Finance and Insurance - The Profit Center I would like to make myself clear on a few items of interest before I get too deep into the sales processes at any dealership, including: automobile, recreational vehicles, boats, motorcycle, and even furniture or other big ticket items. A business has to turn a fair profit in order to stay in business. I believe that they should make this profit and use it to pay better quality employees a premium wage in order to serve you better. The financial strengths or weaknesses of any business can definitely have a dramatic effect on your customer service and satisfaction. I do not, in any shape or form, wish to hurt a dealerships profitability, as it is essential for his survival. I merely want to advise people how to negotiate a little better in order to make the profit center more balanced. Let's get right down to this! Every dealership has a finance and insurance department. This department is a huge profit center in any dealership. In some cases, it earns more money than the sale of the automobile itself. Profits are made from many things that most buyers do not understand. You as a consumer should understand the "flow" of the sales process to understand the profit centers that are ahead of you. Most negotiating from the consumer seems to stop after the original price is negotiated and agreed upon. Let's examine just a small portion of what leads up to that point. The first thing that every consumer should understand is that when you go to a dealership several things come into play. One of the most important things that I could point out to you is that you are dealing with a business that has been trained to get the most amount of money from you as they can. They are trained and they practice these tactics everyday, day after day, week after week, month after month, and year after year. Let me point out a couple of important facts that I have said in this paragraph. First, you'll notice that I said a dealership and not a salesman and secondly, I emphasized times of day after day, week after week, etc. etc. This was done to let you know that the salesman is working very closely with the sales managers in order to make as much money as he can. Your interests are really not their objective in most cases. One tactic that is used heavily in the business is that the salesman says he is new to the business. This may be true or not, however; keep in mind that he does not work alone. He is working with store management, who gives him advice on what to say and when to say it. These guys or gals are very well trained on how to overcome every objection that you may have to buying from them. They have been trained in the psychology of the buyer and how to tell what your "hot buttons" are. They listen to things in your conversation that you may say to one another as well as to the salesman. They are trained to tell their desk managers everything that you say and then the desk manager is trained to tell the salesman exactly what and how to answer you. A seasoned salesman does not need as much advice from his desk and may negotiate a little more with you directly without going back and forth. The process of negotiation begins the moment that you walk into the front door or step foot out of your car and begin to look at vehicles. Different stores display inventory in different ways. This is done for crowd control or more commonly known as "up control". Control is the first step in negotiating with a customer. Ever who asks the questions controls the situation. Let me give you an example: A salesman walks up to you and says "Welcome to ABC motors, my name is Joe, and what is yours?" The salesman has just asked the first question- you answer "My name is George." He then asks you what you are looking for today, or; the famous "Can I help You?" As you can see, step after step, question after question, he leads you down a path that he is trained to do. Many times a well trained salesperson will not answer your questions directly. In some cases, they only respond to questions with other questions in order to avert the loss of control. An example of this could be something like you asking the salesman if he has this same car with an automatic rather than a stick shift. Two responses could come back to you. One would be yes or no, the other could very well be something along the lines of: 'don't you know how to drive a stick shift?" In the second response the salesman gained more information from you in order to close you. Closing means to overcome every objection and give your customer no way out other than where do I sign. The art of selling truly is a science of well scripted roll playing and rehearsal. We have established that the negotiating process begins with a series of questions. These questions serve as two main elements of the sales process. First and foremost is to establish rapport and control. The more information that you are willing to share with you salesman in the first few minutes gives him a greater control of the sales process. He has gathered mental notes on our ability to purchase such as whether you have a trade in or not, if you have a down payment, how much can you afford, are you the only decision maker (is there a spouse?), how is your credit, or do you have a payoff on your trade in? These are one of many pieces of information that they collect immediately. Secondly, this information is used to begin a conversation with store management about who the salesman is with, what are they looking for, and what is their ability to purchase. Generally, a sales manager then directs the sales process from his seat in the "tower". A seat that generally overlooks the sales floor or the sales lot. He is kind of like a conductor of an orchestra, seeing all, and hearing all. I cannot describe the entire sales process with you as this varies from dealer to dealer, however; the basic principals of the sale do not vary too much. Most dealerships get started after a demo or test drive. Usually a salesman gets a sheet of paper out that is called a four square. The four square is normally used to find the customer's "hot points". The four corners of the sheet have the following items