In 2014, CarMax started using its own finance company to book deals from subprime customers, rather than work the deals through other lenders.

During a recent quarterly conference call, company executives say they haven’t seen “anything negative” from the in-house subprime financing test, and they expect it to continue as planned.

The CarMax effort is yet another sign of the growing importance for dealers to properly serve credit-challenged used vehicle customers. Industry analysts estimate as much as 30 percent of today’s used vehicle finance deals go to subprime buyers.

The key question for dealers: How well are you handling this important segment of the business?

As I talk with dealers, the answer I get to this question is usually some form of “we definitely could be doing better.”

DAlfa Romeo  300x185 A Used Vehicle Challenge: Increasing Your Share Of Subprime Dealsealers who understand the subprime opportunity have already recognized the need, like CarMax, to align their stores with lenders who specialize in financing subprime deals. Beyond that, though, there are typically two larger challenges:

1. Acquiring the right subprime inventory for your market at the right price. Achieving this imperative means three things—identifying the exact vehicles that fit subprime lender criteria, recognizing an auction or trade-in vehicle’s subprime potential when you appraise it, and purchasing these cars sufficiently “back of book” to ensure lender approval and your profit margin.

2. Efficiently matching subprime customers and cars. Dealers estimate they may miss 15-25 deals a month due to either lacking the inventory for a subprime customer, or failing to get customers “bought” in the F&I office. Dealers will be able to solve the first problem by using technology and tools to incorporate an emphasis on subprime vehicles as part of their inventory acquisition and management strategy, as noted above.

I would also submit that dealers can address the problem of getting subprime deals “bought” in F&I by doing a better job matching subprime customers to the correct cars early on in the sales process. If sales associates had a list of subprime-eligible vehicles at hand as they discuss a potential purchase with a subprime customer, there would be fewer instances when F&I managers would not be able to book deals with lenders, far less frustration and more completed sales.

I recognize that many dealers have traditionally shied away from the subprime business due to these difficulties, as well as volatility among subprime lenders themselves.

However, as CarMax notes, lender behavior has been consistently “stable” since the market correction and the number of credit-challenged buyers represents a sizable, if not growing, segment of the used vehicle business.

One could argue that these conditions represent the “new normal” for retailing used cars and create an opportunity for dealers who seek to increase their share of retail sales in their local markets.



For at least the last 15 years, I’ve had a recurring dream.

In the dream, I’m flying down a steep mountain slope, my skis cutting picture-perfect arcs in fresh powder. It’s just me, the mountain and a rush of adrenaline as I go faster and faster.

Then I wake up. The feeling of euphoria fades to frustration as I realize it’s just a dream and I’ll never really be able to ski like that again.

I first fell in love with skiing as a child. My family no barriers logo 1 An Opportunity To Rekindle A Lost Love, And Live A Dreamwould go to Pines Peak in Valparaiso, Ind., where my brothers and I learned the basics of the sport. As we grew older and got better, we would head west every winter to Colorado and Montana. Some of my fondest family memories come from the time we spent in Vail Village, reliving our day on the slopes and planning the next day’s runs.

It was tough when my eyesight deteriorated to the point where I had to give up skiing. My family still went out west, but I had to bide my time at the lodge, wishing I could get back out there.

Well, thanks to Cox Automotive, it looks like I’ll have my chance later this week. I will be joining an extraordinary person, Erik Weihenmayer, who’s also blind, for a ski outing in Beaver Creek, Colorado. Erik’s got a long list of achievements, including being the only blind person to successfully reach the summit at Mount Everest.

Our ski adventure took shape following Erik’s inspirational speech at last month’s Cox Automotive annual meeting. He spoke of how he and his organization help others live a “No Barriers” life—a concept the leaders at Cox Automotive have embraced as an imperative for themselves and the entire family of Cox employees.

To say that I’m excited for the opportunity to personally apply the “No Barriers” mindset on the ski slopes and rekindle my love for skiing would be an understatement. It’s really a dream come true. I can’t wait to once again feel the euphoria, freedom of movement and sense of achievement that skiing provides—feelings that, for me, only arrive in my dreams.

I’m planning to share what promises to be a life-changing experience here on my blog and beyond. Stay tuned and wish me luck!


It got quiet pretty early at the final day of NADA 2015 in San Francisco.

Word of bad weather out east prompted many to catch earlier flights back home and it was the final day of NADA, whevAutoBoothTeamfun 300x209 NADA Day 4: Dealers Depart, Big Themes Emergen pretty much everyone’s feeling the effects of three full and productive days and looking forward to getting back to their dealerships.

