Automotive News - June 9, 2008 - (Page 24)

24 • JUNE 9, 2008 finance & insurance Dealers: Be open about credit problems Bernadine Williams bwilliams@crain.com What does a dealer do when a customer wants to buy a Lincoln Navigator but can get financing only for a used Ford Focus? As they face a growing number of customers with credit problems, auto dealers across the nation are learning to handle such “special finance” buyers with finesse. Dealers say most customers know they have marginal or poor credit — and are candid about their sketchy credit histories — when they walk into the showroom. “Some people are confused when they come in, because they know they have credit issues,” says Jim Candela, financial service manager at Dean Sellers Ford in suburban Detroit. “The first thing they assume is that it would be easier to get a used car. They don’t understand what credit is all about.” Dean Sellers, the dealership’s general sales manager, says it is easier to get a credit-challenged customer approved to lease a new vehicle than to buy a used one, because the risk to lienholders is lower. Paragon Honda’s Ashley Antonio: “We call a certified vehicle ‘nearly new’ or ‘hardly used.’ ” Today’s special Here are tips from dealers on working with customers with special finance needs. Discuss financial information privately, not on the showroom floor. Encourage customers to be candid about blemishes on their credit histories. Give customers options, but don’t move them to a different vehicle without discussing it fully. Take time to educate customers about how to improve their credit. Explain the thinking of the dealership and its lenders about financing customers with tarnished credit. Remind customers with financial problems that their situation is common in the current economy. barrassment of credit-challenged customers by reminding them: “You are not alone.” He says he seeks to offer customers options rather than appear to force them into a particular car or truck. Tom Pospisil, president of Lujack Northpark Auto Plaza, a 15-franchise auto mall in Davenport, Iowa, compares special finance deals to a chess game. “You always have to think a couple of moves ahead,” he says. “You have to think on your feet. Our sales managers work with the finance managers so they can structure the deal that is exceptional for the customer.” When dealers have to tell customers they have not been approved for financing of the vehicles they want, they say that conversation is better handled in a private setting rather than on the showroom floor. “Don’t leave any gray areas with customers,” advises Larry Garrison, general sales manager of a Subaru dealership in Grand Junction, Colo. “Just be upfront.” c Arlena Sawyers contributed to this report Some can’t be helped Sometimes, though, dealers’ hands are tied. “We run into customers with bankruptcies or foreclosures,” says Tim Flanigan, general manager of North Brothers Ford in suburban Detroit. “If they are open court cases, we can’t help them because the courts will not let them incur any more debt.” A growing number of customers are upside-down, owing more on a car or truck than it is worth as a trade-in. But they still may desire a newer, more stylish model. “Sometimes people have payments in mind that may be an unrealistic expectation,” says John Sunderland, a Chevrolet dealer in Jerseyville, Ill., a suburb of St. Louis. “Others realize they have to spend a little more to get the car they want.” MICHAEL SETO Brian Benstock, general manager of Paragon Honda in New York, works on a deal. Despite customers’ credit challenges, Paragon sold 1,542 certified used vehicles last year, more than any other Honda dealership in the U.S. Sue Mallino, a spokeswoman for GMAC Financial Services. “We don’t want to get the customer into a situation where they can’t handle the loan. We are in the business to support our dealers.” If customers can’t get financing for a new vehicle, a factory-certified used car or truck can be an attractive alternative, dealers say. “Maybe a customer can’t afford a new car, or it is hard for them to get approved to lease a vehicle,” said Ashley Antonio, director of marketing and purchasing at Paragon Honda in the New York borough of Queens. “The certified program may become an option for them.” At least 10 percent of Paragon’s customers enter the dealership planning to buy new vehicles but shift to certified used vehicles, Antonio estimates. Last year, the dealership sold 1,542 certified Honda cars and trucks — more than any other Honda dealership in the United States. “It allows for flexibility, not just for the special finance customer but for anyone going through some sort of hard time,” Antonio told Automotive News. “We call a certified vehicle ‘nearly new’ or ‘hardly used.’ Customers know it is a steppingstone. The car will tide them over for the next two or three years until times are better.” Root of the problem The nation’s economic climate is aggravating credit problems. Gasoline prices are climbing. Sales of new homes have plummeted. As the discretionary income of U.S. families is shrinking, personal bankruptcies and foreclosures are rising. As a consequence, vehicle lending agencies are making credit tougher to get. “We have tightened our underwriting standards over the last year, given the economic environment,” says Words to sell by Dealers say salespeople and finance and insurance employees need to show sensitivity when they discuss a customer’s financial troubles. Sellers says he tries to ease the em- Finance venture has $1 billion NEW YORK — Sixth Gear Solutions Corp., a new independent auto finance company, says it has entered the market with $1 billion in equity and debt financing commitments. Sixth Gear, of New York, says it will work with auto dealers and consumers to finance new and used vehicles across all credit segments. The co-CEOs of the new company are Michael Barrington, a former CEO of AmeriCredit Corp.; and Norman Buchan, a former president of Chase Auto Finance. Sixth Gear’s capitalization encompasses more than $250 million in equity commitments from a group of private investors led by Warburg Pincus LLC, a private equity firm, and $750 million in long- term debt commitments. Chase Auto hires 4 bankers GARDEN CITY, N.Y. — Chase Auto Finance has hired four bankers to work with franchised dealers in its Northeast, mid-Atlantic and New York markets. They are: Jennifer Lozzio, a former dealer account manager with Ford Credit. She works with dealers in Massachusetts, Rhode Island and Vermont. Jerry Henderson, a former manager with SunTrust Banks Inc. He works with dealers in Maryland, Virginia and Washington, D.C. Kevin Oury, a former manager with Primus Financial Services. He works with dealers in New York state. Chris Brown, a former dealer development representative for Fifth Third Bank. He works with dealers in the New York metropolitan area. Chase Auto Finance, of Garden City, is the largest bank provider of auto financing in the United States.

