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OVERLAND PARK, Kan. — I ask a different question. Where did
all the customers come from that are buying right now? Have all these customers
been waiting for financing to come back to life? Did they all just hang on to
the same car for five, six, or even 10 years? I hope this year helped you
realize that there have been many customers in your market who could have used
your help, but they would never consider buying a car from you because of their
perception of what you do.

There was a long list of decisions to make when you decided
to get into BHPH:

—What business model
—What inventory
—Your tolerance for risk
—How you would collect
—Shop or no shop
—A one-man show or full crew

These decisions were all part of what your motor company
would eventually look like. Now comes a new challenge – special financing.
Special finance isn't really a new challenge. I have been through at least
three surges in special finance.

Customers wait because they want something "better,"
something different than they believe they can get from you. What is the
special finance dealer offering that you are not? New vehicles with six-year
loans or other vehicles you do not offer? Do they have longer warranties or
lower interest rates? You should know. You need to know.

Since my start in the car business I have been involved in
three unique BHPH operations. One operation financed cars that had low ACVs and
fit into what most people perceive a "note lot" looks like. Things like
operating out of a single wide trailer on a partially-paved lot while offering
little recon and even less service after the sale. From there, I moved to an
established high-line operation that operated in a very nice facility. In the
late 1990s we offered vehicles above the $10,000 ACV range with long term
service contracts, GAP and credit life. We had a profitable, full-service shop
operation. With four-year loans and inventory choices like Cadillac, Lexus,
Infiniti, BMW and Mercedes-Benz. We had doctors, lawyers, airline pilots and
even a federal judge in our portfolio. Bad credit occurs at all levels. I
learned quite a bit from both these operations and the original people that set
them up, which lead me to the third operation.

This was a startup I handled eight years ago for a franchised
dealer and using my own business model. My goal was to attract the special
finance customers in that market. I wanted an operation that provided greater
service and a better opportunity to our customers than the special finance
dealers and their lenders could offer. I decided on a business model with an
ACV in a $6,000 to $9,000 (average $7,200) range with full recon, including new
tires. My experience from the high-line operation confirmed offering a
long-term, quality service contract while having side loans available for
maintenance and other repairs would have a positive effect on our marketing and
portfolio. We offered them along with GAP to each customer. To keep payments
affordable, we offered a 36-month term, which helped make early trading easier.

What do your customers want besides a great looking, brand
new car that never breaks down, burns gas or has payments? They want the
closest thing they can get to that with no money down. Our program advertised
flexible down payments. We worked with what the customer had available using a
deferred down program. We had a set interest rate for all approved customers of
7.5 percent. We reported all loans to the credit bureau. All this and we had a
very interesting mix of inventory the customers only saw on our lot. Our
program, combined with friendly and helpful customer service (including
collections), allowed us to generate above 75 percent repeat and referral
business over the last eight-year period.

You can wait for the latest special financing boom to
subside and go on doing what you always have, or you can make some changes that
will help keep your existing customers and possibly attract a different type of
client to buy from you.

Ask yourself and others what you do (or don't do) that
drives customers to the Special Finance dealer down the street. What are your
prospects seeing or hearing that makes them stop at your competitors before
coming to you? Is it a great website? Is it the inventory? Is it the way they
are advertising? Or is it something your operation does or doesn't do that your
customers talk about?

Does what you sell, the interest rate, lack of warranty or
how you handle collections stop customers in your market from even considering
your operation when they need a vehicle? Why not start now to change that
perception? Figure out what the customers in your market want from their car
dealer, whatever that may be, and let folks know you can provide it.

Gene Daughtry is an
executive conference moderator, trainer and consultant specializing in
BHPH/LHPH dealership operations for NCM Associates. Daughtry's 22-plus year
retail automotive experience began in a franchise dealership working in sales.
Through different operations he worked as a finance director, sales manager,
assistant general manager, general manager, and handled a startup of a new BHPH
operation. He can be reached at (800) 756-2620 or gdaughtry@ncm20.com. To learn more about
NCM Associates, visit www.ncm20.com.


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