January 2015 – Louies Used Cars

ONE SIZE FITS ALL?

SALES TRAINING IS MORE THAN JUST “GO SELL CARS”

To be honest, “One Size Fits All” is a load of unvarnished malarkey even in the clothing business. But we are here to talk cars, not clothes, so I am referring to your sales presentation, not your suit. We talked before about outfits. (In this previous post).

Sales training is great, and I wholeheartedly support it. A problem develops with those people who train a person to do it only one way. Some of them aren’t flexible enough to flow with the situation, and lose sales because the customer isn’t following the script.

Introduce yourself in keeping with your customer. Professional people expect a professional introduction, and blue collar people tend to be more comfortable with a friendlier intro.

Keep your manner of speaking professional, saying Yes or No instead of Yeah or Naw, even for the blue-collar crowd. Use Sir or Ma’am when referring to them. People love respect. People also love the sound of their name. Learn it, and use it. Before you call them by first name, ask if it’s ok. If the person has a title, such as Doctor or Judge or even Officer, use it. It shows respect for their position.

As for those objections you may hear, don’t jump straight to the defense, or even mention that you heard them. Include in your intro and presentations words or phrases that defuse objections. Learn to listen to whats being said, and learn to HEAR what is being communicated. People usually tell you (more often than not, indirectly) what they want, and how they want it. You have to glean the information from the chatter.

As for defusing, be positive in defending and explaining. People do not like to be called liars, nor do they want what they may consider a trusted source being called that, either. If your company made a mistake, but fixed it, own it. Something along the line of “Well, yes, that was an unfortunate situation, but I am glad that we were able to address that problem.” (Or “And that we are addressing it, hopefully, to everyone’s benefit.”)

If you trash or insult another customer in front of this one, they wonder when they are next on that list, and may decide not to get on it at all by buying somewhere else. We’ll talk more about customer interaction in a later visit.

Lastly, never be afraid to ASK the customer if everything is going to their satisfaction. Take those little hesitations and pick up on what you need to fix to keep them happy. Pro tip of the week: If a customer spends a lot of time looking at their watch, save the waiting games for someone else, this person is not the one for that. They will respect you a lot more that you interpreted that, and sped the process up for them.

FTC RULES COMPLIANCE

This is by no means a complete tutorial on compliance. — You need to read and be familiar with the rules discussed, and interpret them for yourself, or contact an attorney for assistance.

The Federal Trade Commission’s guidelines for the Red Flags Rule includes this statement:

Each financial institution or creditor that offers or maintains one or more covered accounts must develop and implement a written Identity Theft Prevention Program (Program) that is designed to detect, prevent, and mitigate identity theft in connection with the opening of a covered account or any existing covered account.

The Safeguards Rule of the Privacy Act has almost exactly the same wording.

What this means to you, as a Dealer, is that simply, you have to come up with a Plan, and put it in writing. You will need to identify and write down, some or all of the following:

What we do to implement and monitor the rules.
How we comply with the rule. >> Be specific.
How we train employees to follow the rule.
Which employees are affected by the rule.
Sanctions or penalties to employees for violations.
Where we store the records for our proof of compliance with the rule.
Who is responsible for all this.

To be honest, your reading of the Rules could lead you to see something else you need to do.

A couple of those need further clarification:

WHAT WE DO TO COMPLY:
THis is not HOW you comply. This is a statement of your plan, and what steps you took, (or take) to implement your plan. This should include an Audit Plan.

HOW WE COMPLY WITH THE RULE:
Let’s get this straight: You simply saying that you are in compliance won’t cut it. Nor will just saying that your DMS program “handles it.” The DMS and its’ functions will need to be identified as a component of your plan, but the DMS by itself is not the plan.

HOW WE TRAIN EMPLOYEES:
Have some training materials done up with plain-English explanations of what the Rule means, and the specific responsibilities of each employee. Again, be specific. This can’t just be for show. Actually do a training session with the affected employees.

WHICH EMPLOYEES ARE AFFECTED:
Simply put, identify which people will need (and have received) training. It makes no sense to sit shop mechanics down for Red Flag Rules training, but cashiers will need this. Keep a log of when employees are hired, and when trained. Annual refreshers are a good idea, also.

WHO IS RESPONSIBLE:
This simply means that you appoint someone in authority (even if it is yourself) who is responsible for the implementation of the plan. If this person leaves, you must have a replacement.

