Non-Prime 101: Beware of the Credit Specialist

Many people and dealers look at prime finance and non-prime finance as black and white. You either are prime or you’re not. But it’s way more complicated than that, and if mainstream new car dealers don’t start to figure that out, they are going to miss out on a crap load of business in the future. But, whatever they do, they shouldn't hire that credit “specialist”.

Twenty-five years ago, non-prime was in its infancy. If a client didn’t qualify for a prime automotive loan at the dealership, then there were only a few other finance options, and they were all a pain in the ass to deal with. Customers would go through the process of selecting and agreeing to purchase a vehicle and go into the finance office. If the customer wasn’t approved, after they bought five thousand dollars worth of warranty and rust proofing, then usually they were just sent on their way with their deposit refunded. Some of the more advanced dealers would take a shot at non-prime, but it wasn’t like today. They were mostly small finance-type companies, extremely difficult and complicated to deal with, and the interest rates went from six percent at the bank to twenty percent and higher. Not exactly a little bump, or switch. “I’m sorry Mr. Smith, the bad news is you don’t qualify for that brand new van, but the good news is you can have this five-year-old van with a ton of mileage for only an extra $100 per month! How does that sound?”

Twenty-five years ago, non-prime was in its infancy.

Most dealers just stayed away. Left it for the smaller used car stores, or the odd new car store with a “specialist”. The process was different. The banks and paperwork were difficult to navigate, and in all honesty, dealers often stereotyped non-prime customers as less than pleasant to deal with. Complicated banks, older vehicles, difficult customers, and even a unique sales process.

Yep, they stayed away, and they are still staying away. Some new car dealers have figured it out, but they remain few and far between. The thing is, it’s not simply non-prime anymore.  It’s not just a few fringe finance sources doing specialized finance. It’s major banks and finance companies with huge portfolios. It’s not either a client that qualifies at the bank or the rate is suddenly twenty percent higher. A client could qualify for anywhere between one or two percent over prime up to twenty percent or more and all points in between. And it’s not just that stereotypical difficult non-prime client from twenty years ago either. Now it’s a wide spectrum of people from all walks of life. A huge market that is only growing, especially now.

Still, most new car dealers are not in the game. Why not? It’s complicated but here are a few reasons. One of the reasons is that it involves used cars, and a ton of new car dealers don’t exactly embrace the used car business. Two, it’s a different sales process. It requires unique training and specialization. And three, and this is a big one, many of the “specialists” that operate in non-prime aren’t exactly customer-centric.

Most new car dealerships, at least the good ones, make customer satisfaction a priority. That’s how they build their business. Quality products and high levels of customer service. Yes, they exist to make a profit like all businesses do, but it’s based on a healthy business to customer relationship. Non-prime can be predatory. A giant game of smash and grab. If I’m a new car dealer, with a good reputation, I’m not going to go out and hire some “specialist” that is going to grab my customers by the ankles and shake them upside down until all the cash drops out. I’m not going to let that person with questionable ethics ruin my relationships with customers and banks. I’m not going to go buy a bunch of used cars, spend a fortune on advertising, then have to pay 30% of the gross out to a “specialist” who is going to burn a whole bunch of bridges for me before he, or she, moves on to the next victim… uh dealership.

I’m not going to let some “credit specialist” with questionable ethics ruin my relationships with customers and banks.

And there it is, the real problem. It’s not really the unique sales process, although there is one. It’s not really the extra used car inventory, although it’s certainly a factor. It’s not the customer either. It’s the “specialists” with no ethics that are making the non-prime industry a no-fly zone for so many dealers. How do you compete with people that don’t follow the rules? It’s simple, you don’t.

The non-prime market is growing rapidly, especially now. Customers who are credit-challenged that want a quality vehicle, a quality warranty, a high level of service, and want to be treated like every other client. They are a growing market and believe me, dealers and sales staff with ethics and who are customer-centric are going to rule the day. Just in case you’re not paying attention, all those emerging online used car sites, even the fancy ones, are relying on non-prime for profit and growth. If you’re a mainstream new car franchise, and you haven’t embraced non-prime in a serious way, then you are about to have your lunch eaten by a bunch of used car dealers who will get more for their used cars than you do for your new ones. Just make sure you avoid hiring the “specialist”, if you know what I mean. Good luck and good selling.