days before, came in asking for help because the water pump literally came apart in the middle of the road. They promptly pulled out her As-Is, shoved it in her face, and the sales manager laughed as her told her she was, and I quote, “Sh*t out of luck.”

Long story short, neither of these dealers lasted long.  Frustrating thing to me is, that it’s dealers like this who complain the loudest about a lack of customer loyalty, that customers won’t pay their notes, and the lack of profits in this business.

Thanks for visiting. Next time, we are going to revisit the Snake House. Put your boots on, and get ready!

Desert Ships

Has anyone seen this picture or one like it?

Some people see a boat in the desert, and think of how eerie it looks, or how out-of-place it is. When I see it, I think to myself: I’ve seen that car dealer before.

The whole point to this is to get you to think about what you have and what your market is.

Inventory Management is a concept that I see very little of at times. Dealers need to start spending a little more time looking at what they have, and ask themselves one question of each and every unit on the lot: “Can I sell this unit at a profit?”

Look first at how long you have had it. This is called Aging. The industry suggests that, except for a few very limited circumstances, a 45 day old unit is a management failure.

Is this unit still here because you have it priced too high? Or is it there because your sales staff *can’t* sell it? In the first case, look at your competition, and similar cars in the area. In the second case, you either have a training issue, or, you have what’s pictured above.

One more possibility to the “can’t sell it” case: They cant sell it because it is NOT saleable. What does that mean?  Simply this: potential buyers walked away from it because of some real or perceived defect.  Stuff as simple as lingering odors, mismatched wheel covers, busted taillights, or even a drive-ability issue. Have one of your staff go drive the thing, and see what puts them off about it. Then, either get rid of the car or fix it.

I was at a used car lot a few months ago looking at a $10,000 used van. When I looked at the back, I saw a busted tail light lens cover. I asked the dealer if he had noticed it. He said yes, and had even called the local scrap yard to inquire about getting a replacement. Told me it would only cost $25, and he would give me the number of the guy he called.  I was speechless for a moment. I finally asked him why he did not spend $25 to make a $10,000 unit saleable? He looked me right in the face, and said the tail light was NOT his problem.

I did not buy the van. Because: As I looked at the ignored inexpensive cosmetic (and safety)  issue with this unit, I wondered what else has been ignored or noticed and declared insignificant, and it gave me pause. If something as simple as a $25 tail light cover was “not his problem,”  then what else was also deemed to beneath his level of concern for me as a consumer? And that, dear readers, is a chance I decided not to take. You’ve heard before the old refrain,

For want of a nail the shoe was lost. For want of a shoe the horse was lost. For want of a horse the rider was lost. For want of a rider the message was lost. For want of a message the battle was lost. For want of a battle the kingdom was lost. And all for the want of a horseshoe nail.

This dealer could have spent a mere $25 on a tail light cover, and I might have drove home in that van. How many other customers has he lost due to his miserly outlook on reconditioning? I wondered if losing the gross on a $10,000 van was his problem? Maybe not.

I will admit, when I sold cars, it always confused me the tiny things that made people walk away from a deal. Once, a dealership I was at lost a sale of a used Lincoln Town Car over rusty ashtrays. The sales manager dug in and refused to order new ($50 for all) ashtrays to make someone happy. So the customer dug in and refused to hand that dealership $25,000. Salesman lost out on a $600 commission. Point is, to the customer otherwise willing to buy it, that car was not in a saleable condition.

I’ve seen dealers lose sales because of dirty cars. I’ve talked to one dealer closing up his lot and going bankrupt, and as I looked over his inventory, I noted (and told him) that the inventory he had was not suited to the market area he was trying to sell cars in.

Don’t let a handful of nails be the reason you turn off the lights and close up shop.

EVERY car. Go today and put your hand on EVERY car, and ask: Is this priced right? Can I sell it to the consumers in this area? If those two answers are yes, then: Is something wrong with it or do I need to retrain the sales staff? 

QUESTION POST: PLEASE COMMENT

Question Post:

I have been approached to do some computer system and tablet reviews.

My question is, would the readers of this Blog be interested in seeing those here?

Also, is there a certain Computer System/ Laptop / Tablet / Smart Phone you want researched?

Let me know in the comments.

Also, see my new service: Excel and PDF Forms Help (Link in the the Header above )

WHERE ARE THE SNAKES?

DO YOU KNOW WHERE YOU ARE?

It’s been brought up before, and it bears repeating. There is a concept called “Situational Awareness.”

Roughly, it is defined as the “ability to identify, process, and comprehend the critical elements of information about what is happening to the team with regards to the mission.” Simply put: It is knowing what is going on around you, how to deal with it, and what it means.

SA is taught and retaught and retaught in the military, with police departments, fire fighters, and many other tactical groups. It’s a concept that means life or death, not only to those groups, but also to the public they serve.

Your SA may not entirely affect on your personal lifespan, but it certainly can mean the life or death of your business.  

The title of this visit referred to snakes. In jungles or similar situations, its one of those things that requires intense SA. The snakes are usually well-hidden, due to the undergrowth or their ability to simply drop out of a tree, and are typically camouflaged fairly well. It’s also important to note that not only are they the most elusive to spot, they are among the most deadly. Each different situation has different hazards. Maybe it’s a different type of snake, maybe its some other poisonous creature, or even a human adversary who manages to hide and be as deadly as those snakes. When they train tactical forces to go into a specific area, they train them on the specific hazards in that area. In addition to identifying the threats, the unit is also trained on avoidance of them, and dealing with the ones that cannot be avoided.

So, where and what are the “snakes” in the used car business? No, that’s not a crack on your sales staff. I’m simply asking you to sit down and put some thought into what the hazards are in your area, and what is your plan to avoid them or deal with the unavoidable ones. Your “area” being the Used Car Business, coupled with the city or state in which you are based. If you engage in dealer financing, you have added hazards to identify, as well.

Some of these “snakes” are more obvious than others, just like in the forest. Some are more annoying than poisonous, and also like the wild, some are only a threat to you when you become one to them. So, when you assess the various species of snakes in the Used Car Business, you also need to assign to them a reasonable estimation of the amount of harm they can do.

This is another situation where 20 Groups are useful, in that they can assist the newer dealers with identification of the hazards, and sharing proven methods for dealing with them.

Older dealers benefit from sharing the wisdom, because stronger dealers strengthens the industry as a whole.

In the US, there were 38.3 Million used cars sold in 2015, and franchise lots only sold 11.4 million of those. (Source: Autoremarketing.com)

That means the independent Used Car Dealers moved nearly 27 million used cars in one year, over 2 million per month. Unless you yourself have a lot that size, remember that we depend on each other. No man is an island, and neither is a dealership.

See you next time.