It is YOUR responsibility as a Dealer to find out what is required, and understand what it all means.

The Safeguards Rules of the Privacy Act are complex. In my opinion, a lot was left up to interpretation or guesswork that could have better defined. That said, it’s not very difficult, it just requires some focus and understanding. For example, did you know that an unsecured wireless network is considered a violation of the Privacy Act? For this purpose, unsecured doesn’t just mean open wireless, it could also mean a secured wireless network with an easy password. This is a violation even if no one can prove that any unwanted people ever accessed the network.

Programs that allow file sharing can be a violation, even if the program did not have defined access to private information. Like the wireless, the violation is simply that a potential hazard to the information exists. Even something simple like credit applications or deal jackets left in a public area laying on a desk are a violation.

Point is, you have to step back and look intently and objectively at what is possible. Don’t discount anything. Always be on the cautious side if in doubt. It goes without saying that repeatedly locking and unlocking file cabinets throughout the day is tiresome and aggravating, but may be necessary.

If you post pictures and names to Facebook or just on your actual walls, make sure you have express permission from the customer to do it.

Remember that compliance is not a one-time thing. It is an ongoing process that needs to be as integral to your business as cleaning the cars out front.

If you need help or a starting point to go by, please contact me.

THE TIP YOU HAVE ALL BEEN WAITING FOR

Free. Oil. Changes. That’s your key to profits. Did I mention they should be free?

Free? You may ask, and I say yes, free. Here’s the math: The average cost of an oil change is about $20-$25. This includes the labor to do it. You can get that cost considerably lower buying both oil and filters in bulk.

Seriously, bulk oil comes in around just $1.50 per gallon. That’s just $2.25 cost for a 6-quart oil change. Filters are between $2 and $4. You would then have just $6.25 in parts, worst case. Figure 30 minutes for a $15/hr employee, and the total in this is just $13.75. Add in disposal fees, employee taxes/benefits, and the tiny cost of the other fluid top-offs, and you will be under $20 for every one.

If you do not have a shop, come to an agreement with the local Quick-lube or tire store that does them for $24.95 normally. You can probably negotiate a deal down a few bucks.

The average oil change should be done at 5000 miles. The average driver puts 15,000 miles a year on a car, and the average BHPH contract is 36 months. The math says that is 9 oil changes. Total cost is 9 x $20 = $180. That’s not a lot of money to put into a unit for sale.

Why? Well, there are a handful of reasons. The first and most important is that you are protecting your collateral. YOU are probably the only one who is genuinely interested in making sure the oil gets changed. You are the one who truly has a vested interest in making sure the engine runs until the car is paid for. Bonus: If you do wind up with the car back again, through trade or repossession, you know that the service has been kept up with.

Reason #2 is that you now get nine opportunities to inspect the car, and look for other potentially bad issues. You get the chance to tell them before they are stuck beside the road that the water pump has started leaking, tires are showing cord, brakes need replacement, or a steering knuckle is worn out. You are taking care of your customer. If you have a profit-shop, you can offer to go ahead and repair these items, and work them out a plan on the bill. If you do not have a profit-shop, then arrange a discount plan with a nearby general mechanic or tire store. You will also be the first one to spot when this car isn’t going to last much longer.

Reason #3 is that you get nine opportunities for this customer to look over your lot and look at inventory. Either they are looking to trade up, or they have a friend looking for a car. Maybe a friend rode with them who wants to put in a credit app.

You get nine chances to shake this person’s hand and thank them for their business. You have nine golden opportunities to remind this customer that you are taking very good care of them after the sale. At least half of these times, the salesman who sold the unit, or his/her replacement, should be gently but gradually steering this person towards their next purchase, and always asking for referrals.

This builds business. This builds good will. This builds a reputation of a dealer who wants his customers to be happy.

Don’t stop at the oil and filter. A decent but inexpensive set of wiper blades is only $8. Air filters range from $4 to $20. If you have a permanent on site clean-up crew, let them wash it off. These are all very cheap investments in your business. You will NOT be able to buy the kind of advertising this will get you.

The customer will need to understand that this service does not constitute warranty, in any shape or form. They need to understand that this is not guaranteed service, and can end at any time. If you want to pass on your cost to the consumer in the form of a “Maintenance Contract,” make sure you understand the laws and rules surrounding those before doing so. Spoiler alert: It gets nasty, and is not recommended.

