Author Archives | Rod

VSCs Are a Win-Win-Win

VSCs Are a Win-Win-Win

Mr. Agent, I would like to challenge you to find a product that provides more benefit to your automobile dealers than a vehicle service contract — without mentioning the vehicle itself.

If you are working with reputable dealers, you know they are genuinely concerned about their customers. They probably offer some type of VSC now on their own. The new-car manufacturers keep extending warranty terms and have experienced huge success with certified pre-owned (CPO) programs for their used cars.

Why? Because they realize that the typical consumer is “warranty wise” and they know it is important to help sell the vehicle and obtain extra profit. So why does the number of vehicle service contracts sold keep increasing every year? I believe there are many reasonsbut let’s focus on the top three:

First, automobiles are much more complicated and much more costly to repair nowadays. Obviously, you cannot take that vehicle to Joe’s Corner Garage to get proper repairs, so customers need to take their vehicles to certified repair garages. If you sell an extended vehicle service contract, it can keep the customer’s cost down to a small and manageable deductible.

Second, the industry is conditioning the consumer to expect warranty coverage on their vehicles. If there isn’t any, or the original factory warranty is going to expire while they own the vehicle, they will generally be positively receptive to purchasing one — when properly presented by the selling dealer.

Third, most of the smaller dealers who are happy with their realized profit on vehicle service contract penetration are offering these warranties as part of the asking price in states where it is permissible. They are not offering it as an “aftermarket” product that can be negotiated as a separate part of the transaction.

Let’s be realistic about the process. Ask yourself the following question: “Whom does the customer fault when the vehicle goes down with a problem?” The dealer, of course! So however you sell it, a quality (and fully insured) vehicle service contract is definitely a win-win-win situation. Let’s take a closer look at how VSCs benefit customers, dealers and you, the agent.

1. Benefits to the Customer

The benefit of securing a vehicle purchase is threefold:

  • Limited out-of-pocket expenses for repairs: A service contract usually represents a very small percentage of the total sale, typically about 5% to 10% of the price of the vehicle. Deductibles can range from zero to $200. The customer usually has little or no cash to outlay toward major mechanical breakdowns. For about $25 per month (when financing), a customer can protect themselves from large repair bills, and the number of claims they have during the contract period doesn’t matter.
  • Fixed monthly payments: When a customer fully understands the benefits of getting an extended warranty, he or she knows the monthly cost upfront. Without it, the monthly payment will be lower, but the outlay of their own hard-earned money can vary according to the type of repair needed. Do not forget about the various labor and parts rates one can encounter when traveling away from home.
  • Quality service: It will usually cost more to visit a dealership service department or a national chain than an independent garage. It costs an enormous amount of money to invest in the sophisticated, brand-specific equipment, tools and training that is required to properly repair today’s vehicles. A customer that has a good service contract from a reputable agent and provider will, in most cases, enjoy fixed costs, regardless of who works on the vehicle.

2. Benefits to the Dealer

If the benefits to their customers don’t persuade them, remind your dealers of the various ways they will benefit from increased VSC sales:

  • Income: The service contract can provide income for numerous areas of the dealership, especially if your dealer has their own repair facility.
  • Customer Satisfaction: Your dealers cannot afford to have a customer buy a car from them once and only once. A VSC ties the car buyer to their dealership and helps enhance customer loyalty. After all, doesn’t your dealer want to know when their customer has a problem so they have an opportunity to stay in the loop when a claim has been filed?
  • Fewer complaints: Agents should encourage dealers to keep things upbeat to maintain positive attitudes and make their dealership a great place for people to buy their cars. The last thing your dealers need is for a complaining customer on the lot or in the office, especially when they are trying to conduct normal daily business. You cannot eliminate repairs or mechanical breakdowns, but you can limit them by offering to protect every unit they sell.
  • More repeat business and customer control: We all like to hear positive and successful sales references from satisfied customers. Dealers and sales managers should look for customers in the service area or be alerted whenever one of their customers has a mechanical breakdown. That is a golden opportunity for another sale, and it wouldn’t exist without the service contract.

3. Benefits to the Agent

If you train your dealers and staff to really and truly believe that your VSC program is a benefit — and an exceptional value — I guarantee you that you will increase in your total overall VSC territory sales, increase your overall personal income, and increase new dealer enrollments.

Your agency will grow because your reputation depends on your ability to partner with your dealer base by offering ways to help them succeed. After all, aren’t bigger territories, higher incomes and more clients what we are all striving for on a daily basis?

3 Steps to an Effective VSC Presentation

  1. Qualify the Customer’s Needs.

Once you have determined the financing term, find out how many miles the customer drives each year and how long they plan to keep the vehicle. Train your dealers to ask about repairs to their previous vehicle, especially if a trade-in is involved. Ask whether a warranty was purchased on their last vehicle and explain how it would have added value to their trade-in!

  1. Overcome the Customer’s Objections.

Remind customers that major and minor repairs tend to come at the most inopportune and unexpected times. Ask them if they need their vehicle every day and whether their monthly household budget can withstand an extra $750 or $1,000 for that unexpected repair bill. Finally, ask whether they have ever used their homeowner’s insurance. Don’t they agree they are much more likely to have a claim on their vehicle?

  1. Get the Customer to Make a Decision at Point of Sale.

Your dealers’ presentation should describe the program to the customer so that, when it’s time to ask for the order, they see the need and the benefits in purchasing the contract. It should also uncover each customer’s “hot button,” the specific benefit that they cannot afford to be without. Once your dealers have created enthusiasm for the product and its obvious benefits, it is now time to make them render a decision on the upgraded term.

We can safely assume that about half of the people who actually purchase a service contract or extended warranty initially objected to the idea. That is why it is important for you to have an effective presentation to obtain your total profit goals on each and every sale.

Good luck and good selling on that VSC program!

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15 Ways to Get Organized

15 Ways to Get Organized

One of the things that I have personally discovered about the most successful agents is their ability to handle a variety of daily challenges, tasks, problems, issues and responsibilities, all at the same time, and still come back for more tomorrow.

This would not be possible if they lacked personal organizational skills!

I don’t wish to confuse anyone, but please keep in mind that I am not talking about time management here but personal management. What you can do in a framework of passing time is just manage all the “stuff” — decisions, problems, resources, customers, employment, successes, failures, risks, paperwork and reporting — as well as all the activities and matching issues in your personal life.

I will take this opportunity to list my Top 15 suggestions to help you improve your personal organization:

  1. Start with a written list of what you want to accomplish for a given time period.
  2. Go back through and prioritize the tasks on the list you made.
  3. Stay focused on your plan by completing each task according to its priority.
  4. Eliminate all clutter in your normal daily routines — if you have not referenced it in the last 10 days to obtain your objectives, why keep it around?
  5. Do not pursue anything on the list that you are not truly passionate about completing.
  6. Get up earlier and go to bed earlier.
  7. Organize your personal workspace — be it your desk or your vehicle — so you can be more productive.
  8. You must learn to say “No” much more often.
  9. If you catch yourself procrastinating on any task on your list, ask yourself why.
  10. Consider enlisting a mentor (or two, or three) to help you prioritize and complete tasks.
  11. When you say “Yes,” mean it.
  12. Respect and value your quality free time away from the job or assignment. Play when it is time to play and work when it is time to work, but do not mix the two.
  13. Have fun and enjoy life as well as this crazy profession you have chosen.
  14. Learn to make the client a friend. Prioritize relationships over transactions.
  15. Use all the available technology at your fingertips today as a tool, not as a crutch.

I realize No. 15 might be challenging for some. It has become much too easy to rely on technology as a sales tool to contact and reach out to new clients, maintain current and past clients, handle your sales and service issues and handle many routine daily functions. But at what cost?

In my personal opinion, business relationships, especially in our industry, are all about the basic concept of dealing one-on-one and face-to-face with people! Our clients want and need, as well as expect, that personal contact.

How often do you shoot over an email or text message instead of dialing that cell or office number and speaking to a client or friend personally?

Please understand that I am not against technology. I do believe it lets us get more done daily and is definitely faster, and I am amazed at the endless capabilities the future holds. But nothing can replace the “warm-and-fuzzies” that are created with a great smile, a firm handshake and a true sincerity to be helpful to the client — in person.

