Issue link: https://read.dmtmag.com/i/626951
FINANCIAL Every business manager needs to think about solving a problem for the customers who walk into their dealership to purchase a motorcycle. People buy things only in an attempt to solve a problem, and there is only one exception to this rule. The only other way people buy things is when they didn't know they bought it, but it was hidden in the paperwork. When business managers sell protection products without helping their customers solve a problem, you end up with chargebacks and low customer sat- isfaction levels. Right now our industry is experiencing a tremen- dous amount of charge- backs, and those can be prevented with the right deal structure and presentation of protec- tion products. Chargebacks hap- pen when a customer decides they don't need the protection prod- ucts that were sold to them, or they have quit making payments to the lender that loaned the money to them, and then it turns in to a repossession. A benchmark for chargebacks is to keep them under 2.5 percent. That means if you sell 100 warranties, only 2-3 of them will get cancelled. The same rule applies to repos- sessions. And I've recently talked to some lend- ers and dealers that are seeing 8-10 percent of their financed units becoming repossessed. Seems pretty simple, straightforward and logical; don't you think? Then why do so many business managers consistently toss tons of time, energy and sales pitches down the toilet? When a deal is structured incorrectly for the customer and the lender, it stands to reason that a chargeback is going to happen. There's always talk about interest rates, and that's important to pay attention to. It begins with the lender with which you finance your customer. Once customers complete the credit application, you send them to a lender, get them approved, sell some protection products, sign them up and send them home. And we know what some of those buyers are doing when they get home, depending on how they purchased the protection products. Some buyers are going home and deciding to look over their paperwork immediately, or if things get financially tight a few months later, they wait awhile to look at that paperwork. First they start with the interest rate. What was that rate? Too many dealerships only have a couple of lenders to offer their customers, and 8 • January 25, 2016 • Powersports Business www.PowersportsBusiness.com Considering methods to avoid killing deals in F&I STOCK MARKET WATCH DEALER FINANCIAL SNAPSHOT DECEMBER 2015 CDK Global Recreation's Same Store Sales dealer- ships (1,516 storefronts) were down 2.3 percent overall in December. Overall, service was the only department that increased in all regions, up 8 per- cent overall. The Northwest was the only region to see an increase in all four categories. The Midwest saw the largest decrease overall, down 16.5 percent, and the West was down 4.6 percent overall. PARTS SALES In parts, 734 dealers were up, and 782 were down. SERVICE SALES 866 dealers were up in service, while 610 were down. MAJOR UNIT SALES Major unit sales saw 695 dealers up and 665 down. NORTHWEST 2.6% Parts Department 3.0% Service Department 2.7% Major Units 2.4% Overall WEST -1.0% Parts Department 9.8% Service Department -7.1% Major Units -4.1% Overall UNITED STATES -3.3% Parts Department 8.0% Service Department -4.3% Major Units -2.3% Overall Stock Price Percent Company Ticker 12/31/15 Change Universal Technical Institute UTI $4.66 24.6% ARI Network Services, Inc. ARIS $4.50 10.0% General Electric Co. GE $31.15 2.2% Speedway Motorsports, Inc. TRK $20.72 1.4% TCF Financial Corporation TCB $14.12 -8.0% Cooper Tire & Rubber CTB $37.85 -9.7% ArvinMeritor ARM $8.35 -11.5% Polaris Industries, Inc. PII $85.95 -13.3% Arctic Cat, Inc. ACAT $16.38 -20.1% Spy Inc. XSPY $0.03 -82.3% POWERSPORTS BUSINESS WINNERS AND LOSERS MARKET WATCH Change 12/31/15 from12/4 % Change Powersports Business Index 235.041 -23.71 -9.16% Dow Jones Index 151.560 -3.68 -2.37% S&P 500 Index 139.115 -3.25 -2.82% Source: Wells Fargo Securities LLC 50 100 150 200 250 300 350 5/1/15 5/22/15 6/19/15 7/24/15 8/14/15 9/11/15 10/16/15 11/6/15 12/4/15 12/31/15 PSB INDEX VALUE DOW JONES INDEXED S&P 500 INDEXED STOCK MARKET ACTIVITY F&I SOLUTIONS FOR MORE ON THE SAME STORE SALES DATA For more information on this report and other industry data, contact: cdkrecreation.com/dataservices this can limit the rates that they might be able to offer. Why do buyers use or sign up for a local credit union? To get the best rate! However, a good business manager will seek out those credit unions and sign up for their indirect lending programs. They'll even give you reserve for signing up your customers with them, and many will let you sell the back- end products that your customers want to buy. You're not going to sign up every customer with a credit union, but dealerships with top- performers (low chargebacks and high pen- etration) are not only paying attention to the products they're selling, but they're also paying attention to the right lender for each customer. If your customer is buying a new bike, getting an extended VSC (Vehicle Service Contract), GAP, paint and fab, theft and sign- ing up for a zero percent interest rate that lasts for six months … will they decide to refinance it at the end of the six-month period? A lot of business managers out there telling their cus- tomers to do just that after the low rate ends. Guess what else is happening? They decide to cancel some (if not all) of those protection products you worked so hard to sell. See ADY, Page 9 NORTHEAST -3.1% Parts Department 9.2% Service Department 2.9% Major Units 3.0% Overall SOUTH -0.9% Parts Department 9.8% Service Department 3.4% Major Units 4.9% Overall MIDWEST -11.2% Parts Department 4.1% Service Department -20.6% Major Units -16.2% Overall TOMMY ADY