The cost could be a deductible expense, if categorized properly. Ask your accountant. I do not advise that you pack the estimated cost onto the car as a repair or reconditioning expense at the time of sale. These need to be accounted for as they happen, not as a projection.

THE HAPPY CUSTOMER HAPPILY MAKES PAYMENTS

Did that need to be said? Well, yes. Too many BHPH dealers simply do not grasp that concept.

There are a lot of BHPH Owners who have the attitude that all customers are liars who are all actively looking for a free car. One dealer says: “They ALL look to get out of making payments, so I sell these thieves the cars that they deserve.” (Actual quote) This is the guy who removes Check Engine Lights and Airbag Warning indicators as long as the car is running, and puts used oil in cars when they are low. There’s more than just one, and they justify it by pointing at a poor payment record of their average customer. “They won’t pay good, why should I give them a good car?” Is this you?

I met a BHPH customer once, and I asked him to honestly tell me about his payment record. He admits it isn’t great. But he points at the car, and tells me that he had to replace the alternator and battery on it the day AFTER he bought it, and the mechanic found the cooling system full of gunk that was an attempt to hide the leaking radiator and heater core. To top it off, both lower ball joints were at the point of falling out. He says the dealer just laughed and told him that As-Is meant he was “on his own” for this car. Eight hundred dollars later, he isn’t in any mood to make an on-time payment.

But the dealer will use these late payments to justify selling this kind of junk. Some dealerships seem like they are gearing up for battle with the customers. These customers, seeing the battle armor, suit themselves up, as well. They really do not see the vicious circle they are creating.

Conversely, I met a dealer, we’ll call him Tom, now retired, who made sure all his cars were in the same condition as one he would put his own family in. In the first 30 days, he would take care of most issues. He changed the oil for free as long as you were under contract. Finally, he only charged 16-18% APR. The result was an overall payment record that made his friend at the local bank almost jealous. He could show that almost 80% of his business was repeats and referrals. He had customers who wrote him personal notes apologizing for being a day late. He had one other tool in his belt: He hired a person in the office who had an accounting degree, who would sit the customers down that were struggling, and help them work out their home budgets. If this person told him to cut the car payment to fit, he would, no questions asked. If he ever caught you lying to him, though, it was over. Tom only asked that if you were going to be more than five days late, you personally called or came by and talked to him. He respected that.

These customers wanted to make their payments on time. They wantedtheir friends and families to also buy cars from him. They knew that this man wasn’t their enemy to be fought with. Tom didn’t need to ask who was on the phone before answering it. He didn’t dread talking to a customer.

I shared this with one dealer who just chuckled and told me it wasn’t realistic. He said you can’t be good to customers, because they will just use your good nature to get over on you. Tom disagreed, and had the good will of his community, a great reputation, and a nice retirement kitty to show for it.

I agree that there are people in this world who are materially dishonest, and yes, they seek out the Toms of the car industry. But the Toms of the car business know who to look for. Even the banks get one of these characters once in a while. This is where credit reports will help you. Learn to read them, and learn what to look for beyond the score. Learn to manage the receivables, and learn when to cut someone off. Tom gave back less than 5% of repos. Once he decided to pick up the car, he was pretty much done with that customer.

Understand this: Most people will not pay for a car they are not happy with, and certainly don’t want to pay you if they can’t even drive it. To be honest, if most dealers would take off the battle armor and extend their open hand, they just might find one willing to shake.

BTW, Fair warning: That oil change idea I mentioned, stay tuned for our next visit.

THE RIGHT PARTS ON THE RIGHT CAR

We’ve been talking about your car lot as if it were a motor vehicle. Let’s go out to the service department and have a look under the hood.

Twenty-three percent of businesses that fail identify “Not the Right Team” (NTRT) as a major contributing factor. We discussed previously about having the right finance team that fits your business, now, make sure everyone else fits it, also.

NTRT can encompass many different concepts, but let’s look at the most basic. What are you doing, and how do you expect to accomplish it? The “how” of that question is inextricably tied to “who” will accomplish it.

Define your goals and your plans to your team, and see if they are wearing the right jersey. Do they have the skills and experience to help you? Are you willing to train if not? It is said that you can modify behaviors with training in about 10 to 20% of the people out there. Not change, just modify. Don’t expect to hire someone with polar opposite attitudes about the industryto readily accept your perspective with a little persuasion.

