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Capitalizing on Tax Time Profit Starts... NOW

Jonathan Schultz
November 28th, 2017

Have you or your dealership staff ever scratched your heads around the end of March and thought, "Where were all the tax-time buyers this year?" If you wait for March to arrive in order to prepare, you will be finished just after tax time has ended and will miss a massive opportunity. The short-lived jolt of tax-time buyers in the market will have been absorbed by the prepared dealerships. Playing your cards right for tax time means drawing from the deck early and often. The IRS will begin processing tax returns on January 24, 2017, so preparing now, is paramount. If you want your team  to bring home a fantastic paycheck in spring, follow these simple steps to set your dealership up for success during this upcoming tax season.

Identify Your Subprime Sales Hero

Every lot has one! It’s the "Sales engineer," the guy or gal who will stop at nothing to help that customer who has less than stellar credit. When a customer walks on the lot and says, "I've been three places and can't get financed," this hero salesperson will not give up until their customer is driving off in their new or used car. Enroll this salesperson in being the "tax-time champion!" Let them know that the dealership is counting on them to succeed this tax season. Ignite their sense of purpose by making them aware of how many people they will be able to help this year by stepping into this role. Let them know this extra responsibility will not go unnoticed. Whatever you can to do motivate your “subprime sales hero” will help achieve results you need for your customers and dealership.

Train the Sales and F&I Departments

[blockquote-right]Start training the entire sales crew on tax time now.[/blockquote-right]Start training the entire sales crew on tax time now. Ensure they all know how to read pay stubs and calculate income properly. Make sure they know what possible stipulations the banks require on subprime loans. Coach them on working with subprime customers.  Ensure you think through these areas:


  • Do you have a strong subprime finance process in place?
  • How do you uncover, and communicate with these customers?
  • When do you set expectations for financing rates and terms?
  • What common objections should you be mindful of from these buyers?
  • Does your team know how most subprime sales are lost?

Train your Finance departments on the banks programs. Have them consider:

  • Who gives the highest advances?
  • When can we use a credit union or other non subprime lender?
  • Who gives bonus flats or tier bumps for lower loan to value cars?
  • Which banks will waive stipulations such as pay stubs, proof of address, or trade in?
  • What is each lender's minimum income requirement?

Enroll your finance department in working side by side with your "subprime hero" because they will be the rainmakers during the influx of customers. Start preparing updated inventory lists that all the people involved in subprime can access. They need to know the banks and  inventory like the back of their hands. Ensure everyone understands FTC compliance rules.  If you break those, you'll need a lot more than a big tax time to turn a good profit!  (Click HERE for a link to the FTC site regarding privacy and compliance.)  

Create an Incentive Program: To Split or Not to Split the Deal?

The “subprime hero” and his finance cohorts are going to be putting in extra leg work to grind out these trickier than average sales. Make sure to make their efforts and time spent worth it! If you have a subprime department that normally splits front-end gross profit with sales people, you may have sales call reluctance when it comes to your “subprime hero” going the extra mile. [blockquote-left]Why would your hero work harder for half a deal when they can just mosey out on the car lot and get a full deal for less effort?[/blockquote-left]Why would your hero work harder for half a deal when they can just mosey out on the car lot and get a full deal for less effort? If you are going to split the deals, I recommend putting together an incentive program based on appointments that show up with all their stipulations, sales volume, or total of cash down.  Providing your subprime point person with an added incentive will ensure vested interest in execution of your plan.

Create Your Call List

Dig through records, CRM, "dead deals,", credit bureaus, and create a "call list" to ensure your subprime sales pipeline is bursting at the seams when the money starts landing.  It's important you create a database of potential tax time buyers. Go through your CRM and find all the deals of the past six months that were unable to finance or left because they couldn’t get approved for the car they wanted. Dig through your "dead deals"and find the credit apps whose income is between $18,551 and $37,650 individually or $75,300 jointly. Based on the 2016 IRS Tax Brackets, these individuals are likely to receive the most in returns and also be above many banks minimum income levels. Gather as many of these phone numbers as possible and give them to your “subprime hero” to call. Craft a message that will incentivize the buyer without offending them. For example, "We are stocking up our inventory for spring time so our customers can get the car they want! We will also have special financing on site to help you get affordable payments! May I reach out to you in late January to give you a list of our special vehicles? They are on a first come first serve basis!" If your hero gets permission to follow up again later, ensure its scheduled in your stores CRM, and that these people are contacted again come tax time.

Start Stocking Inventory for Subprime (Based on What Lenders You Use)

There are several types of subprime inventory depending on the bank. The vast majority of the best subprime cars retail for under $14,000, have mileage under 100,000, and are less than eight years old. Of course, the more options and the bigger the vehicle, the better. If you’re a Credit Acceptance dealership then your best subprime car might be something you have under $5,000 cost and miles become almost irrelevant. The bottom line about both of these types of cars: They can be your fastest selling inventory with the lowest market days supply. Since the demand for these, already high demand cars, skyrockets in January through March you better stock more of them right now. Ensure your F&I manager is collaborating with your used car buyer for maximum impact on sourcing the right inventory. While purchasing inventory, the other factor to consider is that your time-to-market, cheaper cars often need more reconditioning. More reconditioning means more time in the service department, detail shop, or recon vendors. If you buy these cars three to four weeks before tax time hits, you will often pay too much and they may not even be front line ready when tax time rolls around. Stocking  un-serviced, low cost cars can be a risky proposition, so start stocking up before the new year!

Cultivate Your Relationships With Lenders Now

When it comes to a subprime loan, one of the most frustrating things a sales manager and sales person hears from their finance manager is, "They were turned down everywhere." On top of frustration for the dealership, how do you think the customer feels? As the guy or gal that runs the place, the first question out of your mouth should be, "Which banks did you call and try to overturn?" “None,” is the wrong answer! Start schmoozing the bank reps and analysts now so when tax time rolls around you receive preferential treatment. Have them to your dealership for lunch. Give them a call and treat them like a client! Build some rapport. It's even a great time to add a subprime dealer agreement or two to your toolbox. Just make sure to read those dealer agreements thoroughly and know what you're getting into.

Tip: Often when you add a new lender or sign a new dealer agreement, sometimes the new bank will try harder to buy the first few loans! Adding a few sub prime banks just before tax time is a great way to pick up a few extra deals. 

Plan Your Campaigns

You may have heard the cliche "the early bird catches the worm." In this case, the early dealership gets the sale. Make sure your clients know you're there to help their specific credit needs. Let them know about your "no money down" financing or the "push, pull, or tow trade-in" Create a “We forgive your credit flaws” Valentine's Day ad with a box of chocolates!  Be creative, but also have a clear, consistent marketing message across all your advertising venues. Have your business development center answer the calls in line with your campaign. Update your social media sites, online comments, and anything else that the public may stumble across for the next few months. Doing this early ensures that when the time comes, you are on their radar and will get a fair shake at earning their business.

The subprime market really takes off during tax season. Your dealership can have a great head start in acquiring this extra business if you begin now. Be industrious and plan, prepare, and execute for the business coming up in the following months or find yourself in reactive mode, struggling to keep up.  Capitalizing on tax time now will ensure a solid start to your new year. Play your cards right and win!

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