Here’s what I know about Canadian car dealerships: if they’re not devoting resources to subprime, they could very well be missing out on valuable profits. As subprime occupies a growing piece of the Canadian auto pie, dealing with credit-challenged customers at your car dealership is no longer an option – it’s a necessity.
Like any department at a car dealership, specific obstacles will arise with subprime. The key to preparing your dealership for hurdles is understanding how your team can successfully get over them. Here’s how to triumph over initial subprime roadblocks.
1. Don’t Skip the Banks
Some of the biggest mistakes that a car dealership with a subprime department can make is relying solely on big-name banks for financing, and the reason for this is because there aren’t a lot of them. If you want to ensure the best approvals, subprime deals should be shopped to at least 6-7 lenders.
The more subprime lenders your dealership has, the more options you’ll be able to offer the customer and the more likely you’ll be at getting them financed. Subprime customers present a diverse array of financing challenges, so unless you want your profits limited, don’t limit your financing options.
2. Have Enough Inventory
In auto industry terms, inventory translates to options. Every customer, regardless of their credit score, wants their dream ride. However, the reality is only a small per cent of customers will qualify for exactly what they want. Varied inventory, akin to having varied lenders, will give the customer more options.
TIP: Using retired rental vehicles is perfect for a subprime market, and a current year model will get you the lowest rate at the longest term possible. We often see dealerships struggle to capitalize on trades. Instead of using a wholesaler, have your UCM run the vehicle through the shop. Anything dated at 2009 or newer, especially those under 170kms, should be kept if the bill from the shop isn’t too high – these types of vehicles can be used for smaller approvals that would otherwise be wasted.
3. Subprime Staff is Key
Without staff dedicated to your subprime department, deals will likely fall by the wayside, which means money left on the table. Prime finance managers are responsible for maintaining a strong back-end, which means that sometimes subprime focus can be forgotten about.
The biggest key to subprime success is finding a person with the right mix of smarts and dedication to drive your department forward. Just remember: “subprime” is not synonymous with “part-time”.
Click here to learn how myself and the rest of the Canada Drives team can help your dealership today!