Analyze whether you have the right person doing the right job. If someone isn’t doing well, it could be the role, not necessarily the ability. There is a business concept called The Peter Principle, and simply put, it involves promoting people to just beyond their level of competence. A Salesman who is a consistent leader in sales may NOT make a good Sales Manager, but 95% of them will be made a Sales Manager simply because. Before promoting anyone, meet with the person and define the role and responsibilities and see if their abilities will accommodate the new position. This is where your gut feeling needs to help you out, because most people want to be promoted, and may try to assure you that yes, they can handle the new job. If you aren’t sure, prime them for it before promoting, by taking some aspect of the new role, and allowing them to experience it. If they do well, add another responsibility. Keep going until you have either promoted them, or you hit their wall of competence. It may not be the whole job, but just one aspect of it.

I’ve met more than a few managers who were great at managing, coaching, and getting awesome levels of performance out of their employees, but were absolute garbage at budgeting or accounting. (And a few the other way around, too.) If this is the case, ask yourself, is this an all-or-nothing promotion, or do you find someone to handle that part of the role to allow the other to perform what they can? Be flexible and allow some role-exchange where people are comfortable with it, as long as it doesn’t affect the core position.

This exploration into the workings of your team needs to include the WHOLE team, because fixing the steering is useless if you leave the rear axle broken.

One large issue I have seen in dealerships is a lack of trust by owners and partners. People can’t shine in the darkness of your shadow. Back off, and let them work. Let your managers manage. It’s why you have them, after all. Undermining them hurts you both, and demoralizes the employees. Most people realize when the “manager” is nothing more than a title on a business card. Managers should be empowered to do their job, and supported when they do it.

Poorly defined roles will lead to poor performance. People should know what is expected of them, and what to expect of you. Moving the goal posts leads only to frustrated players who give up finding them after a while.

Be honest and professionally constructive with your appraisals of your staff, and give them the opportunity to help you move them, if need be, into a better fitting role.

Finally, mirror time. Look honestly at what you bring to the table, and be willing to admit that you need help somewhere. Your employees will tell you. Maybe not directly, but if you listen closely, you’ll hear what is actually being said.

THE TEST DRIVE

So the “car” that is your dealership has been waxed, and the carpets and windows clean and bright. Now, let’s put the key in this thing, and take it for a drive.

How does your business FUNCTION? Do all the gears mesh well, or is there a grinding noise whenever two things come together? Do the sale side and the finance side synchronize? Is the customer passed over to service correctly, or is there a hiccup in the process?

The point here to get is to analyze whether the different parts of your business match up well, and suit each other. You can probably find a way for a Mustang engine to turn a Fiesta transmission, but it’s not going to last. More than one in 10 businesses that fail identify (among other things) Disharmony of the Team as a significant reason for failure.

Identify the problem, and fix it. For example, if you sell a lot of upscale cars, and the finance person(s) are only familiar with sub-prime low-market financing, you have a problem. The reverse is also very true. Ideally, finance people will be aware of finance resources across the spectrum, and not solely focused on one range.

Make sure your sales staff is aware of your finance offerings, and basic finance concepts. Before some of you sales managers whip out the nasty letter paper, understand this: If your salesman can’t feel confident he can close the sale, he can’t close it. Sales managers have to stop expecting the sales rep to close the deal as if it was a cash sale, and hope the finance manager closes the financing. This illustrates a disconnect between these two parts of the sale, most especially if financing is a core of your business model.

The old game of “Well, if I can get the payments where you want them, would you buy?” isn’t worth playing if it isn’t realistic. I do very much agree that the car must be “sold” FIRST in order to “sell” the financing, but if your customer only has $1500 down, and can barely afford $400 per month, you probably should not be test driving a $20,000 (or more) car.

Another important consideration is that if the customer has to meet with Finance separately, the handover should be smooth. Have the Finance person talk privately with the sales rep to get some idea of what the customer’s expectations are. It’s also a good idea to have the sales person tell the guests where they are going next, and to properly introduce them to the Finance Person. Customers really don’t care for being “dumped” on someone else. Above all else, stop lying to the customer. No, they aren’t going to the “business office” to meet the “business manager” to have the “sale price approved.” Most customers already realize that first, the sales price was already approved by the salesman running back and forth to the tower five times, and second, they don’t have to go get set in an office just so a manager can view a piece of paper.

