Collections are the most exciting activity at a Dealer Controlled Financing dealership. If your employees have properly worked the other processes at your dealership, then collections can be easy. The dealership can maintain a larger portfolio without increasing personnel expense.
If your dealership is charging the highest interest rates allowed, extending contracts beyond the expected life of the vehicle, or treats customers like they are doing them a favor by financing them in the first place, then no collection system will work. Collections will always be difficult. However, if you treat your customers with respect, charge a reasonable interest rate and keep your loans within the expected lifespan of the vehicle, your collections efforts will be significantly easier.
The collection`s process actually starts before the customer first walks on the lot. The DCF business is the retail finance business. The first step in an effective collection process is the sales process. To start the collection process in the right direction, treat the customer with respect when selling the vehicle.
The first time the manager actually talks to the customer about collections is during the loan closing. There must be a definite procedure for the closing and it should involve only the person(s) who is (are) going to pay the note. The closing must be done in a quiet, private place in an unhurried atmosphere that is friendly, but serious. The manager must explain to the customer exactly what the customer should do if there is ever a problem with making his or her payment on time. The message that must be conveyed is, the manager expects to see the customer on or before the payment date, with or without the payment. The customer should not expect the dealership to chase him for payments or to call about late payments. The manager will work with him if there is a problem, but he must first come into the dealership and talk to the manager. The customer has been given a way to keep the account current even if he does not have money; with a process that is totally within his control. Many dealerships use a checklist to explain these policies and then have the customer sign that document to indicate they understand.
The way the first delinquent payment is collected will be the way the customer expects all future delinquency to be handled.
Collections at a BHPH or LHPH dealership depend on in-person contact with the customer. The idea is that whatever the problem may be, it can be solved and this is easier to accomplish face-to-face than over the phone. Issues must be forced into the open. The manager should not be afraid of the facts, nor should the customer be afraid to explain them. Do not get into conversations about payments on the telephone. If a pattern of discussing late payments on the telephone is set with the customer, he will wait for a call if he has future problems. For this same reason, we never go to the customer’s home or work to collect a payment. If you do so, they will expect you to pick up their payment every time. The manager should reinforce the customer’s responsibility to come in, even if he does not have a payment.
The other reason the customer has to come to the dealership is so that a signed agreement can be worked out. Written agreements carry more weight and are more likely to be successful than verbal agreements. Sit with the customer, listen to the facts, verify them independently, and make a decision. If the problem is temporary, the manager can write make a payment agreement with the customer. Any agreement with the customer should be made in writing and both the customer and the dealership manager should sign it. The customer should be given a copy of any agreement they sign. If the customer has been truthful about the situation and the manager has been objective about the agreement, the problem should be resolved. It was acknowledged that BHPH customers lived from paycheck to paycheck when the business first opened. People will always have adversities in their lives. The relationship with the customer started with respect and understanding, and it needs to continue that way.
The purpose of the Buy Here – Pay Here business is to increase the weekly bank deposits and to have repeat customers. Find innovative ways to allow customers to stay in their vehicles and to continue to make payments. Work with the customer if the customer is working with the dealership. When a customer is willing to pay, keep him. Do not let him leave because of a temporary setback.
Remember, your goal in collections should always be to keep a good customer in the car and paying.
