From the March issue of UCD
In the buy-here pay-here space, getting a customer to make payments on time and reach the end of the life of a loan is something to be celebrated by the dealer and the consumer.
Many dealers reward these good-paying customers by offering special incentives on their next purchases as their loan approaches term. It allows the customer to upgrade vehicles, and the dealer to continue working with someone with a solid pay history.
“If we have a good customer, I want to keep their business because I already know that customer,” said AJ Rogers of Pappy’s Auto Sales in Hopkinsville, Kentucky. “Right now, I have four to five people that want to upgrade with their tax money… For me, it’s selling an opportunity to grow into a nicer car. It’s a relationship. You treat me well and I want to help you get into another car.”
Rogers offers an opportunity to upgrade with a matching down payment of $1,000 if a customer has paid six months with no late fees.
The topic of working with customers with a low balance and the incentives to keep them in the portfolio was discussed at the end of the BHPH 20 Group meeting in Galveston, Texas, in February.
The dealers at the meeting took different approaches on when to contact their customers and the types of incentives they offered to keep customers.
Kevin Pendergrass of Carolina Auto Sales in Myrtle Beach, South Carolina, starts contacting customers when they hit $1,800 left on their loans.
“If they are 100 percent on time, they can roll into a new loan with no money down,” Pendergrass said. “If it’s their third down we offer a loan rate with a significant cut.”
Pendergrass said they will even work with customers who regularly pay a few days late, but always make their payments.
“If they are always a consistent payer, we want them back, even if they are 14 to 18 days late. We know what to do to collect and how to work with them,” Pendergrass said.
Nathan Smith of Parker Auto Sales in Knoxville, Tennessee, said they start working customers at $3,000, and allow for some added flexibility. He’ll offer down payments of $500 or less.
“Our sales manager pulls a report each week and starts calling them as a new lead,” Smith said. “Your balance is low and we’d like to try to put you in a new car. We try to make a deal work. At that point, we know it’s a customer we want to keep, so we’re going to do what we have to do to make that payment work and get that trade done in a way where we don’t increase their payment so they can’t afford it. But we want to sell a new car to get that balance back up.”
Seth Merrifield of McCall’s Auto Sales in Brewton, Alabama, offers a rate drop of 6 percent points for repeat customers with a good payment history that’s made it to a balance of $2,000 or less.
At Shantok Motors in Uncasville, Connecticut, Melissa and Nathaniel Dailey offer customers the opportunity to trade at $2,000.
“We offer $500 toward the down payment,” Melissa Dailey said. “We give them a trade credit.”