Neither the hottest new iPhone, the fastest computer nor the award-winning website can convince a client that you really do care about their success. Go ahead and label me “old school” or, better yet, “technologically challenged,” but humor me and try the following for the next 30 days and then monitor yourself:

  • Personally call one prospective client every day instead of shooting them an email.
  • Personally call one previous customer every day — not to sell them anything, but just to say “Hi” and ask how the world is treating them.
  • Personally call a relative or a close friend, just to tell them that you were thinking about them and extend warm wishes.
  • Finally, do not always assume that every client you are dealing with is as technologically advanced as you are.

Better personal organization will directly relate to improved effectiveness and increased productivity. Improved effectiveness as well as increased productivity directly relates to a more positive attitude. Positive attitude directly relates to a higher and more rewarding quality of life!

And after all, isn’t that the No. 1 priority on your written list of daily tasks to be accomplished?

Posted in F&I, Training Articles0 Comments

10 Common Mistakes Made by Outside Sales Agents

10 Common Mistakes Made by Outside Sales Agents

Before you can start selling more products & programs than you are selling right now, you have to change some of the mechanics that you are doing right now.

To know what areas of the selling process that you need to change, you need to make the most difficult evaluation and that is to evaluate yourself- and do it honestly!

Thought for the Day…

“You will only perform as well as the example you set for yourself”

Set your priorities daily … and live by them!

In my field agent training classes I like to refer to self-evaluation and how you can spot areas of weakness that need your immediate attention. The answers to all of your self-evaluating questions should be a simple “Yes” or “No,” there are no middle of the road answers when evaluating.


If the answer to the question about whether agents sell more products after their first initial visit to the client is “Yes,” then instead of making excuses for your current results, shouldn’t you be figuring out a way to develop more be-back visits and presentation opportunities?

Don’t get me wrong; I’m not trying to be smart or cute. But when someone calls something to our attention that falls into the category of good old-fashioned (sales) common sense, it seems that we should make excuses about the way that we have always done it, or better yet, the way it was taught to us. Just pay some attention to the results of your personal self-evaluation and every time you make an excuse you are closing your mind to new thoughts and that can cost you hundreds of dollars every day.

Please keep in mind that human nature is to reject any kind of change coming. We have all been doing some things so long that we’re confused and not sure about what and how to change it. We have all forgotten that “CHANGE,” (now let’s say “tweaking”) is how we got to where we are today.

All that I ask is that you listen to everything you hear objectively so that you can weigh the facts and make an intelligent decision. Since we are all in this “sales” game together, I believe that keeping an open mind is critical to your future success as an outside sales rep in the field.

Let me ask you this …

“Are you selling your products and programs in the same manner and procedure that you did last year?” If you are, then you are losing ground. Can you afford to lose one sale to your competition?

Let’s take a closer look at some specific examples and see where you fall in this self- evaluation process by answering the questions honestly!

Mistake # 1- Do you take each customer seriously?

Do you call on any perspective client that is not really in need of your programs, services and expertise? Do you pre-qualify potential clients? Do you list the same old entry (excuses) on your daily report expressing the status of your visit? Are these just descriptions and terms that you use to describe the potential clients that you let slip through your fingers? Please understand that every potential customer that you talk to today, in person or on the phone, at a business social gathering or connected to on social web sites is a potential client of yours. With this mind set you will begin to sell more products and programs.

Mistake # 2- Do you qualify customers properly?

Qualify = Investigate professionally & ask the proper questions to determine needs.

If you are not finding out your customers wants and needs before you make your presentation and you are closing 8 to 12 deals a month now, I am telling you that you’re losing that same number in extra sales a month!

The only way that you can find out customers wants and needs is to ask the right questions. I am not sure what is worse; not qualifying your customers at all, or only qualifying them on price alone? Since your presentation should be based on their needs, if you are not qualifying on the above-mentioned category that means you are missing more sales that you’re making.

Mistake #3- Do you conduct normal conversation or interrogation tactics?

Establish some common ground with the customer, relax the customer, and try to establish trust and confidence. The key to your entire sales approach should be that every customer gets the “red carpet treatment.” Let me ask you this, how much tip did you leave the last waitress that was rude to you and did not ask you for your wants and needs? Remember, you never get a second chance to make a good first impression. The first five minutes should be spent in making the customer your friend, instead of rushing right in to your sales presentation

Mistake # 4-  Do you always ask for the order?

