Car dealers are targeting customers with less than perfect credit now that the flurry of 0 percent financing has receded.
The no-interest loans were available only to prime credit risks. About half of the customers lured by 0 percent loans did not qualify, said Paul Taylor, chief economist of the National Automobile Dealers Association. But 0 percent promotions got subprime customers interested in buying cars.
"It's a group that is cut out of all the new-car promotions," said Bob Manley, CEO of AdTel International Inc., a Dallas marketing firm that helps dealers promote to the subprime market.
Manley says his list of customers grew by about 11 percent in the first quarter of this year, to 826.
His company sets up toll-free phone lines and Web sites for dealers targeting subprime finance customers.
Stewart Gluck, president of Advantage Direct Mail Services Inc., a dealer ad agency in Pompano Beach, Fla., is mailing car sales promotions to homeowners with subprime mortgages. Although they are riskier customers, they are stable enough to own homes, Gluck said.
And there is evidence special finance promotions are boosting sales.
Emil Bayan, general sales manager of Dublin Auto Center in Dublin, Calif., said the dollar volume of his subprime business was up 25 percent in the first quarter from the year-ago period.
The dealership is using TV commercials with customer testimonials to promote a toll-free phone number for people with less than stellar credit.
"Some of these people are underemployed," said Bayan, noting that some customers lost their jobs and had to take other lower-paid positions.
Dublin Auto Center, which sells Dodge, Hyundai, Nissan and Volkswagen vehicles, is in an area in which Internet companies have laid off employees or gone out of business.
Fred Hogan, finance director of Dutch Miller Chevrolet Hyundai in Huntington, W.Va., who recently targeted subprime customers in two direct-mail promotions, said first-quarter unit sales in that segment of his business were up 5 percent from the first quarter of last year.
During the 0 percent finance push in the last quarter of 2001, subprime business dropped off.
Hogan says his biggest challenge as a result of the 0 percent finance promotions is that many prospects enter the store expecting low rates that are available only to the most creditworthy customers.
Said Hogan: "People (subprime customers) are claiming they can get interest rates that just aren't going to be available."