One of the lasting legacies of the economic collapse a decade ago is subprime. After lying dormant for several years in the aftermath of the Great Recession, the subprime market has returned with a vengeance. Everything is subprime nowadays, as banks, finance companies, and unconventional lenders are less averse to risk and are willing to extend credit to consumers with low FICO scores and inadequate incomes. As the great Yogi Berra used to say, “It’s déjà vu all over again.” READ MORE
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Used vehicle sales are expected to increase 20-30 percent in the last week of February as tax refund season begins, according to Cox Automotive. IRS refund checks will begin arriving shortly Jan. 15. Over the past two years, the IRS distributed almost 50 percent of refunds by the ninth week of the year, which would be the last week of February. Peak demand usually ended by the 16th week of the year, or mid-April, which is when about 90 percent of tax refunds have been distributed.
Tax Season: Are You Good to Go?
Did you secure funding to be able to purchase the additional 20-30 percent more vehicles you will need? Have you secured the right inventory? Inventory that’s acceptable not from just the consumer’s perspective, but vehicles your financing sources will find acceptable if you use indirect lenders, or vehicles that fit your BHPH business model. Selling vehicles is always easier during Tax Season as customers are flush with Tax Refunds, but don’t walk away from the policies and procedures you adhere to all year. It’s easy to wave stips when you’re ready to collect a $4,000 down payment, but it could serve to boost your delinquencies and charge offs later.
Marketing and Advertising
You could be tempted to ratchet up your marketing and advertising budget this time of year. However, when customers have cash they seek you out if you’ve secured the right inventory. Be sure you website is up-to-date, and if you’ve done a consistently good job of keeping the website fresh and optimized throughout the year, they will find you. Do not ignore some lower-cost marketing activities. Use the power of your social media, signage at your dealership, email campaigns, etc.
Merchandising
Make sure your lot if full of front-line ready vehicles. Get employees to park elsewhere. Move repos and mechanical-issue vehicles off site. When your customers come on the lot it should be inviting and loaded with high-quality inventory. Be sure your team starts the vehicles at least every other day and if you have GPS devices make sure you’re monitoring them for low vehicle battery alerts. Make sure the seats are adjusted to accommodate the majority of customers, and popular radio stations are pre-set. Go across the street and look at your dealership like a prospect might. You’ll notice things you wouldn’t from inside your office, and you can direct your staff to spruce things up.
Technology and GPS
Almost all BHPH dealers who hold their own notes or sell them off put some type of GPS tracking unit on their vehicles. Most finance companies who buy notes, or capital providers to the BHPH industry require GPS tracking devices. Some require starter-interrupt, while others do not. BHPH dealers and finance companies need to locate their vehicles in the event of a customer default, but today’s devices do much more. The data they collect helps with stip verification and assists in making current collection decisions. Longer-term, the data they collect is very valuable, and with the addition of artificial intelligence can help with future funding decisions. Think of it like a researcher that never sleeps and only thinks about improving and optimizing your portfolio.
Other technologies to consider include an upgraded DMS. Today’s DMS systems provide far more information and can make accounting much easier. For those in Dealer 20 Groups, the monthly data needed for Composite Reports is easily accessible. Consider payment processing kiosks to make it easier for customers to pay. Texting customers is really important and encouraged, but please note the Telephone Consumer Protection Act has very stringent rules and steep fines if those rules are not followed. Some texting platforms allow for sending payment notifications to your customers who opt-in, and enable them to send a payment using that same texting platform. It’s really cutting-edge. Hey, if you’re going to utilize the most current technology why not spend a little money to make it easier for your customers to pay you?
We hope you have very successful and profitable 2020 Tax Season.
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