From the Front Lines On Main Streets Across America

The fourth quarter typically is a time when dealers scramble to increase sales during an historically slow period. Many of the dealers interviewed in this article will be on hand for the Leedom National Special Finance and Buy Here-Pay Here Conference, to focus on learning more, to sell more and to earn more, not only in the fourth quarter but into 2009. Take a look at what they’re doing and ask yourself, “Are you doing enough?”

Every October for the past eight years, car dealer Gary Zimmerman has staged a special sale to help boost business.

“That sale has always helped our fourth-quarter profits tremendously,’’ said Zimmerman, owner of Twin Pine Auto Sales in Ephrata, Pa.

This year, Zimmerman’s not so sure about holding the sale. The reason? The industry is just too unpredictable.

“What we’re seeing is a much more turbulent market,’’ he said.

“I’ve been in business 18 years, and this year is just crazy,’’ he added. “I understand moves in the market, but in car sales, you don’t see thousands and thousands of dollars in swings. It’s not like that in the used-car business.’’

As a traditionally tough season begins, viewpoints about the fourth quarter are equally unpredictable:

“The problem is, our strategy didn’t work last year,’’ joked Todd Smith, owner of Dothan Motor Co. in Dothan, Ala. “We were scratching our heads, we broke the crystal ball and nothing was coming up.’’

“The two weeks before Christmas are bad, but other than that, you can still make some good sales,’’ said Mark Striegnitz, owner of Mark’s Auto Sales in Lakewood, Colo. “I think anybody who does buy here-pay here or special financing can have a strong fourth quarter.’’

While not many dealers are likely to be forecasting big profits, some are planning holiday sales, crossing their fingers for a positive “tax season,’’ redoubling their efforts and, mostly, hoping for the best.

Tax refund programs enable dealers to accept down payments late in the year based on customers’ projected refunds. Of course, there is always the risk that the customer won’t come back with his refund check.

But TRS Tax Max, as one example, outlines a fourth-quarter sales program that provides safeguards. On its Web site, the Tampa, Fla.-based company suggests: a pre-refund payment schedule; customer matches on refund advances; third-party financing to limit the dealership’s liability; using only known customers in good standing; starter-interrupt devices if concerns arise; and limiting the customers’ inventory choices.

Still, the tax season can be inconsistent from month to month and region to region, as fluctuating gas prices, weak economic conditions and the consumer credit crunch continue.

Smith said Dothan Motors has always had a strong pre-tax filing business – until last year, when sales were off by 50 percent. In the month of December, when Smith can usually expect to move 150 units, he sold about 90. His dealership normally averages sales of 80 to 100 vehicles each month.

“We duplicated the previous year’s (program) down to a ‘T,’ and it didn’t work, which is scary when you have 550 cars of inventory,’’ Smith said. “We’ll probably still go with it and hope last year was an anomaly or something. But we will not be as aggressive in buying and our expectations.’’

Anthony Underwood, owner of Anthony Underwood Automotive in Bessemer, Ala., said that “back in the real old days’’ of the 1970s and ‘80s, there were more tax advantages for end-of-the-year deals, for businesses and consumers. Today, with fewer incentives and a down economy, Underwood tells his salesmen to sell the stability and longevity of the business.

“There are more challenges than we’ve ever had,’’ said Underwood, who operates a special finance and buy here-pay here dealership with about 180 cars on the lot and 75 to 80 vehicles in monthly sales. “There won’t be an increase over last year (in the fourth quarter), certainly.’’

One tactic that Smith uses at his buy here-pay here dealership is the use of “bird dogs’’ on other lots. His sales reps maintain relationships with sales reps at subprime stores who refer customers who don’t qualify for financing. Then he cuts those stores a bird dog check depending on the amount of the deal.

“On the buy here-pay here side, I think there’s a little bit of a gold mine there,’’ Smith said. “That (subprime) market is changing. … it’s tightening up … If (customers) get turned down, our goal is to be their next stop.’’

Whether there are gold mines, silver linings or red figures coming in the fourth quarter, Zimmerman won’t hazard a guess. And he prides himself on being able to read the market. In the summer, when sales of utility vehicles hit a low point, he took a risk and purchased millions of dollars’ worth of vehicles for his prime store. When the market came roaring back in early September, he cleaned up. He said this has been the dealership’s best year ever. He keeps about 300 vehicles in inventory, about 200 to 225 on the lot, and sells just more than 100 per month.

His strategy for those October sales has always been to fix the pricing just right, perhaps just over wholesale, and catch the market just before its big dive each season – “Some years, I caught it just perfect,’’ he said.

“The market would drop, and other dealers would scramble to lower their prices. By that time, I had already sold mine,’’ Zimmerman said. “But the last couple of years, it’s changed.’’

Zimmerman said dealers have started loading up on inventory earlier and earlier in the fall season, which affects the prices and his ability to judge the market. That’s why he’s not sure whether he’ll hold the annual fall sale this year.

Once fall turns to winter, dealerships will be competing with Christmas, which is often a lump of coal in the sales stocking.

At Midtown Motor Co. in San Antonio, Texas, owner Steve Babinsky tries to capitalize on the holidays with giveaways at Thanksgiving and Christmas, a Christmas sale – complete with photos with Santa Claus, of course – and other theme events, such as $200-down sales or $0-down sales.

“That’s probably what keeps us cranking,’’ Babinsky said of the sales at his BHPH dealership.

Zimmerman has his staff send out Christmas gifts to customers – that may not help sales, but it does promote goodwill. And he added that the week between Christmas and New Year’s is typically the best of the year, with kids home from college and looking for wheels, customers planning on tax refunds and dealerships wanting to get rid of inventory.

Whether it’s been good or bad, as a tumultuous year draws to a close, dealers press on.

“You have to make people understand that people are still buying cars,’’ Underwood said. “You have to make more contacts, make more calls, see more people. If the guy down the road has gone out of business, you need to take his place.

“You have to look at it as an opportunity – we’re still here. Use that as your slogan: ‘We’ve been here, we’re still here.’”