With recent announcement from GMAC on their new credit score cutoffs at 700 FICO what steps can GM dealers take to still move metal?  Established relationships with local banks and lenders can pay huge dividends in these situations.

I have started a discussion in our forum to discuss how dealers can best respond to this situation and other like it coming down the pipe. http://www.drivingsales.com/bb/viewtopic.php?f=3&t=42

Full Release

GMAC Financial Services Statement on Automotive Finance Purchase Policy

DETROIT, Oct. 13 /PRNewswire/ -- GMAC Financial Services today implemented a more conservative purchase policy for consumer auto financing in the U.S. as a result of the lack of stability in the global capital and credit markets. The changes include limiting purchases to contracts with a credit score of 700 or above. Additionally, the company will restrict contracts with higher advance rates and longer terms. Last week GMAC also increased by 75 basis points the rate it charges dealers for providing non-incentivized consumer auto financing. These changes in pricing and underwriting are related to the current market environment, which has reduced access to funds and increased the cost of funds. The company currently expects these actions to remain in place until the credit markets stabilize and accessibility improves. GMAC's wholesale auto finance business is unchanged by the actions announced today.

Source: GMAC Financial Services

Stay up to date with pressing automoive issues and solutions at DrivingSales

Looking back on day one I’ve got to give credit where its due: Mike Roscoe, President of Dealer Communications has done a great job of building these conventions, each one gets bigger and better.  The Texan Gaylord is a great location.  The guest rooms are comfortable, good restaurants and plenty of convention space.  This was by far the biggest and nicest convention hall to date.  I was very impressed with the exhibit hall.  Many new companies were present as were some familiar faces. 
The morning session covered the 101 tracks by Todd Smith. Its good stuff even for the veterans, we should never loose sight of the basics.  Then one of strongest data sources and wisest web marketers in the industry, Kevin Root took the stage.  Kevin’s message is always spot on and something that can be referred back to time and time again. The speaker’s list for the rest of the event was looking good too.  Many familiar friends were lined to speak, Dennis Colome, Rafi Hamid, Ralph Paglia, Todd Smith and Mike Dececco are just a few that I always recommend. They have great experience, are entertaining to watch and nail relevant topics. Many new faces also looked promising to check out, certainly there will be more topics worth watching than one person alone can attend.  BTW, did you know you can purchase access to the prior convention videos and seminars?  It’s a good way to catch on what you may have missed.

To cap the end of a great day one I headed out with the guys from Dealersocket to this SWEET Texas BBQ joint! Yea!!  We ate until we were FAT… then we went and got some “Texas style homemade ice cream.”  Ahh yes, Texas is a great place!
For all those not attending, you’re missing out.  I had to jump on a plane to be present for an announcement at the JD Powers event so unfortunately I can’t do the updates for day 2 or 3.  No worries though, we have plenty of community members on the ground who will keep us posted!
 

The Vendor Ratings are growing and many many people are taking notice.  Dealers are using the feedback of many to determine which vendors are the best at delivering value to their stores.  This is exactly what the Vendor Ratings were intended to do. Can you imagine how powerful the resource will be when we can research ANY company  or product from a neutral source BEFORE we sign the contract? 

When we created the vendor rating system we had 3 main objectives:

1. As a dealer I was frustrated every time I was looking to try a new Vendor like additional sub-prime leads, a CRM system or deciding on a website provider.  The only resource I had to locate my options was the brand recognition I had from their marketing collateral, by who had "cold called" me at the store or who I had stumbled across 6 monts prior at the convention.  Due to lack of options I would open up the magazines and mark all the ads for the genre of product I was looking for and call and schedule demos.  Why couldn't we have a one stop shop product directory that lasted more than just convention weekend?  We as dealers are each investing hundreds of thousands of dollars per year and had no dynamic way of knowing what our options were, it was frustrating to say the least!

2. Once I had narrowed it down to a few vendors (generally I would already have a few recommendations by my colleagues) I would pick up the phone and call other dealers I knew around the country to see if anyone had experience using product X, or had heard of company Y.  This process was extremely valuable and it headed off disaster a few times but it took lots of time, plus i usually would only get 2 or 3 refrences and I would get pulled away.  We have all experienced a vendor with great promise but poor delivery but flushing them out was work and thus signing a contract always had an element of gamble to it.  Often we would call experts like trainers or consultants, but many times they were paid to recommend particular products.  Now, through the Vendor Ratings, we have an efficient way of getting feedback on a MUCH LARGER scale, in an unbiased format and in a fraction of the time!   

