Subprime Approach Helps Customers Buy Cars, Rebuild Credit

Ricart Credit Factory, a specialized subprime unit of Ricart Automotive, expects to sell a healthy number of vehicles to consumers with ailing credit ratings.

Sales and Finance Director Tony Davis admits that being part of a big Columbus, OH-based dealer group such as Ricart helps his numbers. But he adds much success stems from an approach driven by a process intended to not only sell cars but also help customers rebuild their credit.

Ricart’s Credit Factory uses search-engine optimization, search-engine marketing and local radio and TV ads to drive leads to its website and business-development center. It also purchases third-party leads.

Leads are pursued by 10 staffers who each make 20 to 25 daily follow-up calls. “We’re making 200 to 250 calls a day to sell 100 cars a month, responding to each lead within 30 minutes of receiving it,” says Davis, who’s been at Ricart for eight years, in automotive retailing for 18 years.

The Credit Factory is a stand-alone facility adjacent to Ricart’s Used Car Factory, both on Ricart Automotive Group property. Overall, the Used Car Factory sells about 750 units a month.

Subprime customers go through the Credit Factory first. The sales approach is an invitation to allow the Credit Factory to help repair a customer’s impaired credit.

Most of these shoppers present with a 450 to 620 credit score. Scoring varies, but 550 to 649 is poor, and below 550 is bad, according to Experian.

Davis works with 35 banks and two credit unions. “Because of volume, we have better insight into bank programs and how to work these deals and we have leverage with the banks and lenders,” he says.

Once the Credit Factory sales department processes leads, shoppers are invited to visit.

“We get them motivated to come see us,” Davis says, “so we learn who they are to better understand their credit challenges. By asking them to talk about past credit problems the process might humble them a little but it sets up the conversation to discuss how buying from Ricart and making regular payments benefits their credit future.”

Equifax in a 2015 commentary supports this strategy, citing data on more than 210 million loans. “Subprime auto lending has been delivering a viable second chance for many consumers who fell on hard times” and are struggling to rebuild their credit- risk standing.

“Our data also shows that subprime is a well-managed and stable subset of automotive lending, a subset that has been a key driver of our overall economic health,” Equifax says.

Davis says his subprime shoppers typically are age 25 to 42 and have visited three to five other car lots before contacting the Credit Factory.

“They’ve been told a lot of stories and have been turned down several times, so they’re skeptical,” Davis says. “It’s always news to them when we share that consistent car payments made to a buy here-pay here dealer does nothing to help them reestablish their credit.” 

As an indicator of success, Davis cites performance results.

For a comparison to industry averages, Greg Goebel, who is CEO of training company DealerStrong and a special-finance specialist, shares benchmarks compiled from dealer reporting and an analysis of millions of transactions each year. Goebel says: