by Denny Long When I was a finance manager at a dealership in the mid-80s, the banks didn’t buy anyone who had a bankruptcy until seven years after their discharge. A few years later after I was in direct marketing full-time I received a call from one of my clients, Jerry Schwelling at Warren Nissan in Warren, Ohio. He asked if it were possible to get a list of people that had discharged from Bankruptcy in the last two years. After he assured me that he hadn’t lost his mind I started my quest to find a list that wasn’t available at that time. I found a company that compiled the information for credit card companies to use as a suppression file before mailing pre-qualified offers. You see, at that time, even the credit bureaus took forever to get information from the bankruptcy courts across the nation. We paid dearly for that list, but the investment paid huge dividends for my client. We mailed 5,000 pieces and in the course of three days he delivered 48 vehicles and made $153,000 in gross profit. That’s not bad money today, but it was more than a lot of dealerships took in during an entire month at that time. This was the beginning of my career as a subprime marketing expert.
Fast forward to 2014 and the subprime market has many faces. There is no one marketing program that will cover all of the different segments that make up the subprime market. Each segment is a micro target that requires a separate marketing program. Bankruptcies are still the cornerstone of the building blocks needed for any subprime department that chooses to go after the entire subprime market. But even Bankruptcies have a few different faces. If you have the right lenders, the right inventory, and the right marketing programs you can be the master of this highly profitable segment. In the beginning the lenders would only approve Discharged Chapter 7 Bankruptcies. Today you can help these consumers get a vehicle the day after they file their Bankruptcy. There are a number of lenders that are now buying Open Chapter 13 Bankruptcies. We can break down the current Bankruptcy opportunity into three programs.
FRESH CHAPTER 7 BANKRUPTCIES Statistics have shown that 37% of consumers that file for Bankruptcy will purchase and finance a vehicle sometime between the day they file and 30 days after they receive their discharge papers. In many cases it’s because their current vehicle was repossessed before the bankruptcy. In other cases, because they were contacted by a dealer that was in a position to help them, they surrender their current vehicle during the Bankruptcy process because the payments were too high or they were buried in the vehicle. There are a limited number of Bankruptcies in any given geographic area and there is a small window of time to take advantage of the opportunity for additional sales. For this reason you need to market to this group multiple times during the time period between filing and 30 days after discharge.
DISCHARGED CHAPTER 7 BANKRUPTCIES
If 37% of this audience purchase a vehicle early in the Bankruptcy process that means that 63% may still need a vehicle. A large number of this population will purchase and finance a vehicle within two years of their discharge. You should not ignore this group, but you should also not mail them too often. Once every 60 to 90 days should put you in an ideal position for the highest return on investment.
OPEN CHAPTER 13 BANKRUPTCIES
This is what we would call a limited market. There are a limited number of consumers that fall into this market. There are also a limited number of lenders that buy this paper, although the number of lenders interested in this segment is growing. Regardless of the limits, if you have the right lenders there are additional vehicle sales available for you if you properly target this audience. Since it is a small market it won’t take a large marketing investment. It should also be noted that financing an Open Chapter 13 Bankruptcy consumer requires a letter from the Trustee. In some states these letters are fairly easy to acquire. In others it’s a little more difficult. You should speak to your lenders about this.
First of all, you need to follow the same rules and laws with direct marketing as you do with any other type of advertising. Rule number 1 – if it’s not true don’t say it. Since this is a public record file type of mailing and you have not looked at their credit bureau in most states you cannot use term like pre-approved or pre-qualified.
This letter is what’s called an “Invitation to Apply” or ITA. Again, make sure what you are stating is legal. Rule Number 2 – don’t throw it in their face that you know that they have recently filed or discharged from bankruptcy. Speak in more of the third person, about how you can help someone that has been through a bankruptcy. How you speak to a person that recently filed vs. recently discharged should be different. Don’t assume that these consumers know what you know, because in most cases, they don’t. You are trying to help them in a very difficult time in their life and you should covey that in your message. Again, remember your letter should be written in the third person.
One more thing – make sure you have a “Call to Action” and it is easy to reply to your offer. You must tell the consumer what you want them to do, which is to respond to your offer. If possible, give the consumer multiple methods to respond such as a toll-free number and a web site. Marketing is about the entire experience, not just the advertising itself, so make the entire process as easy as possible for the consumer to get maximum results.
Keep in mind that the Bankruptcy market is a moving target. There are new consumers coming into the market every day and, on the other end of the timeline, consumers falling off that no longer need the help of a subprime department. For that reason you should not use a “one and done” marketing program, but you should use a program that constantly sends a timely message to the consumers. Do this right and you will add a nice chunk of change to your bottom line every month! Good Luck and Good Selling!
Denny Long is President of Credit Mail Experts. He has over 30 years of experience in the automotive industry and is known as the top expert in sub-prime marketing. In those years Denny has written hundreds of helpful articles that have been published in World of Special Finance, Auto Dealer Monthly, and the BHPH Report.