If you have a service department, the sales staff should be aware of the offerings available there, as well. This knowledge can help them build value in the dealership during the sale process. Allow sales reps to assist customers in setting service appointments. Make sure your service department notifies the sales rep when the car comes in. If you have committed sales reps, they will appreciate this.

Lastly, if the mechanics of the operation so far are good, it still won’t run well if the brains (management) of the car don’t work. If you have more than one “manager” in the business, sit them all down and identify their roles, responsibilities, and the consequences. Put it in writing. Draw clear lines, and be prepared to arbitrate disputes. Another attitude that has to be thrown out with the used oil is “If you two can’t get along, then one of you has to go.” You also get an opportunity to prove you equally respect all the people you hired. Be fair, and impartial. There’s nothing wrong with telling someone “This is not the role I defined for you.” This is an indicator that you may need to MORE clearly define what your expectations are.

Happy Driving!

CLEAN THE CARPETS AND WASH THE WINDOWS ON YOUR BUSINESS

Put away the steam vac, and stow the window cleaner, this is not about that. This article is going to open the discussion about how a business “looks” on the inside, and how you interact with the public.

Last time, we talked about presenting the business. I hope you polished the outside. Now, let’s look at how it appears from the inside. The office or showroom needs to be inviting, welcoming, and clean. Your staff needs to look and act professional. All of them, even the car washers, need to follow a dress code. Granted, you can usually get away with being a bit more relaxed than a franchise lot, but there still needs to be a business-like appearance.

Know your market: For most used-car lots, I would say lose the ties, unless you are doing upscale units like late-model high-end cars. Trade the slacks for khakis, but a collared shirt should still be the minimum. Golf shirts or polos go well here, especially a quality one with the dealer’s logo on it. Clean up staff should be wearing pants or shorts with a company t-shirt. No cut-offs, ever. Save the jeans for Saturdays or special events. Personal hygiene must be the order of the day. Not to be crude, but dealers in the hotter southern regions need to find a way to remind their staff that many sales are lost to BO. By the same token, a lot of customers are sensitive to overly-strong colognes and perfumes. If you are ok with facial hair, at least make sure it is groomed. Ladies need to save the outrageous makeup for weekend clubbing. Staff who are off-putting generally find the customers walking off the lot, putting their money back in their pocket. Visible tattoos, especially obscene or tasteless ones, usually make customers invisible. Body mods or odd piercings tend to put a lot of holes in your bottom line.

Customers must be greeted in a friendly and professional manner. Make them feel like you actually WANT them to spend their money at your business. Make them feel valued, by genuinely showing appreciation for even considering your lot. Don’t just make this part of it window-dressing, though. This needs to be an ingrained culture of the business. If the staff doesn’t believe it, they will have a hard time convincing anyone else.

To sell a car, the dealer usually needs to answer two very important questions:

1. Why the customer should buy this car.

2. Why the customer should buy from this dealership.

Way too many salespeople miss #2 entirely. They spend too much time focused on selling the car, and rarely “sell” the dealership. A lot of customers walk off not because of the car, but because no one bothered to convince them of the other half of the deal.

I personally have visited dealerships, even very high-end ones, where the “Thanks for coming in” part felt like it was being read off of a card. Where the part of the pitch about the dealer’s commitment to service and quality sounded hollow, like it was memorized, not felt. I am quite sure I was not the only customer who had that impression. The point is, the owners and top managers of these places knew enough about this concept to force the staff to say it, but didn’t know how to make them believe it. Take a look inside your own attitude, and see if you believe it. After all, the whole process starts there.

Customers have many choices these days. The old attitude of “I’m going to sell you a car, and you are just going to get over it” has to be retired. Did that quote sound ridiculous? There are a lot of dealers out there even today that might as well post it on a sign over the door. Fittingly, these are usually the ones who complain the most about poor customer retention, lack of loyalty or referrals, and very low conversions of ups into sales.

Lastly, for BHPH dealers: When a customer doesn’t feel appreciated, even if they did buy a car, they typically are the first ones to not care about paying the payments. More on that in a later visit.

