Wednesday, Feb. 28, 2007, 07:00 PM UPDATED 11:59 AMBy Nick Zulovich
FORT LAUDERDALE, Fla. — Thanks to dealer demand, AutoUSA recently introduced a new program that provides special finance leads to its dealer partners that work in the subprime industry.
"Providing special finance leads to dealers is a brand new service for us," explained Phil DuPree, vice president and general manager of AutoUSA. "We started building the infrastructure a year ago, but we just started selling special finance leads in February 2007."
"We decided to offer special finance leads when we kept hearing from our salespeople that dealers want more special finance customers," he told SubPrime Auto Finance News. "It's a combination of growing demand from the dealers who are obviously responding to a growing demand from customers who require special financing."
DuPree pointed out that a lot of customers in the marketplace need vehicles but may not qualify for regular financing.
"These customers have been turned down by a lot of dealers. Ultimately, what we do is provide a way for these customers to connect with a dealer willing to help them in a way that's not embarrassing for them."
How the Program Works
A credit-challenged consumer visits and clicks on "Credit Challenged" at the top of the page. Once on "Special Financing and Credit" section of the site, a consumer enters his Zip code and fills out a short form that requests name, address, phone number, e-mail address, social security number, birth date, monthly wages or annual income and employment information, according to DuPree.
"A customer must be employed in order to qualify," he highlighted. "It also asks what the monthly mortgage or rent payment is, and whether the person has ever filed for bankruptcy.
AutoUSA verifies that the consumer's e-mail address and phone number and makes the lead available to its dealer network.
"The leads become available to dealers in ‘real time,' that is, as soon as they are submitted online," DuPree explained. "How quickly the dealer responds to the lead is up to them. AutoUSA's mission is to provide dealers with leads that result in the highest closing ratio in the industry.
"The company never sells leads generated from spam e-mail campaigns or pop-up ads," he continued. "It does not sell leads to multiple dealers; and was ranked No. 1 in the quality and quantity of leads provided in a 2005 J.D. Power and Associates survey."
DuPree went on to say that the special finance leads are stored on the company's secure server and dealers are notified via e-mail when the leads are ready to be accessed.
"We don't pull credit scores so the dealer cannot specify that requirement with us (as in telling AutoUSA he doesn't want leads below a certain FICO score), but if the dealer identifies a factor as important to him, we will consider it," DuPree pointed out.
"We feel that what is more important is whether the person is employed," he said. "In order to qualify, a person must be employed and making a minimum of $1,500 per month. We also consider bankruptcy information. If a person makes a low income but has no bankruptcies, he might qualify, as opposed to someone with a slightly higher income and one bankruptcy or multiple bankruptcies."
Dealers can purchase the leads on a per-lead basis and prices vary based on market conditions, the general manager.
"A dealer qualifies to purchase special finance leads if they have a special finance department or someone dedicated to special finance within the dealership," DuPree said. "If a dealer does not currently meet the requirements but would like to, we can connect the dealer with trainers who can go in and train the dealer on how to handle this market.
The Zip code comes into play by narrowing down the geographic area where the consumer is located and matching him with local dealers.
"Typically, dealers only want to purchase leads for customers that are within a certain geographical distance," DuPree pointed out. "This makes sense as it's very unlikely someone would travel hundreds of miles to buy a vehicle. So, we ask for the Zip code and the typical radius is 100 miles from a dealer; however, the dealer can specify that leads be closer or farther. It's up to them."
While state laws vary on how much a dealer can charge to arrange financing and whether APR needs to be capped at a certain rate, the company said its trusts the dealers to know this. The leads are available throughout the country.
Overview of the Subprime Market
Although the company just launched its special finance leads program in February and doesn't yet have statistics on closing rates, DuPree pointed out that successfully closing 10 percent of special finance leads is considered strong in the marketplace.
"Right now industry numbers seem to reflect that closing 10 percent of special finance leads would be doing a good job. That is the current standard of performance," he explained.
Highlighting the importance of the subprime market, DuPree noted that profits for dealers generally result from two areas.
"Typically, with pre-owned vehicle dealers can make a lot of gross on the vehicle they sell, in addition to finance charges," he said. "Inventory has to be inexpensive. The typical special finance customer needs a monthly payment of less than $400. Typically this would be on a used vehicle, and a vehicle with a high residual value will make the loan more attractive to lending institutions.
"Dealership employees who work in special finance departments need very good connections with finance people who can provide subprime lending," he added.
Commenting on the importance of a separated, dedicated special finance department, DuPree said, "Knowledge of the market is also critical, including what type of inventory sells well. For instance, most subprime autos are a few years old with higher-than-average mileage. Also, cars with a high residual value tend to make the loan more attractive to lending institutions.
"There are also federal regulations and legalities on how you handle these types of transactions, i.e. when you respond to consumers, how to respond to them, etc. If you don't know these regulations and legalities, you could be opening yourself up to liability," DuPree said.
A Bit More About the Company
The company works primarily with franchised dealers; however, DuPree said the company may start some relationships with independent dealers under its special finance lead program.
"Many independent dealers that do buy-here, pay-here are successful in the special finance market, and those are the types of customers we would like to service," he said.
AutoNation purchased AutoVantage from Cendant in 2000 and subsequently changed the company's name to AutoUSA.
DuPree noted that the company partners with a variety of online auto resources, including Edmunds.com, Kbb.com, NADA Analytical Services Group (formerly, N.A.D.A. Official Used Guide Co.), MSN Autos, Yahoo and AOL.
The company currently works with more than 4,000 franchised dealers, he noted.
"We estimate that 15 to 20 percent of our current dealer network can support special finance," DuPree said.
For more information on the company's special finance leads program, call (800) 243-9935.