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Automotive News - June 9, 2008 Hummer Bummer: A death sentence? New F-150, Ram in peril as big pickups collapse Japanese can add small cars faster than Detroit 3 Battery shortage hurts hybrid sales 2 key overseas staffers move to Automotive News in the U.S. Toyota may add Camry to Indiana truck plant Mazda extends warranty on RX-8 rotary engine CAW to consider strike against GM Porsche's new 911 GM plans big ad push for its big hybrid SUVs Chrysler cuts fees to outside service firms 5% Toyota considering 'Made in U.S.A.' Prius Congress, Bush square off over rollover suits GM finance whiz changed the industry GM's big SUVs may get lighter Harbour Report: Chrysler, Toyota most efficient Spring intros can be dicey Ford spends big on MKS ad launch Media buyer for GM cuts 25 jobs Sources: GM poised to buy Cobasys GM dealer program rebounds Mazda updates the RX-8 New Maxima is a tad smaller — but more buff Congress must balance safety, mpg concerns Is the gas crisis real or just temporary? What about poor driving? There's no substitute for safe driving Lack of regulation foils safety laws Sticker law cleaned up a pricing mess Lithia to sell outlets, delay used-car stores Nielsen likes to step off the beaten path GM union local strives to pull parts jobs in-house JCI will open Ga. plant to supply Kia Dealers: Be open about credit problems Finance venture has $1 billion Picture this Personnel Dealers BMW purchasing chief 'looking for waste' Nissan Mexicana gets new chief Ford Flex output begins Hyundai Genesis: $33,000 Ford buys more from minorities Audi's U.S. chief: Brand can handle high gas prices May in Detroit: Scary, not merry Infiniti FX starts at $41,765 Lincoln: 8,600 MKS orders Plastics supplier sees growth Jenkins gets Aston Martin post Smith is CEO of Jaguar, Land Rover Kremlin watching, Chrysler style Toyota breathing down GM's neck on monthly U.S. sales PR chief Steve Harris: At GM through '08 Small-car surge is a replay of 1979 Auto execs would benefit from some store experience Mini's mixed results: Sales soar, quality stumbles Nice car — so what's the ppmpg? Volt's good PR got struck by lightning

Automotive News - June 9, 2008

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