PRESENTING YOUR DEALERSHIP TO THE PUBLIC

Anthony Melchiorri of Hotel Impossible always instructs the General Manager or Owner of the hotel to park in the farthest parking spot away from the building. Why? So they get the largest overview of the property as they approach it on foot. As you drive, even in a parking lot, you are preoccupied with operating the vehicle, and, your visual outlook is limited by the car that surrounds you. Walking on foot hopefully is now instinctual for you, so it’s now time to look around. You also walk slower than you drive, so you have more time to soak it in. The point is to back away from the thing, and look at it as you approach, to get a more open, developing perspective on it. Sometimes, you should even go park across the street, get out of your car, and look. Just look. Take a few minutes to truly view the property, and see just what it is that other people seeing. The question then becomes, is this image the one you intended to present?

Do hotels = car lots? Yes, in the manner of speaking that either one has to present itself favorably to the public. Every commercial establishment has to follow this rule. In the customer’s mind, a trashy exterior almost always equals a trashy business. Your business image, regardless of your practices, is first formed by most people as they approach your lot. Some people won’t give you a chance to show them what a great business person you are, because they have already driven away, having been turned off by the physical image you gave them. In some areas, it may not be your fault, because you are on a road that gets a lot of trash thrown out of cars. The point is how you address it. If this is your problem, make sure someone gets there just before normal business hours to clean up. People who are used to the area will notice the effort you make. People who are not familiar will still notice your shining gem in the middle of the rest.

Consider it this way: most experienced car buyers view how well a car looks to determine if the person took care of it mechanically. A trashed car almost 100% of the time is also not taken care of where it counts, in the maintenance. You, as a dealer evaluating cars for purchase, notice that, and even if you do not realize it, you tend to take off driveline points when the paint and interior have been abused or neglected. In other words, sometimes, you aren’t going to give the car much of a chance to prove itself if you are not happy with how it looks.

And, when you sell a car, one of the most important things you spend money on is the appearance, because you know that the customer is the same way. It’s human nature. You have by now realized that no matter how much wax and buffing you do, if a car smokes, skips, or has slipping gears, all you managed to do was waste a little more of the customer’s time than you would have if they had not been drawn in by the shine. Word spreads fast these days, and you need to be keenly aware that people will soon know that you as a business person spend a lot more time polishing the outside than making it work functionally when it counts.

Car people know that if you can get them in the car with keys, a good test drive is the ultimate sales tool. Be careful, though, there are all too many dealers who are still dumping the sawdust in the gearbox, so to speak, when it comes to customer service. I am fully cognizant of the arguments from BHPH dealers who feel that appearance doesn’t matter, erroneously thinking that just because they finance, customers are beating a path to their doors. Consumers, no matter what the credit score, want to be treated like valued customers.

Have some pride in what you have built, or what you have been entrusted to manage. Clear the junk, pull the weeds, and get out the paintbrushes. It’s a good idea to get a friend who does not work for you, one who is willing to be honest, look at the place, and give you his or her opinion.

In the future, we’ll talk about polishing the inside, cleaning the upholstery, and doing an occasional tune up on the driveline that is your business practices. Once you present your business physically from the outside, you have to close the sale by showing the customer how well it works.

NO CREDIT CHECK! YOUR JOB IS YOUR CREDIT! EVERYBODY RIDES!

No Credit, No Problem, as the ads say. But No Credit Check = BIG Problem for you as a dealer.

I fully understand that the clientele coming into the Buy-Here-Pay-Here lot have a low credit score. That is actually a given. But a consumer credit report is more than just a numeric score. This report costs between three and five dollars, but information on it besides the score can save you thousands in the long run. If the deal is going to be in-house finance, wouldn’t you jump at an additional chance to make sure the buyer is going to pay you?

First, the Credit Report helps you satisfy the requirements of the FTC’s Red Flags Rule. The rule requires that you verify the identity of the individual applying for credit. The report can verify addresses, employment, and past credit history.

Second, there is information to be gleaned from amongst the delinquencies here. What you are looking for is *which* delinquencies he has. If the buyer has defaults or collections on “regular bills” such as house utilities, rent, and cell phone, then your regular car note bill will be a problem, also. Next, look for repossessions. One or two repossessions may be normal, but try to make some sense of why they had that default. When in doubt, ask. If the answer is a combative or argumentative one, then you should be cautious, because the next dealer he argues with over payments will be you. If the repo was over a dealer’s failure to fix a problem, then you may have a person who happily signs your “As-Is” statement today, but will hound you endlessly or refuse to pay over even minor issues (real or imagined) with the car. It could be that they were promised fixes that just didn’t happen. You won’t know until you ask. And if you do move forward with the deal, make sure that what you promise is in writing, and ask them twice if they understand your position.