Rate the products you have used and leverage the ratings of others.  After about 2 weeks of being live I'm please by the numbers of dealers participating by sharing their experiences with specific products.  The more participation we have the more valuable this is for everyone. 

3. Lastly, we spend and we make HUGE amounts of money thanks to the vendors.  In fact, take them out of your store and you wouldn't have a successful businesses.  The Vendor Rating system helps the vendors innovate because it provides direct feedback to what would make the products more successful.  It is of huge value to the dealer to have venodrs who are innovating fast and on target for our needs, in fact lack of innovation is one of the biggest complaints insite the not so positive reviews, check them out and see for yourself. Helping the venodrs stay on the cutting edge is paramount to both the dealer and venodrs success.

Today, the Vendor Ratings are new but growing fast.  Dealers contribute your reviews and return often, particularly before you ever sign another vendor agreement.  Make sure you are investing your hard earned dollars wisely.  Vendors we hope the information helps you continue to be on the cutting edge so we can all be more successful!

Cutting costs and expense management can be a painful, but necessary part of business.  In today’s economic climate, with times being tough 90% of the dealers are cutting costs and this process is painful for everyone.  So where as an operator do you start and how and an employee do you react?

The discussion surfaced earlier today, and a dealer responded, you always start with the non-personnel expenses.  I’d add that fixed costs represent the most risk, and that risk is amplified in a soft market when volume is down.  Controllable expenses tend to be inventory and marketing, look to cut there first:

-  When cutting inventory remember you are dealing with a depreciating asset and your first loss is your best loss; sick to your inventory turn policy and move the old stuff off the lot.  Also, you generally need less inventory than you think.  Some of the most successful used car dealers in the country run with a 30-day turn.

-Marketing costs should be judged on a track able Cost Per Deal.  If you cant track it QUESTION IT!  There are enough marketing options that are completely track able; there is no reason to not to use them up first before you gamble on other options.  Then, grab your reports and figure out how much an avg. cost per sale is with each marketing mechanism.  Every marketing channel or mechanism will have diminishing returns at a certain point; this will vary for every store but maximize each one and trim the fat off your marketing budget.

After going through all fixed and variable NON-personnel costs, if need be some dealers are still forced to make personnel cuts.  A dealer in our NADA class today mentioned how he approached this tough decision.  He brought all three sales managers in and leveled with them.  They had already seen the other cost cuts and knew his efforts to protect them were sincere.  He gave them the option of him cutting someone, or of them staying as a team and each shaving a little off their pay to achieve the same savings.  The team chose to stay together.

Cutting personnel is one of the ugliest jobs any business owner has to do and unfortunately, it is something that most, at least one time in their career, have to do.  I applaud how this one dealer handled it, and Id like to get some thought from other dealers on the topic and also from employees.  How can a dealer help make that ugly situation better for both sides?  We would like your opinion in the open discussion about it here.

 I watched the 2007 movie "Shooter" earlier this evening.  Its about a US Sniper who is framed for an assassination attempt on the president by a rogue CIA unit.  The movie follows the manhunt for this extremely well trained Marine Scout Sniper who they think tried to kill the president.  I wont give up the details of the plot, nor the intense ending, but I will tell you this (because it relates to car sales):  Swagger (the sniper) recruits a blown off FBI agent to help him fight his way out of the situation.  Unfortunatley this FBI agent is 3 weeks out of the academy and needs some serious training to keep up with Swagger.  At one point in the movie Swagger is training this rookie to shoot and reload under extreme pressure and he says to him, "Remember, slow is smooth and smooth is fast."  Later in the movie as they enter their most intense battle Swagger restates these words of wisdom.

Slow is smooth & smooth is fast is an oxymoron of a proof, however it provides great direction for anyone in car sales (any form of sales or negotiations really.)  So often we are hurried and especially become excited when we receive the "green lights" from the customer signaling their willingness to continue the sales process.  As a result of this positive anxiousness we hurry things along, begin to believe that "this customer is different" and maybe even cut corners.  The result is usually a "quick and easy" sale right? ...Wrong.  Slow down and remain in control of the situation.  Follow the sales process even if some particular steps are "not needed because this customer IS different."  The vast majority of the time the hurry causes long term pain, such as  incomplete paperwork that holds up funding, a lack of proper information put into the CRM system or worst case scenario is cutting just enought corners that we lose control of the deal all together.  There is nothing worse than losing a deal you knew you should have had?  So, how do we avoid these problems?

