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Subprime consumers: Making an impact at dealerships

Published September 2011

In this tough economy, many people who used to have great credit have now fallen under hard times. And because of the recession, dealers have seen an increase in subprime consumers. With the help of GM Financial's programs and dependable representatives, many dealers are able to provide these consumers affordable financing options that put them into new vehicles.

Dealer Insider spoke with several dealerships in high subprime markets to discuss how to work with subprime customers to take advantage of subvention programs and low interest rates. Each dealership has been able to successfully promote new vehicles to their subprime customers, while also giving their own unique approach to selling the vehicle and understanding the customer's needs.

Subvention programs help subprime consumers

Kingdom Chevrolet, in Chicago, Ill., has had success transitioning credit-challenged customers who thought they could only purchase a used vehicle into a brand new vehicle. Mike Helmstetter, Principal for Kingdom Chevrolet, explained that the dealership has an understanding of why some customers purchase a vehicle and then stop paying on it, which in turn hurts their credit.

"I've discovered that there are usually two reasons why a person will buy a car and stop paying on it: the car doesn't work and has some mechanical problem, or there's a change in their financial situation that makes paying for the car more difficult," he explained. "So if we're able to transition them from a used car into a new one, we see fewer problems with the car and they're willing to come back for business."

Recently, the dealership has seen a surge of subprime customers. Helmstetter said that GM Financial's subvention program has helped many of his subprime customers get into a new car. "For the customer, it makes car-buying more affordable, and that spurs return business for the dealership. For the dealership, it's great because we do about 50 subvention deals with GM Financial on a monthly basis."

Rick Hendrick Chevrolet, in Duluth, Ga., has also built a successful relationship with subprime consumers. Tafi Jaji, Sales Manager of F&I, noted that GM Financial's subvention program offers huge benefits for both the customer and dealer.

"First, for the customer, it gives an opportunity for someone with credit challenges to buy a new car at an affordable monthly payment and at a lower interest rate. This will in turn shorten their trade cycle at the lower rate and also allow them to have the comfort of owning a new car that is covered under warranty from the factory," Jaji said. "For the dealership, it allows us to give a great deal to our customers – and that is a win-win for both parties. It gives us a customer who is 'wowed' by the rate, which in turn gives us a very loyal customer who will return to the dealership to do business in the future, as well as gives us one of our best sources of advertising: word of mouth."

Consumers know where they fall on the credit spectrum

Colonial South Chevrolet, in North Dartmouth, Mass., has had success with its subprime business – not just because of the low interest rates, but also because many of their customers understand their credit situation.

"Most of our customers who qualify for the subvention program understand their credit situation fully. They are delighted when they see the rates and terms Colonial South Chevrolet and GM Financial can offer them to get a new Chevrolet," said Alex Castergini, General Manager of Colonial South Chevrolet. "Many of our subprime customers who would normally have to purchase a used vehicle at a high interest rate are now getting a new vehicle at a rate that's sometimes better than a prime rate."

Leverage customer service with your finance partner

All three dealerships have noted that GM Financial's Dealer Relationship Managers (DRMs) have contributed to their success in the subprime market.

"The team at GM Financial is by far the best to deal with because they truly look at it as a partnership, and they are always looking for ways to make it better for both of us. Our DRM, Gary Glisson, is constantly checking on deals that are going through the funding process, asking about any challenges or concerns we have, and he will pick up the phone and help structure our deals for us," Jaji said.

But it's not just about getting the deals funded. Castergini explained that GM Financial's DRMs also open new windows of opportunities for their customers.

"Every GM Financial rep that has had interaction with our dealership has gone above and beyond to help us turn subprime opportunities into new Chevrolet sales. We consider our DRM a part of our team," he said.

It's clear that dealerships are seeing more and more subprime consumers, and dealers are benefiting from their partnership with GM Financial. Customers are continually giving positive feedback to their dealerships, complimenting them and GM Financial on the flexible programs that are offered and the quality of service given. Remember, a lot of these customers are new to the subprime segment. Having an open, respectful dialogue about their credit situation and ways to help get them into a new GM vehicle will only serve the dealership with a positive outcome and give the consumer a positive shopping experience. It truly is a win-win for everyone!

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