The decline in the automotive industry over the past few months has brought difficulties that challenge everyone in the auto industry. For some, it is nearly impossible to sell cars right now because of the loss of lot traffic and lack of interest in their products. All of our interactions with dealers as well as the news of the day indicate the problems are exacerbated if a store is a domestic. It stands to reason that the used market and the subprime market in particular, should weather the storm better than the new car market as people still need transportation and everyone is watching their expenses more carefully. Interestingly, even those dealerships that historically do special finance well are struggling a bit.

In tough times, the best companies look at their business model and make the appropriate changes to cope with the changing landscape of the business. Consider the wisdom of Jim Collins. In his book, Good to Great, he uses the idea of a fox and a hedgehog to illustrate business approaches. The fox is always busy running around trying to devise a new strategy to get the hedgehog. The hedgehog simply continues to be a hedgehog—relentlessly doing the same thing over and over. Collins puts it this way:
“Foxes pursue many ends at the same time and see the world in all its complexity. They are ‘scattered or diffused, moving on many levels’ (quoting Isaiah Berlin) never integrating their thinking into one overall concept or unifying vision. Hedgehogs, on the other hand, simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything. It doesn’t matter how complex the world, a hedgehog reduces all challenges and dilemmas to simple—almost simplistic—hedgehog ideas. For a hedgehog, anything that does not relate to the hedgehog idea holds no relevance.”

Those that have chosen to ignore it or avoid subprime must let today’s pressures act as a positive force to take a long and fresh look at their business model. Subprime may be the business that carries many dealers through these tough economic times. It won’t be the traditional approach that carries the day as the domestic auto makers were not prepared for the gas and credit crunch. Dealers are on the front end of this.
Let’s review some basic ‘hedgehog’ principles of success. Simplify the business and excel at the basics. What are the expectations of today’s car deal? Expectations are at the core of every sale. If we meet them, we get the deal. If we don’t...no deal. It is vital to understand and manage expectations—especially now because the market is tougher today than a year ago!

Consider:
1.    The expectation of the dealership
The dealership must adjust its expectations regarding gross profit. The “5-Pounder” cannot be considered the norm any longer. Those deals may come along occasionally, but the lesson here is about adhering to basics and simplicity. What does that mean regarding expectations? Dealerships must be willing to move cars and adhere to good process to hold as much gross as possible, but also to look to make any and every deal that is possible.
2.    The expectation of the lender
Lenders cannot expect the customer’s credit to be perfect. In today’s economy more and more borrowers are watching their credit scores move south. Subprime customers will increasingly become the norm in the coming months. Smart lenders will see the opportunity and make necessary adjustments.
3.    The expectation of the salesperson
The salesperson can’t expect customers to come streaming into his dealership any more. Salespeople need to work harder than ever to attract their own customers. A smart sales associate will treat every customer with respect and assist them in creating a buying experience. Customers don’t show up as they once did, which means customer service and gratitude are musts or the customer will walk across the street.
4.    Finally—the expectation of the customer!
The customer’s expectations can be controlled, but that will come from education and proper process once they arrive at the dealership. This requires clear communication about lender expectations and the customer’s realistic evaluation of their ability to pay. This requires knowledge and patience.

It is time for paying close attention to basics and keeping the business model simple. There is business to be had, but it requires perseverance, follow-up, and clear expectations. The expectations of the dealership, lenders, and salespeople must take today’s situation as it is. This may mean re-orienting, re-training, and humbly realizing that if adjustments are not made, your customers will go elsewhere!
Bob Blackburn is the national sales manager for the Auto Lending Network. For more information, please email This e-mail address is being protected from spambots. You need JavaScript enabled to view it or visit www.autolendingnetwork.com.