Let’s agree to this one tenet: There are individuals in this world who simply cannot handle a payment agreement. Whether their bad credit is voluntary or due to their own incompetence, they do exist. There are people out there who, as they sit in your office, are already planning their trip to the bankruptcy attorney. There are some who sign whatever you ask, but have no intention of ever handing you another nickel. These are the people that you just have to learn to say “No” to.

Collections activity must be studied. Who or what is the deal, and was it paid in full or part, or is the consumer making payments on it? Was all of this bad activity before a certain time? Is it all happening right now? Remember, bad credit follows for seven years. A six year old late payment or default has almost as much effect on the credit score as one from last month.

Finally, the credit report can show employment consistency or residential history. If this buyer moves around a lot, and not just within the area, we are talking about city to city or state to state, he is a fairly large risk.

As for bankruptcy proceedings, look for active ones, or how long since last one, or any patterns that may lead to one very soon.

If you say No to this customer, then quite possibly, someone else will sell him a car. If it is a competition you are looking for, why make it the one who has the most repossessions or largest losses?

Remember that saying No doesn’t make you a bad person, it can make you a smarter business owner.

IS THE INTERNET PASSING YOU BY?

I mentioned before that the Internet has almost completely replaced print media and airwave (Radio & TV) advertising. It’s true. Most newspapers that have folded (sorry) or gone to electronic –only versions put their position squarely on the Internet.

We talked previously about Facebook. My mistake, I got this out of order. Too many dealers don’t even respect the Internet first. Many dealers out there began selling cars before the internet existed, but that was long ago. Most people research or look for cars online, not the local newspapers. Even Auto Trader turned its’ weekly paper magazines into one of the largest auto sales websites in the world.

When people want to buy something, especially large purchases, they go look for it online first, and sometimes, only online. Your print media ad is increasingly not being seen. In these days of satellite radio or direct connect MP3 players being played in cars, your radio ad is also being lost into nearly empty air. We have DVRs that let us skip the television commercials. But people will watch a YouTube video of a car we are interested in. More people in the last week saw a Craigslist or Backpage ad instead of a newspaper ad for a car.

If you did not understand much of the last paragraph, that is okay, but it is time to consider hiring someone who does. Almost every retail outfit in today’s world needs an Internet Specialist who knows these websites, can follow them, and knows how to manipulate the ads shown on them. This specialist can also get you on Facebook, Twitter, GooglePlus, and will embrace whatever the next Social Media phenomenon that arises.

The other part of this is the expense. You will spend less in a whole year specializing in Internet advertising than some dealerships spend in a quarter on television, radio, and print. You will also inarguably reach a larger, wider audience. Think of it this way: the non-Internet media is limited to your local area, and can take days for the ad to even be seen or heard. The Internet is global, and works at light speed. Dealers have reported selling cars to buyers thousands of miles away within an hour of posting an online ad.

Over eighty percent of people will research the purchase online. Almost a third of car buyers would prefer to handle the entire purchase electronically. The so-called “Millennial generation,” those born in the 1980’s or later, is increasingly becoming a very large portion of car buyers. These people grew up on connected computing, and most of them rely on it exclusively. The first of this generation are now in their thirties and the number of the rest who are of car-buying age grows each year, as the number of pre-internet car buyers drops. Even people born in the 1960’s to 1970’s grow more and more connected to technology. More than 90% of that generation has internet. Smart phones and wireless portable devices such as tablets or small laptops put the Internet in their hands anytime, anywhere.

The light-speed velocity of the Internet also has an effect you have to be aware of that we discussed previously: The ease and speed at which people can talk about your business. Before Internet, people would tell an average of ten to twenty people about their bad experience, and that process took weeks. Now, one single Social Media post can reach thousands of people in minutes. Keep in mind that the Good News travels just as fast, and reaches just as many people. What you have to manage is the response. What I think businesses miss is the opportunity to simply thank people for good reviews. It conveys the message of your awareness, appreciation, and responsiveness. Prospective Buyers will notice that just as much as your response to bad reviews. Here’s more good news: the internet society actually pays attention to personal reviews, and uses them as much or more than advertising claims to make purchasing decisions.