We would all do well to take advise from a Marine Scout Sniper, "Slow is smooth and smooth is fast."  Staying in control and doing things right the first time will mean more deals, higher income, happier customers and a more successful YOU!   Have a great week! 

I recently spoke with Nathan Scripps, winner of the DrivingSales inaugural Strategies contest. Nathan’s strategy, “The Long Spiff,” was rated the highest by our members. Last week, I had the pleasure of personally delivering Nathan’s prize, a new MacBook Air, to him at Jumpstart’s very cool offices in San Francisco’s “Media Gulch.” In addition to being the director of digital advertising for Jumpstart Automotive Media, Nathan’s an active member in the DrivingSales community and well-versed in how dealerships can tap the Internet to be more efficient and successful. Not to mention, Nathan’s a very sharp guy. Here’s a write up from our conversation.

JH: Thanks again for your contributions in the first Strategies contest, Nathan. You submitted not one, but two great strategies that were highly rated by our members. Tell us a little about your background.

NS: I grew up in the south, in the Birmingham, Alabama area. My father has been selling cars for over 20 years, so I grew up in and around a dealership. Trying to escape both Alabama and the auto industry, I studied mechanical engineering at Georgia Tech. That led to working for General Electric as an engineer in manufacturing power generation equipment. As my duties expanded, I realized that I liked the relationship building aspects of business better than engineering, so I began to look for ways to get into sales and business development. This was all about four years ago, and at that time I was lucky to find an opportunity with Jumpstart; it seemed natural to come back into the automotive world. I changed coasts and changed careers and I haven't looked back since.

JH: Tell us a little bit about what you do at Jumpstart and how long you’ve been with them.

NS: Currently, I’m a director of sales and have been with the company for over three and a half years. I started as an inside sales rep in San Francisco, then did outside sales, managing all of Florida from my home in Tampa, then back to the SF headquarters to head a small sales team with a national territory of our largest dealer clients. After a few years of almost non-stop travel, I am happy my new role keeps me home a bit more. I'm now transitioning into working with partnership and business development in the local area.

JH: What interested you in what we’re doing on DrivingSales.com and how long have you been a member?

NS: I’ve been a member for several months now. Really, I joined after we talked about DrivingSales at a convention earlier this year, I believe it was Digital Dealer. Back then, you still had a small user base, and I was just one of a few members. In the past couple months, since you’ve opened the community, it’s really taken off.

JH: Yeah, we’ve been real pleased with the traction we’re getting. We’re now well past a thousand members. What are your favorite features?

NS: The strategies, blogs, comments – it’s all great. I think you are spot on to gather all that intel. in one place. And I think the strategy competitions are a great way to build the membership and the content – your members are the ones with the experience – the stories to be told. I can see the site is really growing, and it's cool to be a part of it. Winning a new Mac for contributing popular content isn't a bad deal, either!

JH: What are some of the benefits you’ve seen, and how do you think the network is benefiting others in our industry?

NS: I'm just really happy to see the content grow organically; it's really grassroots. Dealers, vendors and other members are really coming together to make the industry better. I think it’s unfortunate that dealers, dentists, and lawyers are in the same group… people to avoid. My dad never fit that mold and I never saw the industry that way. I am happy to work with car dealers; they are often the best businessmen in town. This site, the Driving Sales community, can help turn that perception around. Everyone can help to make each other better.

JH: You took the words right out of my mouth. What do you think is most important to help dealerships in the current economic environment?

NS: I really feel passionately about the value of long-term strategy. Dealers (or any business) will be more successful if they align employee incentives with long-term goals. You can't fix the 30th on the 15th, but a lot of dealers and GMs keep trying. The dealers I work with who plan and implement long-term strategies have a huge competitive advantage. They simply do better than dealers who focus only on the week or the month.

Also, really take a hard look at what you're doing with your marketing. If you're still focused on doing the old stuff (newspaper, TV, and radio), and Internet is an afterthought, then you can bet you're losing sales opportunities and not getting the best return on your marketing investment. I know that there are dealers out there who severely limit their online marketing budget, or just use what's left over after they spend on traditional media. That's not what works today. Vehicle shoppers are online every day; you can target them very specifically and in most cases only pay for people who see or use your ads and keywords. You can't really do that with traditional media. With online marketing you can decrease your overall marketing spend and maintain or grow sales volume.

Unfortunately, during tough times, what I've seen many dealerships do is cut to a profit, killing the newest line items first. That is often online spending, simply because they're new and either not fully understood or haven’t been in play long enough to make an impact. I really question why the first thing to go when cars stop moving is the marketing budget. It doesn’t make sense to me that when nobody is walking in your doors, you stop inviting them in. It’s the lean times, like we are in now, that I would lean most heavily on direct response, super targeted marketing. Make every dollar work on getting a shopper in your door, save building brand for later. That was pretty much my second strategy on your site, but I guess “The Long Spiff” just had a catchier title.

