A solid second chance finance program on the dealer level can be quite profitable. But in many cases, the program falls apart in which case the dealer shies away from starting the program again or at all. Having gone great lengths initially to get the program up and running. That is purchasing the right inventory, hiring a finance manager who understands second chance finance, to then all of the branding and marketing that is involved. That said, why do these programs fail? And if they do fail, why give up? Yes the dealer makes profit, but this program does also assist the customer who otherwise would not be able to purchase a vehicle and or they are having to purchase from a buy here pay here which - as we know - does not always report to the credit beaurus in which case it does not assist with their credit. That said, here are to the top things to consider when wanting to run a second chance finance program. 

It’s All About the Processes. You Have to Have the Right People in Place. 

As mentioned above a successful program means having the right people in place to ensure that the program is running smoothly. One of the best ways to approach the hiring of your second chance finance program is to first understand what the demand is at your dealership. Wherein, you might not have to hire additional staff to handle the traffic. If you do not need additonal staff, make sure that the sales consultants you have selected understand the program. Knowing what steps they have to complete when handling a second chance finance customer. Offering that you expect the same level of customer service to be offered. However, the way you offer the customer service has to be in alignment with the customer and dealership. By providing the right level of customer service can make for a great experience. One that your customer will remember! 

Have the Right Inventory. Explain to the Customer How the Process Works. 

We have most likely been in a situation where your customer calls in - with credit issues - wanting the brand new model that has all of the options. If we could offer them the vehicle of their dreams, we would do so, no? But this is not always the case. As we know, the banks usually have a loan to value ratio limits. As well as finance limits. In so far as the lender might only finance 85% or so of the loan. That having been said, there is a best practice when it comes to approaching the customer with this information. Namely, we do not want to just offer “that will not work,” and instead offer “Mr. Customer, I can certainly understand. At this time, based on your credit history, the lenders will offer (insert options), and in time perhaps you could transition into your (vehicle).” This is not to say it will always work, but in most cases, the customer will see that you are trying to work with them. 

Regarding the inventory goes it is best that your purchasing manager buys inventory that is approachable for the customer you are seeking. Wherein, if your purchasing manager is purchasing inventory in a steep price range 35k+, then it might be a bit difficult to make that vehicle work. The other thing to consider to depending on your lender's requirements is both the age and mileage of the unit. The lender will sometimes have restrictions. As for the customer, it is best to make sure you clearly state what the next steps are online. Offering how the customer can expect to navigate through the car buying process. That is everything from completing the credit application to working with you to select the right vehicle that meets their needs. In doing so, it will offer for a very smooth buying experience! 

Bottom Line: A credit acceptance program can be very lucrative. However, for it to work processes have to be in place on the dealer level to ensure that everything runs smoothly. One of the most important factors is having the right inventory. By having the right inventory in place - along with the staff to work with your customers - you will have a much better chance of everything working. Lastly, make sure that you have a clear outline as to what your customer can expect when purchasing a vehicle with you! 

Do You Have a Second Chance Finance Program? Have you had success with your program? 

Several dealers reported record months in the service drive. With a record number of RO’s hitting the lanes each day, it is a gold mine for selling service contracts. Service contracts are a security net for both the dealer & the customer as s/he will most likely return to service their vehicle.

Here are the top reasons you should offer service contracts in the lane:

A Drop In Deferred Services?

With customers declining large service items a contract - in some instances - can offer the customer the ability to purchase the service with the discounts s/he receives. Or in this case, their contracts would cover the OEM maintenance intervals, which should be stressed to the customer as being important.

If they already have a contract that includes these items, then s/he is far more likely to return to have their services completed.

                                   What percentage of your customers have a service contract?

Vehicles Serviced past OEM Retention Requirements

OEM’s usually have retention requirements for your in PMA (primary marketing area; assigned customer base) customers, which can range between anywhere for 3-5 years depending on the OEM. Dealers spend thousands of dollars marketing to their customer base. Giving away everything from oil changes to steeply discounting services, which can have damaging - devaluing - effect on your dealer's image and pricing. Where customers will continue to expect that service at a low discounted price.

Whereas, if they have a contract they aren’t thinking about the price. Instead, they are thinking about the value the contract offered them. Giving them the peace of mind knowing that their vehicle is being serviced.

Revenue for Dealers

If service can pick up 10-15 contracts per month in the lane that is 10-15 more customers that will keep within their retention time frames. All of which is highly beneficial to the dealership. This service customer is also more likely to be a repeat purchaser vs. a customer who does not service their vehicle regularly with your dealership.

The bottom line is the service lane should continue to diversify its revenue streams. One of those sources of revenue is selling service contracts in the lane. This not only benefits the customer and service advisor, but it adds money to the bottom line.

Does your dealer sell service contracts? If so, has it been successful? If it hasn't been successful why not?