It really seems too simple, does it not? Make sure that you at least attempt to close everyone that you present to.

Now, do you have any questions?

I know you will say to me, “Why should I bother and try to close these people that have already told me they aren’t buying today? This is just a waste of my valuable time.” Well as soon as you learn not to cross hair (pre-qualify with no facts) a customer (deciding whether you have a live one or not) and instead ask everyone for the sale during your best presentation, you will soon realize that even some people who say they aren’t buying … will buy on the spot.

Mistake # 5Who controls the selling situation?

Who is the pro here with regards to the selling situation? Do you listen to the conversation that is taking place during the presentation process and ask yourself, “Who is controlling this situation?” Is it the salesperson or the customer? Getting the client involved in the presentation by control is the key to a successful close. Remember, soft commands can help you maintain control.

Mistake #6Staying average

The average outside field sales rep usually presents to 3 to 4 customers a day, and does not follow up religiously, does not prospect in off time, does not attend more than 6 hours of sales training a year, closes about 6-8 clients a month, and blames all sales results and income results on something or somebody else.

Remember if you are still closing the same number of clients a month this year that you sold last year…you’ve quit growing. You’ve averaged out and you’re standing still with no forward momentum.

Caution: Standing still is the first step to heading backwards.

Mistake #7Do you truly understand “Sales”?

“Selling is the lowest paying easy work … and the highest paid hard work that I know” – Author Unknown

Every sales “job” has its limits. That is why it is so great to be in an actual profession and not just a job. In a truly professional sales job, all the limits have been removed and there is no limit to what you can earn or the levels of success that you can reach.

Make a decision- Decide if you want your territory sales at the bottom, in the middle, or on top of your company. Real success is only up to one person- (surprise) … That’s you!

Mistake #8- Do you plan and schedule your day, week, month, & year?

Work on your sales objectives daily- Break down your monthly sales objective according to the number of selling days in the month.

Keep a personal planner (App or program) – Using this type of tool effectively can be your most effective organizational tool. (It will actually become your boss.)

Schedule cushion times during the day– Take a walk around the building, have a bag lunch at the park, relax on lunch time and enjoy your surroundings, etc. Make it an hour or so of your time to recharge.

Focus on high priority sales objectives– Certain goals and objectives have to have a higher priority than others, these ones should get the larger percentage of your workday. Select goals and objectives that inspire you and put your goals in writing, and then picture your feelings when you achieve the end results. Look at daily and routine assignments with eagerness, to make it a more professional working atmosphere.

Set priorities on your ‘to-do’ list for the day and keep a running master list of to do items- Adding and changing priorities daily.


Mistake # 9Do you motivate yourself and others daily?

Discover who or what really motivates you. You should want to do what you have to do daily, with positive energy, enthusiasm and a contagious attitude. Give yourself and others around you plenty of positive reinforcement by being a mentor to mold themselves after.

Make prospective clients you meet feel like the most important people in the world, because they are!

Mistake #10Have you embraced proper follow up techniques?

Most follow up systems require the salesperson to follow up owners periodically for no apparent or logical reasons. When the salesperson follows up buyers in a haphazard way, they eventually contact a buyer who is sore about a problem, or possibly feels as though they received discourteous treatment from someone within your company. At this point the salesperson gets “chewed out” for something that he had no control over. When this happens a couple of times, the salesperson usually no longer wants to conduct customer follow-ups.

Secondly, most salespeople fail to realize that one of the great secrets of outside sales success lies in a salespersons ability to continue to do the same good things, day after day, week after week, month after month, year after year.

Remember: Successful salespeople are the ones who are continuously persistent, and to some this is extremely difficult and boring. Real losers in our industry are the ones who continually jump from one project, company, or sales process to another. In reality, they get bored doing what it really takes to become successful in the field.

Every field rep should develop and work with a program that is designed to retain at least 90% of his/her clients. In my opinion, there is only one way. You must become involved with the buyers personally as well as emotionally. Or in other words- KNOW WHAT IS IMPORTANT TO YOUR CUSTOMERS.

