Conventional wisdom is that you'll find about as many subprime car shoppers online as you'll find convertibles in Alaska.
Not so, says Greg Goebel, a former dealer and current finance & insurance sales trainer, specializing in subprime.
“Let me tell you, they're there, whether they're online at home or work,” he says of people with checkered credit looking online for vehicle deals, mainly on used cars.
It's a big market, but largely ignored by franchised dealers more interested in selling new cars, says Gobel.
One reason few stores do subprime deals online is that most Internet sales managers know little about structuring and working special finance deals.
“The biggest difference is the need for immediate and continued follow-up,” says Goebel, vice president of Leedom and Associates.
That, and getting the pre-qualified subprime buyer into the dealership.
Special financing on the Internet reflects changing times. In the Internet's early years, most users were affluent, techies or both. Now persons of various socio-economic levels are connected.
A lot of them are looking for auto loans. They're using the Internet, not necessarily for the traditional reasons of speed and convenience, but to avoid the embarrassments that people with spotty credit histories encounter when trying to get loans, says Goebel.
“They are people who don't want to be told ‘no’ in person or on the phone,” he says.
Some hopeless cases must be told no. Others, whose credit future looks better than the past, can often find a lender willing to finance a car at an interest rate higher than prime.
If the rich really are different, so too are subprime customers, according to Goebel. He's done 11,000 special finance dealers over 12 years. “We've learned what to do and what not to do.”
Learned most is that you're selling financing more than cars. In a typical good-credit deal, the customer selects a vehicle, then arranges financing. It's the reverse in a special finance deal: the customer gets a subprime loan, then picks a vehicle priced within credit limits.
Subprime vehicle shoppers do less research on the Internet and shop fewer stores.
“They'll usually stop shopping when they find credit,” says Goebel.
At some point the Internet subprime shopper must get off line and into the dealership to consummate the deal.
“Once in the dealership, the sales process is the same as for any special finance customer,” he says. “The Internet is a tool to get the person into the dealership.”
Goebel says that ideally the dealership should respond to a subprime shopper's email within an hour, collect credit data for the loan application and then telephone to schedule an appointment at the dealership.
There's a 6-3-2-1 ratio with typical subprime customers. That mean given six leads, three usually make appointments, two show up and one ends up buying.
Goebel says that with the Internet customers, it's usually 4-2-2-1. Of four leads, two schedule appointments, two keep them and one ultimately buys.
“The appointment-setting stage is usually where it breaks down,” he says. “Call their homes. If they're not there, call their offices. The key is to make that appointment with the subprime customer who's been qualified.”
He recommends keeping calls upbeat, simple and non-confrontational. Here's what he says to do on the phone:
Go over the information submitted to make sure it's right.
Be warm. “Get them to like you and get them in a good mindset.”
Urge them to bring in pay stubs, utility bills and other credit “stipulations.”
Avoid talking about specific cars in stock. Here, financing overrides vehicle preferences.
Avoid or deflect questions about interest rates and down payments.
Basically tell them: “I want you to come in and select a car.”
Use emails to remind them of their appointments and remind them to bring in the credit stipulations.
How long does a special finance deal take?
Goebel says about 72 hours if there's a thorough credit history and the dealership's credit interviewer is competent. He recommends hiring bank credit managers who know the game and know how to talk to finance people.