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Consumers expect and demand a wider range of products and easy shopping opportunities. Today, a dealer might carry new vehicles from as many as five or more competing manufacturers and offer a substantial selection of used cars.
Brand loyalty on the dealer's part is far less important than putting together a package that appeals to the customer. The actual sale of a vehicle - especially a new vehicle - represents a very small percent of profit to dealers.
The more significant portion of profits is made in areas such as service, financing and insurance programs. Savvy dealers are exploring their options in these areas, and developing products such as service and maintenance agreements that can be sold separately from the vehicle itself.
The fastest growing segment of automobile sales involves buyers with bad or bruised credit. As banks move to decrease their loan risks, it has become increasingly more difficult for a large percentage of the population to qualify for traditional credit.
For new car dealers able to finance non-prime credit, this situation translates into significantly increased sales and leasing. Originally pioneered by buy-here, pay-here lots, the concept is quickly becoming an important profit center for conventional dealerships.
Finance Works is positioned to take advantage of the industry shift with a variety of programs that offer subprime credit in both lease and purchase situations.
Automotive Financing and Financial Services for New and Used Vehicles Increasing new and used car prices, fluctuating interest rates and personal economic uncertainty on the part of consumers have sparked a number of changes in the way vehicles are financed.
Consumers are looking to dealers to find ways to make the cars they want affordable. Consequently, major auto companies have been forced to re-examine their financing capabilities.
The results of this activity are illustrated by companies such as Jones Credit, which wants to use their new subprime finance unit to create customer loyalty. Kelly Motors, and Riota recognize the financing demands and are evaluating the potential for subprime financing programs.
Kelly Financing wants to boost its retail financing programs, and plans to shift gears from creating the programs to implementing them.
By contrast, the finance groups owned by Brownlee, Manzli and Reynolds say they are not currently interested in offering subprime financing.
Sportz Cars North America Inc. This ended a three-year partnership with Credit Corp. The move was made to cut the response time for credit checks, expand a used-car leasing program, and tailor its programs for high-end customers. An issue automobile financiers must deal with is a large percentage of consumers who are currently able to pay, but who may have suffered a bruised credit rating for one reason or another.
These customers are often excellent candidates for leasing.
Local dealers who have good relationships with several local banks who can offer more flexibility in financing terms with their buyers. On average, franchise dealers can arrange financing for 65 percent of their buyers. In comparison, independent used-car dealers can arrange financing for less than 25 percent of their buyers.
However, increased financing options mean increased sales. That's why Joe Caldwell, owner of the Caldwell Automotive Superstore in Chicago, Illinois, has been aggressive in building banking relationships. An October, issue of Corp. Caldwell works with at least eight local banks to arrange financing for 80 percent of his buyers.Pompei-Schmidt's business plan for a nationwide dealer group takes advantage of an emerging industry trend of vehicle leasing.
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