addressed, not necessarily in this order. Number one is sales price, number two is trade value, number three is down payment, and number four is monthly payments. The idea here is to reduce three out of the four items and focus on YOUR hot button. Every person settles in on something different. The idea for the salesman is to get you to focus and commit to one or two of the hot buttons without even addressing the other two or three items. When you do settle in on one of the items on the four square, the process of closing you becomes much easier. One thing to keep in mind is that all four items are usually negotiable and are usually submitted to you the first time in a manner as to maximize the profit that the dealer earns on the deal. Usually the MSRP is listed unless there is a sales price that is advertised (in may cases the vehicle is advertised, but; you are not aware). The trade value is usually first submitted to you as wholesale value. Most dealers request 25-33% down payment. Most monthly payments are inflated using maximum rate. What this all boils down to is that the price is usually always negotiable, the trade in is definitely negotiable, the down payment may be what you choose, and the monthly payment and interest rates are most certainly negotiable. If you do your homework prior to a dealership visit you can go into the negotiation process better armed. You still need to keep two things in mind through this process. The first item is that you are dealing with a sales TEAM that is usually highly skilled and money motivated. The more you pay the more they earn. The second item to remember is that you may have done your homework and think that you are getting a great deal and the dealer is still making a lot of money. The latter part of this statement goes back to the fact that it is essential for a dealer to make a "fair" profit in order to serve you better. Once your negotiations are somewhat settled, you are then taken to the business or finance department to finalize your paperwork. Keep in mind that this too is another negotiating process. In fact, the finance manager is usually one of the top trained sales associates that definitely knows all the ins and outs of maximizing the dealerships profit. It is in the finance department that many dealers actually earn more than they earned by selling the car, boat, RV, or other large ticket item to you. We will break these profit centers down for you and enlighten you as to how the process usually works. Remember that finance people are more often than not a superior skilled negotiator that is still representing the dealership. It may seem that he or she has your best interests at heart, but; they are still profit centered. The real problem with finance departments are that the average consumer has just put his or her guard down. They have just negotiated hard for what is assumed to be a good deal. They have taken this deal at full faced value and assume that all negotiations are done. The average consumer doesn't even have an understanding of finances or how the finance department functions. The average consumer nearly "lays down" for anything that the finance manager says. The interest rate is one of the largest profit centers in the finance department. For example, the dealership buys the interest rate from the bank the same way that he buys the car from the manufacturer. He may only have to pay 6% to the bank for a $25,000 loan. He can then charge you 8% for that same $25,000. The dealer is paid on the difference. If this is a five year loan that amount could very well be $2,000. So the dealer makes an additional $2,000 profit on the sale when the bank funds the loan. This is called a rate spread or "reserves". In mortgages, this is disclosed at time of closing on the HUD-1 statement as Yield Spread Premium. This may also be disclosed on the Good Faith Estimate or GFE. You can see why it becomes important to understand bank rates and financing. Many finance managers use a menu to sell aftermarket products to you. This process is very similar to the four square process that I discussed in the beginning. There are usually items like gap insurance, extended service contracts, paint and fabric guard, as well as many other after market products available from this dealer. The menu again is usually stacked up to be presented to the consumer in a way that the dealer maximizes his profitability if you take the best plan available. The presentation is usually given in a manner in which the dealer wins no matter what options are chosen. With the additional items being pitched to you at closing, your mind becomes less entrenched on the rates and terms and your focus then turns to the after market products. Each aftermarket item can very well make the dealer up to 300-400% over what he pays for these items. Gap coverage for example may cost the dealer $195.00 and is sold to the consumer for $895.00. The $700.00 is pure profit to the dealer and is very rarely negotiated down during this process. The service contract may only cost a dealer $650.00 and is being sold for $2000.00. The difference in these items are pure profit to the dealer. You see, if you only paid $995.00 for the same contract, the dealer still earns $345.00 profit from you and you still have the same coverage that you would have had if you had paid the $2000.00. The same is true for the gap coverage. You are covered the same if you paid $395.00 or $895.00 if the dealers costs are only $195.00. The only difference is the amount of profit that you paid to the dealer. Another huge profit center is paint and fabric protector. In most cases the costs to apply the product are minimal (around $125.00 on average). In many cases the dealer charges you $1200-$1800 for this paint and fabric guard. As you can see, these products sold in the finance department are huge profit centers and are negotiable. I also have to recommend the value of most all products sold in a finance department. It is in your best interest to get the best coverage possible at the best price possible. Always remember this: The dealer has to make a fair profit to stay in business. It just doesn't have to be all out of your pocket.
