Traditional subprime vehicle buyers shop for basic transportation, not the car of their dreams. New arrivals to subprime must adjust to that, abandoning or at least shelving aspirational buying habits from better times.
Dealers need a plan centered on proper inventory offerings if they want a chunk of special-financing business, says subprime consultant Rob Hagen says. “The nameplate on the car doesn't matter to subprime customers. They may want a Ford Expedition, but what they need is transportation.”
However, dealers shouldn't assume the worst car on the lot is just what the doctor ordered for someone who is financially hurting.
“A special-finance car should be big enough to fit a family, because most subprime people have kids,” Hagen says. “Ideally, you want to show them cars with eye appeal.”
Offer some equipment, he says. “If you give them power windows and locks, they are thrilled. If you give them a CD player, you're their hero. But don't ask if they want something like a sunroof; you're just opening yourself up for problems.”
It's a win-win if a dealer can put a subprime customer in an aging vehicle that's overstaying its welcome on the lot, Hagen says.
He tells dealers to learn as much as they can about a subprime customer's credit woes.
“Find out right away,” he says. “If you do, you can usually overcome the obstacles.” If lenders discover unpleasant information on their own after the loan application is forwarded to them, “it's usually too late.”
Dealers also should put subprime customers in a good frame of mind.
“We had nothing to do with them getting into a bad situation but we can help,” Hagen says. “In showing them only select vehicles they qualify for, say, ‘We have limited options, but we have options.’”
If lenders reject a subprime-loan application, dealers should tell customers what they can do to improve their credit health, such as catching up on mortgage payments.
Post turndown, it helps to send the would-be buyers a good-news letter saying, “We can give you a great deal on a $12,000 car if you put down $3,000,” Hagen says. “They may not have the $3,000, but they now have a goal and know what they need to do. This can really work.”