Automotive News - April 14, 2008 - (Page 30)

30 • APRIL 14, 2008 finance & insurance NADA offers training in risky credit Announcing! DVD, manual shows how to work with subprime prospects Donna Harris dharris@crain.com As many as three out of five shoppers who visit auto dealerships have blemished credit, the National Automobile Dealers Association estimates. In response, NADA is offering dealers a training DVD and manual that show how to set up “special finance” departments that work with customers who have risky credit. The credit crunch has elevated the need for special finance experts, says Jim Ziegler, a finance and insurance consultant in Atlanta. Ziegler has helped dealerships create special finance departments. “Special finance is becoming a staple part of the business,” Ziegler told Automotive News in an e-mail message. Nearly every dealership that sells volume brands requires a special finance department or manager to address subprime customers’ needs, Ziegler says. F&I consultant Jim Ziegler: “Special finance is becoming a staple part of the business.” Hare Chevrolet, an Indianapolis dealership featured on the NADA training DVD, initially financed 25 special finance deals a month when it started the operation in 1995. The dealership says it now finances 80 to 90 such deals a month, at an average profit of $3,000 per deal. Knowledge counts NADA emphasizes that dealerships need appropriate staff expertise and lender relationships to sell vehicles to subprime customers. They also must make an adequate investment of time, says Mike Tamas, vice president of training for American Financial and Automotive Services Inc., an F&I vendor in suburban Houston. Subprime deals “are not going to get done in two hours,” says Tamas, who appears on the NADA DVD. “It will take time to explain the process and execute the process. These customers have to be able to prove income, prove residence, prove time on the job and typically have a down payment.” Lenders charge fees to fund vehicle loans based on risk. Rodney Salmon, an area sales representative for Triad Financial Corp., a subprime auto lender, says fees for subprime loans typically range from $95 to $495 per transaction. In addition, NADA says, dealerships must stock cars and trucks that special finance customers can afford. “Dealers must have vehicles with a wholesale cost of $7,000 to $12,000 and appropriate mileage, or their inventory will be virtually impossible to finance,” says Greg Goebel, a dealer consultant and trainer in Sarasota, Fla., who specializes in subprime finance. “Eighty percent of all funded deals by all finance companies operating in the special finance industry have monthly payments under $400 a month,” Goebel says. Special talents Dealers say the ideal special finance manager Has a background in usedvehicle sales, F&I or auto lending Works with many vehicle lenders Respects credit-challenged customers and works hard to get them financed chise dealership group in Murfreesboro, Tenn., has agreements with more than 20 lenders. But three of those lenders account for 60 to 70 percent of the group’s finance business, says sales director Rick Lee. Dealers say the ideal special finance manager has experience in used-vehicle sales, dealership finance or vehicle lending. An upbeat attitude also is important, dealers say. Special finance managers “have to feel they can make something happen to get every deal worked out,” says Steve Williams, general manager of a Saturn dealership in Clarksville, Tenn. Helping customers re-establish their credit is a good way to build loyalty to the dealership, Lee says. Largely because of Alexander’s special finance department, Lee says, “Our referral business is up dramatically, and our repeat business is outstanding.”c As seen on TV A special finance department requires a dedicated advertising budget, NADA advises dealers. TV infomercials and Internet finance leads are especially useful for promoting subprime finance, NADA says. TV advertising can provide a toll-free number for shoppers to contact the dealership. Dealerships also must have relations with enough lenders to address a broad range of credit risks, NADA says. Alexander Automotive, a multifran- Profit center For dealerships with special finance departments, the subprime segment accounts for a third of their overall finance business, NADA says. That’s a major profit center. GE Money - Warranty Services is now part of Wachovia Dealer Services Together we offer a comprehensive suite of F&I after-market products, retail financing and commercial services, providing end-to-end solutions for the financial needs of your customers1. Deal’s goal: Widen appeal of dent-repair coverage Donna Harris dharris@crain.com Vehicle loan delinquencies rise from 2007 NEW YORK — Delinquency rates on prime and subprime vehicle loans have risen over the past year, according to Fitch Ratings. Last month, the rating agency said, 0.63 percent of prime auto loans were past due by 60 days or more — a 16.0 percent drop from February 2008 but 34.0 percent higher than in March 2007. Of subprime loans, 2.93 percent were delinquent by 60 days or more in March — a 22.0 percent lower rate than in February but 33.0 percent higher than March 2007. For more information please visit www.geaws.com or call 800-828-1392. Commercial banking products and services are provided by Wachovia Bank, N.A., Member FDIC and Equal Credit Opportunity Lender. Wachovia Dealer Services, Inc., is a wholly owned subsidiary of Wachovia Bank, N.A. GE Money - Warranty Services is a subsidiary of Wachovia Corporation. ©2008 Wachovia Corporation Dent Wizard, which sells dent-andding repair coverage to auto owners, wants to expand sales of the product beyond its traditional luxury-vehicle customer base. So the St. Louis company has formed marketing alliances with two vendors to offer its Ding Shield service plan as a package with other aftermarket products. The partners are PermaPlate, which sells fabric and paint protection, and Sonsio, which provides coverage of road hazards to tires and wheels. The companies introduced their Assurance package in February at the National Automobile Dealers Association’s convention in San Francisco. The companies say bundling the products can help auto dealerships sell more contracts. “About 70 percent of the 820 dealerships that sell Ding Shield contracts are high-line dealers,” says Lindsey Bird, vice president of finance and insurance for Dent Wizard. “But we’ve started to get more traction from nonluxury dealerships since we introduced the combination program.” Bird says Ding Shield dealers sell Title committee created WASHINGTON — The National Title Solutions Forum has merged into the American Financial Services Association. The forum, which seeks to improve vehicle titling, becomes a committee within the association’s vehicle finance division. The forum was created in 2005 as a nonprofit organization. It has more than 35 members, including vendors, credit unions and banks. The American Financial Services Association is a national trade association for the consumer credit industry. It has 350 members. Owners of luxury vehicles have been the primary buyers of dent removal. about 2,000 contracts each month. The package sales could help the company boost that monthly volume to 2,500 contracts this year, he predicts. Dealerships can offer three levels of coverage: Mainline, Highline or Ultra Highline, Contract terms are for three, four or five years. Ding Shield coverage typically sells separately for $400 to $600, Bird says. The Assurance package retails for $900 to $1,500, depending on the term of the contract and level of coverage. Mike Davis is finance manager of Loeber Motors, a Mercedes-Benz, Porsche and Smart dealer in Chicago. He says 15 percent of the dealership’s finance customers buy Ding Shield. “We have not sold it as part of a package,” Davis says, “but we are considering it. That might add value.”c http://www.geaws.com http://www.geaws.com

