What We Need Now” was one of four panels that took place during the magazine’s first Powersports F&I Conference, held Sept. 16-17 at the Paris Las Vegas hotel. Moderated by Ron Martin, president of The Vision of F&I, the panel included Heidi Byers, finance director of RideNow Motorsports, Jim Dirks, business manager of Killeen Power Sports, and Roy Dinki, finance director of Montclair Motor Corp.
Q: What is the biggest need in the industry right now?
JD: I came to powersports after eight years in the automotive side and the first thing I noticed was a huge disparity in awareness about F&I compliance and disclosure. What the powersports side needs to realize is the F&I manager is in essence the dealership’s legal defense counsel.
There are things we have to execute, clarifications we need to make. The way we handle the documentation, the credit application, and the way we store those credit applications … all of that is governed by federal requirements. And if you’re conducting business without that in mind, you’re leaving your dealership subject to massive fines.
HB: Most of the finance managers in this industry are clueless when it comes to federal regulations. Simple things like password sharing are just unbelievable, especially when you can’t tell who pulled a credit report and when. I also do store auditing and I can’t tell you how angry I get every time I see a gym membership card or library card taken as a form of identification. So I agree with Jim, education is what we really need.
Q: So what can powersports dealers do to change this situation?
JD: Education and training is definitely needed, but what we really need is state-by-state dealer associations that are more organized. The state auto dealerships are much more organized than powersports. Much of that can be attributed to the fact that most of them have been around a long time, so their lobby efforts are much more centralized and are more centered on the needs of dealerships. They also have legal departments that are able to field questions from finance managers and provide guidance and assistance.
The dealer associations on the powersports side, from my observations, are not so organized. I can call my Texas association and my usual response is, “Gee, I don’t know.” There’s just no reason for them to not be able to answer my legal questions. As finance managers we can’t directly change that, but we can pressure our dealer principals to push for change.
Q: Should dealers build a structured finance training program, or should they rely solely on on-the-job training?
HB: Remember that most finance managers are promoted from a sales position, so I think it’s extremely important that you set your expectations right off the bat when you put someone in a finance position. Now, if you have not set up a structured training program, peer training is definitely a good option. However, peer training can also be the breeding ground of bad habits, so you need to sit down and show each manager how to sell product. You also need to teach them what they’re selling. They need to know that every contract in their office is a legal binding document, and that they need to be treated that way.
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Q: Going back to the current market challenges, what can a dealer do right now to weather today’s economic storm?
JD: What we need is uniqueness of identity. Every Honda, Kawasaki, Suzuki dealership — whatever brand you carry — you have the exact same product as that same-branded dealership 25 miles away. That’s who your competitor is. So you need to do something within your store that sets you apart from the other same-branded store.
In my case it was a theft-recovery system. Most other stores have systems that can give a customer a down payment on a new bike, so I took a different route. Now I can tell my customers that if their bike gets stolen there’s a 95 percent chance we’ll have it back for them within two hours.
HB: RideNow is unique in that we have import stores as well as Harley dealerships. And I have to tell you, I can’t believe the camaraderie in our Harley stores. Those stores have customers who come in and just hang out, get a cup of coffee or play a game of pool. These people just live and breathe the brand. It’s not that way on the import side, which I think is because the customers are a little younger.
What I’m getting at is loyalty is very important these days, and it’s something we’ve hit really hard in the last few months. Those doors aren’t opening as much as they once did. We have to go out and reach our customers. One thing we’re doing is working on building a complete experience for the customer. That means showing the customer that we care, and we do that by having the general manager and sales manager out on the showroom greeting customers. And when the customer buys something, we’ll ring a bell. Then the GM comes out thanks the customer for purchasing a vehicle from us.
Improving customer retention also means having a loyalty card. We’ve rolled out a new program that rewards our customers for using our parts and service department. Basically, any work that’s done, the customer gets a certain amount of money put back on the card.
Q: Gas prices were kind of a shot in the arm for the industry, as they created a large first-time buyer population. Have you felt the impact of that?
HB: We did, but it also made us realize that we’re not doing enough as a dealership to protect our customers, their investments, and protect them from themselves. I think we’ve all had that 21-year-old who’s only ever ridden a dirt bike and now he wants that R6. So there he is killing it as he’s going through the parking lot, and all you can do is hope to God that he gets home OK and that your finance contract is fundable.
You know, it is our responsibility to make sure there’s a motorcycle endorsement on the customer’s driver’s license. Ask questions. If you have a customer who doesn’t have a lot of experience on a bike, ask if it’s OK if you deliver the bike to their home.
We even host training classes at our dealerships. We also talk about safety while we conduct the vehicle walk-around. What we do is show the customer every feature on the bike. We also make sure to pass the customer off to our parts counter to show them all of the safety equipment for the vehicle.
Q: With today’s credit crunch, what do you think is going to happen with interest rates?
HB: Interest rates will go up for all lenders, and participation will go away and turn into dealer cost. We’re already getting charged for programs we used to get paid for.
JD: I agree. HSBC handles our Suzuki program and its installment program only accepts new bikes now. And the rates are jumping. They’re now close to 17 percent on the revolving side.
As for installment loans, customers with high 600 and low 700 scores are being declined by AHF (American Honda Financial), my local credit union and Suzuki. If I can’t get that 724 customer bought at 9.99 percent through AHF, it’s going to get worse.
RD: What’s saving us right now are the credit unions. We work with two big credit unions, which have picked up a lot of slack. It worked out really well once we got to know them and sent them some doughnuts. So I think that’s a good avenue to pursue.
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Q: How can a finance manager be creative in making a sale work while remaining compliant and ethical?
HB: It’s important to transition customers from a revolving loan to the installment side. Doing this provides finance managers with the ability to move things around in the deal and make it work within the lender’s requirements.
For disclosure purposes we’ll show an “A” and “B” presentation. I would also suggest not even disclosing a cheap revolving program that’ll probably get the customer stuck in the vehicle for who knows how long. And one other thing, don’t beat around the bush — ask for a down payment.
Q: When it comes to service contracts, how do you price your coverage options?
JD: At my store, a four-year extension gets a $1,000 markup. A three-year extension gets a $750 markup, a two-year extension gets a $500 markup, and a one-year extension gets a $250 markup. This creates a perception of a value difference by virtue of the price difference. If there is only a $100 price difference between a three-year extension and a four-year extension, the customer questions whether they even need the product. After all, an hour of labor can amount to that $100. But when there is a $275 difference, plus or minus a few bucks, now the customer sees a value difference between them.
Q: Charge-backs are always a big problem. Any tips on how to reduce that?
JD: The way to reduce charge-backs is through proper disclosure at the outset. If you’re upfront with your customer on what your service contract requires from them as an owner of the vehicle, then the customer understands that it doesn’t pay for everything. No service contract is going to pay for that engine blowing out because the owner went 18,000 miles between oil changes. The key is setting the customer’s expectations so they’re not so quick to cancel. And that starts by being clear about what the product does and doesn’t do.
Q: Do you use a menu system?
HB: We started our menu off slowly. It was a crude black-and-white version that came from the corporate office. We moved to a color version and it was issued and printed by the corporate office. Now we’re going to integrate it with a Web-based system we’ve recently joined.
JD: One thing I’d like to say is powersports is definitely behind, technology-wise. What we need is a fully functional dealer management system (DMS), as well as training on how to use it. On the car side we had ADP, Reynolds and Reynolds, and about 500 other management software systems to choose from. I’ve probably used 15 dealer management systems on the car side. Powersports doesn’t have the luxury of all those choices, and that’s something that needs to change.