JH: What do you think are the most important benefits of social networking, and what are your thoughts about social media in general?

NS: Most dealers realize the precious value of friends and family referrals. Now they need to realize that these referrals take place both online and off. Now, for example, if I'm looking for a product, I can go to Amazon.com and see reviews from hundreds or thousands of "friends" I don't know, but whom I trust, often because of the sheer volume of reviews. As expanded online networks grow, they are going to affect dealers more and more. Consumers have access to more user reviews and comments, both for specific vehicles and for specific dealerships. Think of it like an expanded friends and family network, and remember they can say whatever they want after they walk out of the dealership. Only now, they can tell a whole lot more people about their experience with you.

JH: Why don’t you tell us a bit about what Jumpstart offers to dealers?

NS: We provide automotive marketers access to the best automotive audience available today. Specifically, for dealers, we offer customized display advertising, search engine marketing (SEM) and new car leads. The true strategic advantage we offer is the automotive audience within our family of publishers. Our partner publishers include NADAguides.com, Vehix, Consumer Guide Automotive, JD Power Autos, Shopping.com, CarandDriver.com, RoadandTrack.com, CarSoup.com, U.S.News.com, HybridCars, and CarGurus. An average of thirteen million automotive shoppers visit these websites each month, giving our marketers access to vast majority of consumers in the market for vehicle purchases. Our partnerships and consumer access give our dealers a tremendous reach and provide Jumpstart a unique knowledge of the way consumers research and shop for vehicles online.

In addition, we have an in-house team of SEM professionals and an in-house creative group called Jumpstart Labs, giving our clients access to leading-edge talent that works closely with each client. We customize the placement and design for each of our dealers, based on their unique needs. We don't just offer packages or templates. We take the time to understand our clients and analyze their individual needs. We're very involved with the dealerships and their campaigns. Since we serve all three tiers of automotive, we have a unique position to gain insight and provide better services.

JH: Excellent. Well, with that being said, we’re very lucky to have you as part of the DrivingSales community!

Nathan can be reached at Jumpstart Automotive Media. On the web at www.jumpstartautomotivemedia.com; by phone at (415) 738-3434 or via email at nathan@jumpstartautomotive.com.

A few hours ago I was talking with an east coast dealer who had just heard from Chrysler Financial, that they would no longer continue leasing vehicles after Aug 1st.

WOW! TImes are changing.

Resitual values are plummiting making it increasingly risky to offer leases.  The question is, what are you chrysler deaiers going to do to fill the void?  Is leasing dead, or do you have other banks lined up?

Its increasingly difficult to put deals together these days; customers budgets are pinched with rising gas prices, negative equity is on the rise and confidence in the economy is weak.  If your a dealer who was trying to do it right, and support your captive lease programs to keep you customers on the lease cycle you've got to make changes quick. 

What are some thoughts from you dealers on the fron line?  How will this affect your business and what plans to you have to fill this potential void?

What makes a good leader?  In class on Tuesday, we watched a video about a military official who runs the most successful aircraft carriers in the Navy, followed by a video on the famed success of Disney.  This led us into a discussion on effective organizations. 

“The most important ingredient in a formula of success is knowing how to get along with people.” 

There is no doubt that effective organizations are a culmination of strategic business planning; but most all facets of implementing such plans are done by individual effort.  An organization can not be effective without a leader to coordinate the efforts of all those individuals.  Such coordination takes more than delegation of roles and jobs.  It takes a human heart and a sense of understanding.  An essential resource of a good leader is the ability to get along with others and allocate their skills and knowledge effectively.

Its interesting that we, in the car business, studied leader ship through the eyes of a "warrior" and from "the happiest place on earl."  These two seeming opposite organizations on the surface didnt seem to have much in common with each other, let alone have anything in common with the car business.  So what was the connector?  Leadership.  We learned in very clear ways that good leadership is universal, and true leadership principles can be applied anywhere.  We discussed what these principles are and how we can apply them to our dealerships.

Leaders who are good at what they do and have a fervor to be where they are, regardless of weather its a battleship, disneyland or a dealership.  The success of these organizations comes down to the ability to accomplish goals through a team.  To be successful, effective organizations must be run by passionate, capable, natural leaders.  What are you doing to develop yourself as a leader?