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5 Jenis Pakaian Ni Akan Buat Anda Nampak Lebih Kurus!



















Introduction To Special Finance Have you had trouble sleeping lately? Been watching any "trash TV" or late night infomercials? Then, without a doubt, you've been inundated with "Bad Credit Mania". It seems like every time you turn your TV on, there's somebody telling you that, regardless of how bad your credit may be, you can get approved for a loan, with no money down, for that beautiful high line import sports car, or how about that beautiful luxury SUV. And payments that are so low, you hardly have made them. Just come on in and they'll send you home in the dream vehicle of your choice with no hassle. If you're an automobile dealer, or manager, you wonder how people can actually believe all this nonsense. No money down financing for bad credit customers is just another fantasy. But the dealership down the street is constantly flooded with ups, while your guys stand around drinking your coffee and littering your used car lot with their cigarette butts. Meanwhile, that other dealership seems to be busy all day and night...why, they still have ups on the lot when you're getting ready to close. If this sounds like your dealership, then you probably never heard of Special Finance. Maybe you have, but you've also heard all the horror stories that go along with it. The "skuzzy "customers, their trashed trade-ins, bad down payment checks, and all the lies they tell to try and get approved for a loan. And the banks, oh the banks you have to deal with for these people. They take forever to fund a deal, if indeed the deal gets funded at all. Seems like the only guy to make any money on these deals is your "repo-man," if he can find these people and get your car back! Why would anyone in their right mind want to subject themselves to this kind of aggravation? But what if I could show you that, by ignoring these customers, you effectively eliminate up to half the customers within a 30 mile radius of your dealership. Imagine that over 50% of the people living around your dealership suddenly pack up and move overnight. Would you even have built it there in the first place? Probably not, but since you're already there, why would you even think of excluding these folks from your dealership? Contrary to what you might think, this aspect of the business can be both profitable and clean, and these customers prove themselves time and again to be some of your most loyal customers ever. They regard you and your dealership as a friend who helped them out during some tough times, and will refer friends and family with great vigor, especially those in the same circumstances. They will service their vehicles at your service department, and will take advantage of your body shop if you have one. They will come back time and again and will continue to do business with your dealership for as long as you'll let them. They are without doubt the best word of mouth advertising you can get! So, who is your store in the grand scheme of dealerships? Do you openly embrace sub-prime customers, and make this business your main objective? Do your people run for cover when a special finance customer hits the lot, knowing that your F&I department has no interest in these customers. Do you dabble on the outskirts of special finance, doing only those deals which require little effort? Research shows that, when it comes to Sub-prime or Special Finance (SFI), dealerships traditionally fall in to on of four categories. We like to call it "The Dealership Four Square": The Bold Dealership is just that. He's known as the special finance king. All his advertising dollars go towards the sub prime market, and you can pretty well surmise that anyone driving one of his cars probably has a credit problem. The dealership caters to sub-prime business, and as such, good credit customers may be reluctant to go there. If a 750 beacon walks in the door, he probably made a wrong turn! The Enthusiastic Dealership is willing to do Special Finance, but is typically not ready There is no pro-active marketing for Special Finance , thus the limited business is generated from , lot traffic," Get ME Dones" and primary F&I turn downs. The F& I Turndowns are typical when the Sales Desk has a strong deal on a vehicle and is delivered to the customer on the Sales Desk's "OK to SPOT". These deals have been shopped to every primary lender with no success. It is at this point (often two days later) that the Special Finance