Issue link: https://read.dmtmag.com/i/379417
FINANCIAL A salesperson drops a deal folder onto your desk with no explanation or turnover and walks out to grab the next customer. The finance manager quickly looks at the folder, and on the front you see: "CASH DEAL." What should the finance manager do now? A. Check over the deal, go find the cus- tomer, and quickly sign them out so they, too, can work on the next deal B. Check over the deal, verify the infor- mation, prepare a menu and sign out the customer C. Throw the deal in the trash, and wait for the salesperson to come back in the office D. None of the above I would personally choose C, though most dealer principals may not agree with me. To teach the rogue salesperson, who does not follow, or maybe does not understand the sales and finance process, C may be the best answer. Do it once or twice, and the salesper- son will know that he/ she needs to complete all steps in the pro- cess. The intent is not to hurt any custom- ers, if the time gets too long. Obviously the customer needs to be taken care of, and it's already most likely too late for anyone to have a decent chance at sell- ing any optional products or gaining financ- ing for the customer. The true answer is D, "None of the above." Let's go back to the sales and finance pro- cess itself. In the situation above, the salesper- son either accepted the customer's request to pay cash, possibly did not even mention that the dealership has the capability to finance, did not do a proper introduction of finance, did not turnover to finance, or for whatever reason he/she eliminated the finance manager's cus- tomer interview and the ability to double the dealerships profits on the deal. For some dealers, that salesperson is paid a ZERO commission for the deal. For those who allow salespeople to "dump and run," C may be the best answer for the finance manager — throw the deal in the trash and wait for the salesperson to come back. Here is the average profit per vehicle retail for cash deals versus finance deals, based on some dealers I have worked with over the last year: Cash Finance $ Per Vehicle Retail $0-$300 $1,000-$1,800 Clearly, creating a finance deal at least doubles profits on the entire deal. Possible reasons for cash deals: Buyer actually has cash in checking account that is not tied to a home or any other loan (not that likely). Buyer is using a flexible Home Equity Line of Credit to fund his/her checking account (very likely). Buyer has a strong relationship with his/ her credit union or a bank relied on every time for a loan (25 percent of the time). Vehicles are rarely ready when the buyer signs the purchase agreement, so customers have time to shop the best rate. Salespeople are incentivized to get the deal written and move on to the next deal. Salespeople are not incentivized to help create a finance deal. Salespeople don't want to jeopardize their deal by turning it over to finance. Finance staff is not aggressive enough in interviewing every single person before he or she walks into finance or out of the dealership. 10 • September 8, 2014 • Powersports Business www.PowersportsBusiness.com Converting cash customer to financing STOCK MARKET WATCH Stock Price Percent Company Ticker 8/15/14 Change Spy Inc. XSPY $1.38 34.8% Polaris Industries, Inc. PII $147.62 11.2% ARI Network Services, Inc. ARIS $3.09 9.6% Marinemax, Inc. HZO $17.68 8.7% ArvinMeritor ARM $13.57 7.2% TCF Financial Corporation TCB $15.28 -3.8% Carlisle Companies CSL $81.19 -6.1% Bridgestone Corp. ADR BRDCY $17.39 -7.3% Harley-Davidson, Inc. HOG $61.89 -8.0% Universal Technical Institute UTI $11.00 -12.0% POWERSPORTS BUSINESS WINNERS AND LOSERS DEALER FINANCIAL SNAPSHOT JULY 2014 Overall Same Store Sales were up 6.2 percent for 1,437 ADP Lightspeed dealerships in July, with all five U.S. regions reporting an increase from the year-ago month. Each department was up during the month, though parts only saw a 0.7 percent increase as three regions reported decreases. Service had the largest increase, up 8.4 percent over July 2013. Three regions were up more than 9 percent in service, with the South leading the U.S., up 10.5 percent. PARTS SALES 804 dealers were up in parts, while 633 were down. SERVICE SALES In service, 859 dealers were up, and 526 were down. MAJOR UNIT SALES For major units, 728 dealers were up, and 512 were down. NORTHWEST -2.7% Parts Department 5.5% Service Department 3.1% Major Units 2.1% Overall MIDWEST -3.3% Parts Department 5.3% Service Department 4.8% Major Units 3.7% Overall NORTHEAST 5.6% Parts Department 9.1% Service Department 3.4% Major Units 4.0% Overall SOUTH 5.5% Parts Department 10.5% Service Department 9.9% Major Units 9.7% Overall WEST -1.9% Parts Department 9.9% Service Department 7.9% Major Units 7.3% Overall UNITED STATES 0.7% Parts Department 8.4% Service Department 6.6% Major Units 6.2% Overall FOR MORE ON THE SAME STORE SALES DATA For more information on this report and other industry data, contact: adplightspeed.com/dataservices See Gallmeier, Page 12 BRIAN GALLMEIER MARKET WATCH Change 8/15/14 from 7/18 % Change Powersports Business Index 339.140 14.94 4.61 Dow Jones Index 144.931 -3.80 -2.56 S&P 500 Index 133.065 -1.58 -1.17 *The Powersports Business Index has been adjusted to reflect the removal of Orbital Engine Gorp. Ltd. ADR (OE). 100 125 150 175 200 225 250 275 300 325 350 1/6/14 1/27/14 2/25/14 3/14/14 4/11/14 5/2/14 5/23/14 6/20/14 7/18/14 8/15/14 PSB INDEX DOW JONES INDEX S&P 500 INDEX STOCK MARKET ACTIVITY *The Powersports Business Index has been adjusted to reflect the addition of TCF Financial Corporation (TCB) on 2/25/14 and the removal of Orbital Engine Corp. Ltd. ADR (OE) on 8/15/14. F&I SOLUTIONS