The times have changed for Canadian car dealerships: the generational switch in car buying, the impact of technology in the auto industry and the heightened percentage of subprime car buyers.
According to the Bank of Canada, approximately 25 per cent of Canadian car buyers are subprime, so catering to credit-challenged customers at your dealership seems like a no-brainer. However, not all dealerships focus on subprime, but that doesn’t mean that you should neglect having a subprime department. Here’s why:
1. Subprime helps move aged inventory
Having aged inventory is one of the biggest problems that a dealership can have. Once your inventory hits 90-days, there's a good chance that you'll end up losing money just to move the iron. Having a subprime department will give you access to the customers who are interested in your older units, which will help you keep your used inventory moving.
2. Your GPPV will rise
Internet pricing has been impacting front-end profits on used vehicle sales since the mid-2000’s. However, a subprime department at your dealership will give you the ability to work with customers based on financing as opposed to bringing in customers based on competitive market pricing. This means you'll be able to bring up your GPPV.
3. Your sales talent will stick around
The number one reason why a dealership loses their top sales people is due to income. With internet pricing at an all-time low and the number of sales people receiving flat commissions at an all-time high, it's no wonder why top sales people are getting lured away. Having a subprime department can help keep your top performers happy while ensuring that they aren't looking for greener pastures.
4. You won’t miss manufacturer targets
New car franchises are always chasing manufacturer targets because there is so much revenue at stake. A subprime customer usually comes in for something that they can’t qualify for, and you can steer them towards the most inexpensive, brand-new vehicle you have. Subprime banks offer sub-vented rates on new vehicles to make it easy to fit in approvals. Subprime departments help dealerships get those extra new car sales, which could make the difference between hitting or missing your manufacturer bonus.
Does your dealership have a subprime department? Click here to learn how Canada Drives can help you today!