Manager gets the deal and is left with the task of salvaging a deal that was never handled properly from the beginning. These stores see the potential for sub-prime but can't figure out how the store down the street can deliver all their turn downs. They tend to take only the easy deals, and those that require some work usually get let out after the initial round of rejections. The Necessary Dealership does Special Finance, but not consciously. The F&I manager knows something about sub-prime, and can get a deal approved with some effort. His pay plan typically does not compensate him sub-prime, so he pays little attention to it. His attitude regarding special finance is that these customers don't deserve a loan, but when he gets them approved, he is the BEST! This dealership is concerned with the image that Sub Prime can conjure up. This dealership is not interested in the being known as a "Sub Prime Dealer", and does not want to jeopardize his current customer relationships. This dealer is only interested in Sub prime if it could be done with only the banker knowing! The Unwilling Dealership has no desire to be in the sub-prime business. This store is usually one of the top dealerships in the market, selling hundreds of vehicles a month. Most of his financing goes through his captive source, and they tend to buy so deep, many of what would be considered sub-prime at another store get done as primary in this store. Management's philosophy regarding sub-prime is that it's simply not worth the headaches, and the few extra deals a month do not make up for the previous nightmares that this store may have experienced. What category does your dealership fall into? DOES MY DEALERSHIP NEED A SPECIAL FINANCE DEPARTMENT? You may already be in the Special Finance business and don't even know it. If your F&I department is that good, you don't hear a lot of complaining about the deal that couldn't get bought. While it's highly unlikely that your staff closes every customer that walks on your lot, odds are that you are probably selling some of these sub-prime customers to your primary sources. But we live in a world of maximums and super sizes, so why not have both on these deals? We know that over 50% of the population surrounding your dealership has some kind of credit impairment. Why would you want to exclude that many potential buyers from your dealership? Even if you're a mega-dealer doing hundreds of units a month, wouldn't it be nice to have another 25 to 50 sales on top of what your already doing? Keep in mind that we're not talking about abandoning the business you already have, but expanding it. Remember, special finance customers aren't just the ones who sit home and watch Jerry Springer all day, trying to figure out where they can cash their next welfare or unemployment check. They may be doctors or lawyers or any other professional who have just had a bit of bad luck. As the saying goes, "Bad things happen to good people." These customers want to do business with a professional, not some fly-by-night operation they pass along the way. Additionally, these customers will provide additional business for your parts, service and body shop. And the referral business they can bring could be well worth it within the long run. Remember, when everyone else is saying how bad business is, the quality of the customers coming into your dealership hasn't changed, it's the circumstances these people face that is different 1.The subprime mortgage crisis effects the your subprime customers the most!. Many of them are "victims" of these subprime mortgage loans and are unsure of what their mortgage payment will be when their rate goes up! 2.These same people that were banking on the equity in their home continuing to rise and many took out equity lines or second mortgages and now don't have the equity left to support these loans. 3.The housing market is down, and many of the people who work in it are feeling the pain. The construction worker, carpenter, framer, electrician, plumber, etc. all were riding high when the new housing market was in full swing. Now, many of them, if they are still employed, have gone from 70-80 hour weeks making big overtime to 40 or less hours a week with no overtime. Income is way off, so many of them don't have down payments available. Remind yourself that now is when you can really shine. Most finance guys would walk away from this market because it's too hard to do the business. Don't be one of them.




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