In Conclusion:

If you are really interested in dominating your market, or if you are just interested in increasing your current sales and commissions, Take this self-evaluation today! Tomorrow may be too late!

Posted in Sales0 Comments

Holiday Sales Myth?

Holiday Sales Myth?

Many salespeople and agents believe that between Thanksgiving and January 2nd, people stop buying and selling. Quite the contrary! People are in more of a buying spirit than at any other time of the year. It doesn’t matter whether you sell computers, real estate, automobiles, extended warranty contracts or portfolio services, the world doesn’t stop just because it is the holiday season!

There are several things you can do as a field agent during this period so that the bottom doesn’t fall out of your year end sales results. Your 2015 results could depend significantly on how you spend the next six weeks.

Here are a few things that I would like for you to consider as you prepare to move into your last six weeks of the year:

Time to Conduct an “Attitude” Check Up!

  1. Have you begun operating your territory under the misguided belief that your clients are going to sell fewer products or possibly none at all during this time of year?
  2. Do you slow down your cold calls and new client visit efforts for these six weeks?
  3. Do you believe that it is harder to see and get appointments with clients and decision makers during the holiday’s?
  4. Do you feel that it is necessary to cut price or offer more “deals” during this period?
  5. Does your personal motivation, energy, and commitment wane during the holiday’s?
  6. Are you too “tied-up” and pre-occupied with other activities ­– parties, shopping, etc. – to keep your selling and closing edge sharp?
  7. Do you keep learning and growing during this time of year or do you put your personal sales growth on hold as well?
  8. Do you spend some time planning your sales strategies for next year?
  9. Do you take some time to carefully evaluate all of your successes and failures of the previous year to ensure you can build on your success and not repeat your failures?
  10. Do you spend quiet time in thoughtful goal setting for the upcoming year?

Here are some suggestions for productive things you can do during the holiday season:

  1. Use this time to evaluate your territory sales results. Ask yourself where you could have done better, been smarter, faster, sooner, or been more effective with regards to locating completely new clients.
  2. Use this time to plan your activities for the new year and set realistic goals in all areas of your territory.
  3. Do not stop “prospecting” for new business.
  4. Use your networking time effectively. You may see a lot of clients and industry related people during the holidays who can help you advance your sales in some way or another.
  5. Read and/or listen to some positive self-motivation books or CDs over the holiday season. (Not necessarily about sales!)
  6. Re-evaluate your sales techniques – what is working and what is not. And then think about why or why not.
  7. Find a mentor or even a personal coach who can help you exceed your sales goals for the new year.
  8. Plan to do something different, unusual, or possibly even “outrageous” next year to get the attention of all your clients, new and old.
  9. Write down a list of ten creative actions you can take next year in your territory to guarantee the completion of your 2015 sales objectives.
  10. Pour it on during these six weeks! You are heading down the home stretch; It’s time to give it your final “kick.” See if you can get more closed deals than you thought possible.
  11. Strive to hit that HOME RUN in the bottom of the ninth inning to win the game. During the holidays, see if you can get that one client who has avoided you all year long. (Tax write offs!)

Please keep in mind one of my favorite quotes:

“Whatever you seek in life’s rewards. . . you must first earn in service to others.”

In conclusion, let me state that as a chronic student of the sale game, I am not a “Scrooge” (contrary to some popular belief!). I do believe in spending important family time with those of importance in your life who need and want some of your quality time. (That topic itself is worthy of a future article!) I am only suggesting that you do not change your sales strategies or slow down during the holiday season.

Remember, while you are letting your attitude change to a slower motion, your competition could be stealing the business right from under you because you are chilling out.

The holiday season will be over before we know it and 2015 will be a reality.  

Do not lose your momentum during this time period!!

And one final thought. . . You have a choice as to whether YOU and YOUR COMPANY will achieve record sales production in 2015 as a direct result of your effective use of time over this holiday season. . . or you can choose to hope that your competition also takes these six weeks off.

Don’t Bet on it!

As a valuable member of your company’s programs and products, let’s use some reverse psychology this year and really pour it on right up to the very end of the year, and show your boss, your clients, your competition, and especially YOURSELF, what YOU are really made of.