But the relative dearth of dealers afforded me time to reflect on the bigger themes that emerged during this year’s event:

A shift in online strategy. As I talked to dealers and other vendors, it’s become increasingly apparent that dealers’ marketing and vehicle merchandising online, across their own and third-party websites, is undergoing a transition from being largely informational to transactional. This strategic shift stands to reason: Dealers are catching up to other retail sectors where online purchasing has been the norm for some time. We’re still a ways away from start-to-finish purchases of vehicles online, but it’s fair to say that the rise of market-based pricing and online tools that facilitate many aspects of a vehicle purchase mark automotive retails initial steps into e-commerce.

A focus on fixed operations. Vendors selling service lifts, tire replacement/rotation equipment and car washes saw plenty of business during the convention—a sign that dealers are investing in fixed operations. The focus on fixed operations is a good thing. Dealers have long struggled to retain customers in their service departments, where the margin on every dollar earned is larger than in either their new or used vehicle departments. Les Abrams of NADA’s Dealer Academy notes that top-performing dealers say a 31 percent increase in their customer pay labor hours in 2014. The gains flowed from tactical changes such as extended service hours and online marketing campaigns that give customers good reasons to visit the dealership for vehicle maintenance and other work.

Troubling business fundamentals. Over the past couple days, I’ve noted the ongoing challenges margin compression and new/used vehicle supply volatility will create for dealers. In addition to these concerns, I would add the prospect of higher interest rates and the seismic change in gas prices.

On the former, dealers have been blessed with an unprecedented run of record-low interest rates, a good thing for retailers who typically borrow a lot of money. Most signs point to a rise in interest rates in the coming year, which will require keen attention from dealers to maintain the profitability they want to achieve.

With gas prices, dealers may well find themselves on the short end of the stick. Manufacturers have invested hundreds of millions of dollars to produce ever-more efficient vehicles that may well fall flat with buyers who, in light of falling prices at the pump, see no reason to look past the gas guzzling vehicles they really want to buy.

As one dealer put it, “it’s only a matter of time before one of these shoes drops and we find ourselves in a pickle.”

Like it does every year, leaving NADA stirs a mix of emotions—a bit of melancholy that our industry’s single-best event has come to a close, and a renewed sense of mission and purpose to serve dealers in the months ahead.

Thank you to all the dealers who stopped by the vAuto booth, and a special thank-you to the entire vAuto team at NADA, who demonstrated once again why they are the best in our business.


NADA Day 3: A Great Start And An Even Better Finish


I started today with a memory that makes me smile. Before the exhibit hall opened, Mike Burgiss, the CEO and architect behind Cox Automotive’s new MakeMyDeal application, handed me a sticker. The sticker’s a reproduction of napkin he’s kept in his pocket since a conversation two years ago at NADA in Orlando. Mike had asked [...]

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NADA Day 2: A Good Year For Dealers Shows On The Exhibit Floor


It’s easy to tell that dealers had a good year in 2014. I lost count of the number of time dealers told me they set sales and profitability records in their used vehicle department last year, thanks to their “all-in” adoption of Velocity management principles. Such success was also apparent as you walked the exhibit [...]

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NADA Day 1: The Birth Of Cox Automotive And Its Promise To Dealers


It’s been a busy first day here at NADA in San Francisco. I’ve spent much of my day huddled in meetings with the various teams that make up Cox Automotive. The focal point of the meetings has been to make sure everyone—from, Haystak, Homenet, Kelley Blue Book, Manheim, vAuto, VinSolutions and Xtime—is ready to [...]

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3 Beacons To Guide Dealers At NADA 2015


I’m pumped for this year’s NADA convention in San Francisco. Like other dealers, I regard NADA as pretty special. It’s a one-time opportunity to meet with many of my dealer friends from across the country in person. The convention also provides a wealth of ideas and insights to apply in the coming year. It’s easy [...]

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3 Ways To Minimize Discounts And Improve Front-End Margins


If dealers compare their current front-end gross profit averages in new and used vehicles to similar data five years ago, you’d likely notice a troubling trend. I’ve conducted this exercise with dealers recently as part of conversations about margin compression in automotive retail. In most cases, the analysis shows that front-end gross profits are pretty [...]

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Our time together this week in Atlanta


Upon reflection of this week’s Annual Sales Event, I would just like to share some thoughts. First and foremost, I just want to let the entire field team know how much I appreciate your enthusiasm and support of our Cox Automotive mission. Your spirit and dedication was evident in every moment of our time together. [...]

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5 Potentially Tough Conditions Dealers Will Face In 2015


I’ve been spending the past few days in budget and strategy sessions, planning for 2015. The work has left me with a pretty clear conclusion: Things aren’t going to get any easier for dealers next year and, in some cases, the challenging horizon may prove too much for those who take too long to adjust [...]

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