Issue link: http://read.dmtmag.com/i/679587
Think of a time when you felt uncomfort- able and had that feeling eliminated simply by a laugh. A few years back I trav- elled to South Africa with my family. The dominant language is Afrikaans; how- ever, many speak English. The family we were visiting spoke English. Upon our arrival, they were ready for all of our adventures. One night I asked our hosts if they had bears in their country. She replied by saying, yes, "doctors, lawyers, accountants and others have them." Later, knowing she had to have misunderstood me, I asked her again. "Oh, I thought you said au pairs," she said. As strange as it sounds, that is one of my most favorite memories of our trip to South Africa. Beatrice was nervous to meet us because she did not speak English well. The bear incident broke her of her trepidations. Many of your customers enter your deal- ership with trepidation — not hesitation in what they want to buy, but in the buying process. The buying process is not always pleasant. Some customers communicate well, and others do not. It is your responsi- bility to get to know your customer; figure out how they communicate, what they do for a living, what they enjoy doing. Learn as much about your customer as possible. This will help create a smoother process and help with financing. When the time does come, running a credit check on your customer is a must. Most people do not realize that when they buy a unit, bike, boat, car or RV, their credit is being run two times. The first time by you, the second by the financing com- pany. How many financing companies does your dealership use? There are many dealerships that have only one financing source. Are you one of them? Dealerships speak one language, while their customers speak another. Selling units and financing them can be tough, if not handled correctly, and the funding resources are not there. According to a Jan. 29, 2015, article in The Washington Post, 56 percent of consum- ers have subprime credit. Having options for financing is a must. Being creative starts with having more than one financing company. As you review the data in this table, you are probably thinking to yourself, big deal there is only a $27 difference between hav- ing one financing company vs. having two or three. That is correct. However, if you were to take the $27 and multiply it by the 10,240 financed deals, that total equals $276,480. The potential for each of the 124 dealers to have additional income of over $2,200. That may not seem like much money to a large dealership but to a smaller one that is a lot of money. Let's look at this another way. Looking back at the statistic that 56 percent of consum- ers have subprime credit. If you as a dealership have only one financing company, and I am one of the 56 percent, you are probably turn- ing many customers away. Dealers in Group 1 average 83 deals, while dealers in Group 2 average 148 deals. More math, I know you are loving this. Let's assume your dealership is in Group 1. You average 83 deals a year, or seven deals per month. What if you were to sell one more unit each month? That would be 12 addi- tional units per year. 12 x ($332.08 + $27) = $4,311.36. What if you were to sell two more units each month — double the $4,311.36 = $8,622.72. Getting better. Group 3 is selling an average of 307 units each. Large volume, multi-line deal- ers. They have a lot of lenders, which might be hurting them. With the average finance income over $100 less than the other groups, maybe they are not using their own financing sources as much as they should. Maybe they need to renegotiate with their lenders, so they can see better profitability. Volume is great, but it is the margins that will keep the business open. Interestingly enough, having too many lien holders can really cause a drop in financing income. Having four or more financing com- panies takes away $127.43. If you were to mul- tiply that by the 130,619 financed deals, the total additional income would be $16,644.779. That comes out to $39,164.00 in additional income per year per dealership. Here are some tips: Have two or three financing companies Research the companies before using them Get to know your lenders Know your customer, not just their credit score Be creative in financing Do not just give up on the customer; make it happen Understand your customers and all of their financing options. PSB Paula Crosbie is the training development manager with CDK Global Recreation. She has been training and consulting with powersports dealers for 14 years. She can be reached at paula.crosbie@cdk.com or 801/519-7570. www.PowersportsBusiness.com SOLUTIONS Powersports Business • May 23, 2016 • 25 Are you using more than one retail lending option? FOLLOW ME PAULA CROSBIE One 1 1 124 10,240 $3,400,463 $332.08 Two 2 3 191 28,220 $10,131,663 $359.02 Three 4 20 425 130,619 $30,380,964 $232.59 GROUP LIENHOLDER COUNT FROM LIENHOLDER COUNT TO DEALER COUNT DEAL COUNT TOTAL FINANCING AVERAGE FINANCING INCOME CDK Global Recreation, Inc. data for 2015