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Auto Services Agents and Their Challenges

Auto Services Agents and Their Challenges

Do you remember when your biggest challenge was to service a growing area of auto dealers without working more than 80 hours a week? When the only worry you had was finding, selecting, servicing, and retaining all of the new and used auto dealers that had a need and a demand for your company’s services and/or products and programs? Do you remember when you would get a lead from the corporate office, visit the prospective dealer/client, make your presentation and cover your marketing material and then have the dealer/client sign up on the first visit? Do you remember when just showing up monthly and taking care of the dealer’s/client’s problems, issues and customers was sufficient to earn his business?

How things have changed! The technology bust, terrorist attacks, new industry compliance issues and a seemingly endless parade of large and small competitive companies (all of whom are after your customers!) have converged to create a perfect storm. Those who can earn their living by selling professional dealer/client services are now facing the most challenging business environment in more than a generation. Incomes have been slashed and many agents are leaving to travel a different career path.

As the executive vice president for sales and marketing, I hear from the 123 agents who are currently enrolled in Peritus programs nationally on a daily basis. I hear a rumbling of despair from the sales reps in the field competing for their share of a much smaller and hyper-competitive auto dealer/client business pie. Common sayings are:

“I can’t get past the gatekeeper.”

“I can’t get a meeting with the decision-maker.”

“Everything is price, price, and price.”

“There is no way I can make my numbers for the month.”

“Thanks for stopping, but I have been with ABC Company for over five years now.”

However bad the situation may seem, I know there is still plenty of business out there for you on a daily basis. In fact, some dealer/client services companies are not only surviving in this turbulent market, they are actually increasing and prospering. What are these professionals doing to win more of the existing business? What are they doing to create new business?

Here are some of my thoughts on facing the street issues at hand.

Consumerism – Usually taking the form of an often misinformed and sometimes hostile dealer/client.

Unreasonable Competition – In the shape of the profit destroying, low-end, no-coverage dealer/client services provider.

The sheer dilemma of just trying to fulfill one’s promises to a dealer/client – Usually made impossible through this seeming inefficiency of a corporate support to the guys in the field and a non-understanding owner or manager. This is compounded by life’s everyday problems.

Whether real or imagined, it is  these negative forces that afford the greatest opportunity for the honest, serious “services” agent. The successful services agent realizes they are in a highly competitive business. They also know that these highly corrosive conditions are chipping away at their competition at the same time, and in the same manner. The intelligent salesperson is  aware that these circumstances chew at and significantly destroy his strongest ally –A POSITIVE ATTITUDE !

But, simply recognizing the problem is not enough. What to do about it is quite another matter. Self-confidence, empathy with the dealer/client, the ability to get the sign up and usage,  handling their customer issues promptly – these are all just broad terms. Unless they can specifically be brought into a workable method, clearly spelling out to the individual service agent an everyday, practical path that results in signing more dealers/clients and earning more commissions, then they are just meaningless.

To be a top earner in the agent arena, an agent must strive continuously not only to know the tools of his trade, but must know how to apply them effectively in a professional manner. The real professionals train constantly to improve their techniques while never forgetting the necessity of maintaining the agent’s relationship with the dealer/client. They must make the most of their industry knowledge, style and personality traits, maintain a sense of humor and most importantly, rely on their ability to establish and maintain “relationships” in order to convince the dealer/client to buy from them. The services agent knows full well that the difference between a “pro” and an amateur is the ability to hear the word “no” without surrendering. He or she recognizes that it is their task to make YES’S out of NO’S. The intelligent services agent quickly learns that deception, false promises, over-exaggeration or anything else casting a doubt on their integrity will work to their own great disadvantage.

The notable services agent takes the positive approach and is always careful to protect that feeling of trust and confidence they have projected to the prospective dealer/client. They utilize selling methods that make them aware of where they are during any part of the presentation, but they do it in an easy, non-threatening manner that is the mark of a pro. The services agent is intent on knowing their product and never falls into the trap of assuming the dealer is aware of all the benefits of their products or services. Each step along the way to a successful sign up, by their very language, manner and approach, is projected to the dealer/client sitting across the desk from them. Everything they do and say is for the benefit and well-being of their business and their customers.

