Did you right-size your customer in the car, or did you put your customer in an avoidable default position?
Verifying and working within the customer’s personal requirements, salary, and budget timeline makes for better deals, greater satisfaction, increased overall revenue, and higher numbers of referrals. Managing your Receivables goes beyond simply taking the money in after the sale. It has to start from the first time the customer asks if you finance, and be a part of all negotiations.
“Personal requirements” simply means verifying that the car being delivered fits the consumer’s needs. A family with two kids in car seats will not be happy with a coupe within a short time. Take the time to ask personal questions and qualify the unit to the buyer.
An unsatisfied buyer will find a lot of things wrong with a unit that a happy buyer will overlook. Keep in mind, too, that the consumer will find a way to also make you the bad guy for not putting him in the car he wanted first.
If the buyer does not mention financing, then it is your job to do so. Unless they are counting cash out, finance is invariably going to be part of the deal. Be upfront and honest about your offerings, and ask for the information from the buyer. How much down? What are his or her pay periods? Find out before showing or discussing specific units.
There is no sense in getting a buyer interested in a unit that at closing, you find out won’t work out for them. Their disappointment in having to “settle” for a lesser unit can lead to a lost sale or overall dissatisfaction with your business.
Financially, someone with just $400 in disposable income will not be able to pay a $450 per month payment for long. Likewise, if the payment is leaving the buyer close to his edge, a car that is a fuel hog or needs frequent repairs is not going to work out.
It is in your best interest in every case to try to find a way to keep the buyer in the car. If the car or the payment did not work from day one, then that task is nearly impossible. Repossession should be an absolute last resort to working with a customer. It is expensive, and can get complicated really fast. No matter how you arrived at that, the dealer is always going to look bad. Too many dealers substitute this for a collections phone call, and you will soon find, these dealers have the worst reputations in town. Ironically, they are also the very first to bitterly complain that customers won’t call or communicate with them. Contempt and distrust of the customer breeds contempt and distrust of the dealer. That little piece of circular warfare we cover later.
Appoint or hire someone with great people skills and a good grasp of personal finance concepts to act not only as your initial financing consultant, but also as a customer solutions representative. Authorize this person to talk to the customers when the payments are late, and charge them with finding a solution to getting the account back to current. You may need to empower this person to make minor modifications or allowances. This position will pay for itself in increased revenue, and happier customers. Happy customers who are riding bring a lot more referrals that the guy sitting at home angry because you picked up his car.
Be proactive and understanding. Watch the local news for notices of major plant closings or work outages, and make a plan to work with those people affected. After all, you’d much rather see your name on Social Media as the Awesome Friend who helped out a person in need rather than the Rotten Jerk who kicked people while they were down.
Lastly, be realistic. If a person had his last five cars repossessed, then, the odds are yours will be the sixth. Sorry, but some people just cannot do a payment schedule, whether it is their own personal choices or just bad fortune. Sometimes, it really is better to say No than to enter into a contract that is certain to fail.
Avoidable default is one of the biggest, and most toxic, cancers a dealership can have. It’s also the single most preventable.