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C OL UMN K ICK E R GOOD PARTNERS One common misconception is that Tier 3 and Tier 4 fnance companies just won't let you sell any back-end products or will limit your income. Yet you're still able to make $600 to $700 per vehicle through companies like Credit Acceptance and Westlake Financial. It really comes down to where they draw the line. What is the end result going to do to the monthly payment? 32 SELLING THE SERVICE CONTRACT ehicle service contracts are for people who want to cover the car the whole time they have it. It's not an exclusive club. Your customers don't have to have high income or good credit to join. What they do need is a dealer who is willing to step down to a less expensive vehicle in order to include a protection package. Giving your F&I; team the opportunity to sell a service contract — and GAP coverage — will be of great beneft to you, your customers and your fnance company partners. My contacts at the banks and fnance companies that serve lower credit tiers seem to agree that these contracts stay on their books for an average of about two years and three months. Adding the service contract increases the time the customer holds the vehicle before they trade V Even if you are limited in the upper tiers, that is a small percentage of your deals. On Tier 1 and Tier 2 deals, with a proper menu presentation, I see back ends of up to $2,500 all the time. If you think that sounds like a prime deal, you're right. Te same rules apply: If a prime customer qualifes for a $500 monthly payment, you do them a disservice if you show them a Mercedes that, no matter what, even with the best lease in the world, they can't get into for less than $650 a month. So if your next subprime customer's income qualifes them for a $400 monthly payment, the salesperson should show them a vehicle that will line up in the $325–$350 range. From there, just as in prime, it's just a matter of a good, solid turn to F&I.; If the F&I; manager does a great job with the menu presentation and the customer wants the products, the callback will cover the payment. AUTO DE ALE R MONTHLY • FE BRUARY 2014 it in. Following the process outlined in this article will make your deals stand out. Be it prime or subprime, as long as you're not overselling the vehicle, you will have the opportunity to do what you need to do. Car buyers know they will be limited by what the bank says they're qualifed for. By and large, they are looking for the smart choice. You're impairing customer satisfaction if you sell them something they can't afford. Build the value in protection the same way you would in prime. END OF THE MONTH I am fully aware of the pressure to move vehicles on the eve of their 30-, 60- or 90-day turn. For some dealers, it's an ongoing issue. Te solution? Don't wait until the end of the month. You should be trying to move that distressed piece of merchandise all month long. Match the car to the customer and the customer's budget. If the customer is looking for a full-size vehicle, show them the Finance companies know just as well as you do that, if the car breaks down and the customer can't afford to fx it, the loan has a good chance of going sour. Part of that responsibility falls on the fnance company, and they wouldn't fnance the protection package if they didn't see the beneft. Those that specialize in Tier 3 and Tier 4 contracts certainly encourage it. If your sales team is just stuffng people into cars and maxing out the payment-to-income and loan-to-value ratios, your portfolio will not perform. Service contracts help keep people in their cars and their loans on the books. one you have had the longest or has the most gross proft built in. Either way, you're happy; the old one had to go away regardless. But if you follow the same process consistently, you won't wind up in those end-of-the-month panics. Will there be times when you have a unit you need to go away? Yes. Will there be customers who will say they want the G35 or nothing at all? Sure. But for the dealers I know who are making those signifcant profts in F&I;, those are excuses rather than reasons. Te time for excuses is over. Until next month, great selling! Greg Goebel is the CEO of Used Car University and the industry's leading special finance trainer since 1989. He is an 18-year former dealer principal and a highly sought-after speaker, author and consultant. ©ISTOCKPHOTO.COM/DHSUEH tomers don't understand how the price translates to their monthly payment. Tere are umpteen versions of the Corolla, each of which will get your customers to work and their kids to school. Car buyers love the look of the Infniti G35, but a Maxima will drive just as well and last just as long. Given the opportunity, most subprime customers would prefer to buy a vehicle with a protection package, particularly the service contract. Tey know their budget is maxed out by the monthly payment. Every dealer knows that when the car stops working, the customer stops paying. Yes, you can repossess the vehicle, but the repo and reconditioning just add further costs. Te special fnance sales process was designed to help customers make the right choice by pre-qualifying their purchase. Tat purchase should include a service contract and GAP coverage. Without them, your customer could wind up in a situation familiar to most creditchallenged drivers: An unexpected repair, thef or total loss leaves them with a vehicle they haven't paid of, can't aford to f x and can't drive. A protection package will keep them on the road, protect their purchase and help them rebuild their credit.