As does every professional athlete, surgeon, lawyer or pilot, they continually train for perfection. They know that the selling climate in today’s auto industry is always in a state of change. The method we used yesterday to close a deal might be obsolete and possibly even destructive to their own territory sales growth. The services agent is not afraid to challenge their own beliefs and techniques and accepts these adjustments as they occur, while intelligently adapting them to their own style and personality. They must be ever cognizant of what is going on in our industry and on the street. It is the dealer/client who ultimately decides who the best agent is for the company and what their territory sales and yearly earnings will actually be!

Fully aware of all these influencing factors, the true professional services agent measures his or her success not only by income but also by the satisfaction of doing the job to the utmost of their ability. He or she recognizes their own weaknesses and attacks them with all their tenacity and drive. They use all the tools available to them to ultimately reap high financial rewards for efforts that are truly attainable for the professional services agent – both now and in the foreseeable future.



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Service Contracts for BHPH Units

Service Contracts for BHPH Units

One of the first questions your new-car dealer clients will ask about buy here, pay here is whether they can sell vehicle service contracts for those units. They definitely can, but they’ll need your help to pick the right program and develop a new sales process.

As a portfolio buyer, I work with BHPH dealers of every size. Some sell as few as five cars a month; others sell upwards of 150. But only 10 to 15 percent of them sell service contracts (or warranties — more on that later) with any regularity. To understand why, you have to understand the mentality of the BHPH dealer: They have a hard enough time collecting $75 from each customer every week. They figure that adding a service contract is going to jack up the price and make collections even harder.

Fair enough. But my question to them is, “What happens to your collections when the engine blows up?” Some dealers put the customer in another car. Others offer to split the cost of the repair or tack the total cost onto the back of the loan. That’s called a “side note,” and, frankly, the whole concept is flawed.

When you’re selling a vehicle to a bad-credit customer, the last thing you want to do is extend the term. And as a portfolio buyer, when we do our due diligence, we often find that the dealer has continued to apply payments only to the principal, saving the side note for the end. It’s not illegal, but it’s not exactly attractive, either.

The best approach is to find a product that works for your dealer’s BHPH operation and use it to protect your dealer’s financial interest and their customers’ investments. If you can master the concepts I’ve listed here, you’ll have the opportunity to earn your clients’ trust and confidence — and business — by making suggestions that benefit their operations.

1. Understand the product. The first step is to educate your dealers on the difference between a service contract and a warranty. A service contract is a promise to perform (or pay for) certain repairs or services. They are sometimes called an “extended warranty,” but a service contract is not a warranty as defined by federal law. A service contract may be arranged at any time and always costs extra; a warranty comes with a new car and is included in the original price.

2. Make it stick. Service contract providers that cater to the BHPH segment understand that repossessions are par for the course. It may take a phone call or two, but some will allow the dealer to transfer a service contract to the new owner of a repossessed vehicle without charging for a new contract.

3. Forget the markup. In new-car and traditional used-car sales, a bank has no problem financing the sale of a service contract and marking it up to help the dealer make a profit. On the BHPH side, you have to sacrifice some of that markup to protect the dealer’s investment.

4. Ask questions. Here’s a list of questions to ask service contract providers as you try to find the right partners for your dealers:

• What claims-to-premium rate is considered too high?
• When does the VSC take effect with regards to delivery date?
• Will the customer be charged a deductible for repairs?
• Does the service contract come with a roadside assistance plan?
• Will the service contract provider pay claims for repairs performed at the dealership’s own service department?

5. Vet the providers. One of the most important questions regarding the service contract program is who underwrites the program. The new BHPH dealer must research each and every company they are considering doing business with. Are they registered in their state? Have they met all the state’s requirements? Do they belong to and actively support that state’s independent dealer association?

6. Put the customer first. Try to incorporate the cost of the VSC into the pricing of the vehicle, and don’t overcharge. The customer will see the added benefit and appreciate not having to put up any additional funds at delivery time. When repairs are needed, help with the scheduling and refer them to shops that you personally recommend. Remember that both sides have a financial interest in the vehicle. This will help build that customer/dealer relationship and create repeat sales as well as referrals.

At the end of the day, the customer will judge the dealer by the manner in which claims are handled. We have an old saying in the BHPH business: “If the car performs, the loan will perform!”

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