Looks like the sub prime auto finance market is on a path for continued growth. I just read an article from SubPrime Auto Finance News about the number of bankruptcy filings hitting an all time high for the first quarter of this year, up about 66% over the same period last year. While this is highly discouraging for the American public who seems to be taking on more debt than ever, it must have buy here pay here and rent to own car dealers optimistic.
In my opinion, I think over the next few years we're going to see more and more of the larger dealerships tapping into the sub-prime market. We've had large franchises contact us recently to create secondary websites for them aimed at this market. I expect to see these types of requests increase, because whether a dealer wants to put up with the traditional problems of sub-prime financing or not, business is all about revenue.
The ripple effects will also be seen in related products such as RFID tracking/shutoff devices and programs geared toward dealers who want to offer financing to sub prime customers.
All in all, we've watched this market grow very fast in the last few years, and it isn't showing any signs of slowing down any time soon. If you as a dealer have the stomach for it, "All Aboard".
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Showing posts with label Sub Prime Finance Dealers. Show all posts
Showing posts with label Sub Prime Finance Dealers. Show all posts
Tuesday, July 03, 2007
Wednesday, January 17, 2007
Buy Here Pay Here Program on Autotrader.com
I wrote a post a while back about subprime finance and buy here pay here dealers (original post is here). It seems that Autotrader was working on a program for this segment of dealers and launched it as an available advertising option about a week ago. In speaking with a friend and past coworker of mine who still works for Autotrader.com, I have to say I don't really know what they're doing. Seems to me like they've taken one step forward and one step back to arrive where they were 6 months ago for advertising options. From what I'm told about features, a major benefit of the BHPH program through Autotrader.com is the pricing. I'm told it's a little cheaper than the similar "Featured" program for traditional dealers, but features don't necessarily address all of the issues at hand. I like to rate things with my own arbitrary scale, so we'll start with +2 Points to Autotrader.com for even venturing into the BHPH marketplace.
Instead of the 3 photos per vehicle on that a dealer would get with the Featured package, a BHPH dealer is only permitted to use 1 photo per vehicle. I hear the reasoning is that bad credit customers aren't shopping for a car that looks good, they're shopping for a car they can afford. Since most BHPH inventory is around the same payment price, wouldn't it make sense to differentiate your vehicle from your BHPH competitor's vehicle through more photos? Especially when Autotrader's biggest differentiator between packages is the number of photos you are allowed. Their dealer training stresses this fact too, and I don't think it can be disregarded just because a dealer is BHPH. (-2 Points for Autotrader.com)
I'm told the BHPH program does give the dealers a secure credit application in their package. I don't know that this is essential since almost anyone can get financed anyway, but the one thing it does do is prioritize your internet leads. Someone who takes the time to fill out a credit app is usually more serious about a car than someone who sends a quick email to ask what the down payment would be. Internet leads are all about getting the customer to show up in person, so I don't know that a secure credit app helps much, only that it lets you know ahead of time who is more likely. (1 Point for Autotrader.com)
The biggest thing I hear is that there will be minimal site changes to the customers. The most obvious need is a section on the site for customers with bad credit to shop for their vehicle. I understand why Autotrader hasn't done this, at least I think so. By separating customers from the beginning of their shopping experience, they're taking them away from virtually the entire dealer base who advertises presently. They've created a double edged sword - they've grown so big that to do something in other markets like BHPH would hurt their bread and butter. To have cars (and dealers) for the sub-prime finance market, you must have an easy way to find those cars. (-1 Point for Autotrader.com)
Total Points: 0
My overall impression of the BHPH program is that it seems Autotrader.com has launched it prematurely. I understand I don't know everything being discussed at the top level of the company, and that they're probably close to launching additional features. I think given the information that I have at this time, there is more work to be done. I'm sure they'll learn this as the sales reps start selling the product and they have some actual data to evaluate. If I were a BHPH dealer I think I would sit it out and see what new features they come out with specific to my market. They can get almost the same thing by spending $20 a car for a "Select Ad", and can get that with more photos too.
Instead of the 3 photos per vehicle on that a dealer would get with the Featured package, a BHPH dealer is only permitted to use 1 photo per vehicle. I hear the reasoning is that bad credit customers aren't shopping for a car that looks good, they're shopping for a car they can afford. Since most BHPH inventory is around the same payment price, wouldn't it make sense to differentiate your vehicle from your BHPH competitor's vehicle through more photos? Especially when Autotrader's biggest differentiator between packages is the number of photos you are allowed. Their dealer training stresses this fact too, and I don't think it can be disregarded just because a dealer is BHPH. (-2 Points for Autotrader.com)
I'm told the BHPH program does give the dealers a secure credit application in their package. I don't know that this is essential since almost anyone can get financed anyway, but the one thing it does do is prioritize your internet leads. Someone who takes the time to fill out a credit app is usually more serious about a car than someone who sends a quick email to ask what the down payment would be. Internet leads are all about getting the customer to show up in person, so I don't know that a secure credit app helps much, only that it lets you know ahead of time who is more likely. (1 Point for Autotrader.com)
The biggest thing I hear is that there will be minimal site changes to the customers. The most obvious need is a section on the site for customers with bad credit to shop for their vehicle. I understand why Autotrader hasn't done this, at least I think so. By separating customers from the beginning of their shopping experience, they're taking them away from virtually the entire dealer base who advertises presently. They've created a double edged sword - they've grown so big that to do something in other markets like BHPH would hurt their bread and butter. To have cars (and dealers) for the sub-prime finance market, you must have an easy way to find those cars. (-1 Point for Autotrader.com)
Total Points: 0
My overall impression of the BHPH program is that it seems Autotrader.com has launched it prematurely. I understand I don't know everything being discussed at the top level of the company, and that they're probably close to launching additional features. I think given the information that I have at this time, there is more work to be done. I'm sure they'll learn this as the sales reps start selling the product and they have some actual data to evaluate. If I were a BHPH dealer I think I would sit it out and see what new features they come out with specific to my market. They can get almost the same thing by spending $20 a car for a "Select Ad", and can get that with more photos too.
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