Table of Contents Feed for the Digital Edition of Automotive News - April 14, 2008

Dealership jobs hit 8-year low GM is the wild card in axle war Service contracts: Hard-sell tactics plague dealers, customers TV auto ads shift to online, mobile venues At seminar, marketing execs to discuss new ways to reach customers Better get to know the Nano — it's set to change the world Veteran Detroit 3 dealer: 'The future is quite bleak' Poll: Dealers scrounge for cuts Locals closer to GM strike Scion xB price rises $100 Valeo CEO: No breakup Tata Nano changes low-cost development Hyundai tailors TV, Web ads for Hispanics Study: Ads focused on vehicle qualities won on Oscar night Post-Celine, Chrysler ad guru seeks right note Chrysler's quest for quality lured Nissan exec Betts Search starts for in-vehicle alcohol detectors After S. Calif. success, Honda may fund ad groups Computer images gain ground in TV ads Web TV offers automakers new ad, sales options BMW: X6 will bring brand new buyers Diana T. Kurylko Chrysler fields 'dream' ads Nissan seeks dealerships for trucks Honda will export Alabama-built Pilots to Russia Toyota, Subaru work on 'affordable' sports car Cadillac's ad agency savors the sweet life Some stores may not sell Chrysler hybrids GM hybrids get off to a slow start in first quarter Lexus adds a personal touch to pamper owners, prospects What they're buying — and what they're not The age of fuel innovation is here Approaches to r&d vary Nano brings credibility to Indian engineering Honda must revisit online dealer sales of service pacts Chrysler got it right Mandates, markets and buyer demand For Detroit, some things never change Buick: As Chicago goes, so goes the nation Auto industry has lost a good man Accentuate the positive Ex-Porsche CEO: Cayenne spiced up sales Green programs shape battle for engineering grads Tata rewards suppliers with ties to India Bill aims to set minimum sound levels for vehicles Industry lobbyists step up emissions fight Seeking wider market, Nissan equips sports car for snow New chief of SAE has D.C. skills China and GM's answer to Nano — sort of $2,500 car is Ratan Tata's personal quest NADA offers training in risky credit Donna Harris Deal's goal: Widen appeal of dent-repair coverage Title committee created Vehicle loan delinquencies rise from 2007 Suppliers to the 2009 Tata Nano Odd China combo: Fuel sippers, SUVs Pontiac Vibe: A sporty hauler with Toyota touches Dealers J.D. Power III named tracking company partner Toyota will buy back rusted Tacomas 100,000 Flex sales a year? Farley: 'Absolutely' Ford wants word-of-mouth campaign Small suppliers feel the pain of axle strike Plastech tries to sell 2 units TRW plant will build Ford gears Toyota plans 2nd India plant Dodge launch goes digital Toyota, GM recall 660,000 vehicles for window flaws Lear announces white-collar layoffs March output drops 23.6% New Ford ads tout quality improvements Tata dealers must be handy with a wrench Can the Greens slow down the autobahn? Racy scandal for race exec Echoes from the grave: Olds still has cachet The Final Say

Automotive News - April 14, 2008

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