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Old 01-28-2018, 09:41 AM   #1
XDCX
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Default How do high FICO customers respond to FCA's low FICO Incentives?

As I mentioned in another thread my father is interested in finding a vehicle that's easier for him to get in and out of and he seems to have landed on the Dodge Journey.

My father's search is now focused on the 2017 Journey because for some reason it appears his $1,000 USAA Incentive can only be used on the 2017 Journeys, not the 2018s.

The question for this thread, however, is how are high FICO customers responding to FCA's low FICO incentive?

For those who may not know the background, currently FCA is offering an extra $1,250 rebate to customers who have a FICO score of 620 or below. In my Dad's eyes it's a program where people with good credit subsidise people with crappy credit and it has somewhat soured him on buying a new Dodge Journey.

I understand what FCA is trying to do and using an aged vehicle like the Journey to market to the subprime segment makes sense but I'm surprised FCA didn't structure the incentive differently so they wouldn't potentially alienate customers who wouldn't qualify for the low FICO score incentive.

So, has there been any pushback from the 620+ FICO customers or is it mostly a non-issue?
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Old 01-29-2018, 07:45 AM   #2
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In my market, we have a lower than average FICO scores, so we do a lot of sub-prime business. but i haven't seen any pushback from the better customers
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Old 01-29-2018, 09:33 AM   #3
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never understood the rationale, but, as we don't have many sub prime, it seems to be a non issue.
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Old 01-30-2018, 07:08 AM   #4
steve_biegler
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Extra rebate for bad credit score??? I think I've seen it all now. 2, 3, 4, tier pricing? What the hell's next.........Even more rebate for a bankruptcy in the last 6 months?
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Old 01-30-2018, 08:40 AM   #5
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Extra rebate for bad credit score??? I think I've seen it all now. 2, 3, 4, tier pricing? What the hell's next.........Even more rebate for a bankruptcy in the last 6 months?
I know, in some ways it seems crazy that if I were to choose to miss a couple of months of my credit card payment I'd be rewarded by FCA with an extra $1,250 rebate that I could use to buy a new Journey.

That said, I understand what FCA is trying to do and imagine the extra $1,250 is helping to sell Journeys to people who are buried in their trade and lack the amount of down payment/rebate needed to get their deal financed. If it were me the only difference I would make would be to treat the $1,250 as Dealer Cash so people like my father wouldn't resent the fact they don't qualify for a $1,250 rebate because they pay their bills.

Concerning people with a recent bankruptcy, your post reminded me of an ad I think I saw in Automotive News a long time ago where a company was selling mailing lists of people who recently completed a bankruptcy. I remember I had to ask someone why anyone would pay for such a list and it was explained that the biggest difference between someone who has filed for bankruptcy and someone who hasn't is the former can't refile for another bankruptcy case until they wait for 2 - 8 years.
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Old 01-30-2018, 06:13 PM   #6
mryan55
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This is a fitting discussion and something I think about from time to time. Rewarding a sub-620 FICO score with up to $2,000 in additional incentive (on the Grand Caravan, which I guess will become the go-to subprime unit for stores with the DT lines).

In reality, this doesn't come up too often in my market because we are 80% lease and the non-prime money is only on a 1/B sale. Of our 20% retail business we only encounter a few sub-620 credit scores per month on the new car side. We are just lucky that FCA doesn't advertise the sub-prime bonus cash in their ads on a Caravan or Journey, or anything for that matter. Here in Metro Detroit some dealerships include the non-prime money in their newspaper ads, though.

I have subscribed to the BK mailing lists in the past (actually have a complimentary subscription to one of the programs right now, long story). We don't deliver many cars off of our efforts, but we can usually get a way to go with these customers, although many are held back by the lack of money down -- or previous burning of Credit Acceptance, Credit Acceptance, and other subprime lenders.
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Old 01-31-2018, 10:57 AM   #7
conn02
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Quote:
Originally Posted by XDCX View Post
I know, in some ways it seems crazy that if I were to choose to miss a couple of months of my credit card payment I'd be rewarded by FCA with an extra $1,250 rebate that I could use to buy a new Journey.

That said, I understand what FCA is trying to do and imagine the extra $1,250 is helping to sell Journeys to people who are buried in their trade and lack the amount of down payment/rebate needed to get their deal financed. If it were me the only difference I would make would be to treat the $1,250 as Dealer Cash so people like my father wouldn't resent the fact they don't qualify for a $1,250 rebate because they pay their bills.
The realization that that the subprime lenders are not treating the extra rebate as nothing but a lowering of their advance (not cash down, and certainly not anything to help the customer) their fees are still there and so it is still difficult to get those deals hung

Last edited by XDCX; 02-01-2018 at 08:47 AM. Reason: Added quote tag to make the post easier to read
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Old 02-01-2018, 08:50 AM   #8
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The realization that that the subprime lenders are not treating the extra rebate as nothing but a lowering of their advance (not cash down, and certainly not anything to help the customer) their fees are still there and so it is still difficult to get those deals hung
Very interesting - thanks for the information.

In your experience is the sub 620 FICO program helping to sell many extra vehicles for FCA? If not, how could an incentive be better structured to get more deals approved/funded?
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Old 02-04-2018, 05:59 PM   #9
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It's not really doing much for us. In the last 13 weeks we have used the non-prime incentive a total of one time. The non-prime money usually isn't finance source dependent (although sometimes there are additional Chrysler Capital non-prime programs as well) so it's nice to have, but doesn't come into play much with all of the leasing we do in the Detroit area.

I would say making it a lease program as well would help us, bu that's a bit greedy... not to mention I don't think the house wants to do much more lease subvention.

From the finance point of view, the money does help deals come in with a healthier front end advance, so I guess it has its place... but not a program we use much.
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Old 02-05-2018, 03:32 PM   #10
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It's not really doing much for us. In the last 13 weeks we have used the non-prime incentive a total of one time. The non-prime money usually isn't finance source dependent (although sometimes there are additional Chrysler Capital non-prime programs as well) so it's nice to have, but doesn't come into play much with all of the leasing we do in the Detroit area.

I would say making it a lease program as well would help us, bu that's a bit greedy... not to mention I don't think the house wants to do much more lease subvention.

From the finance point of view, the money does help deals come in with a healthier front end advance, so I guess it has its place... but not a program we use much.
Interesting, thanks for the information.

I actually would have lost money on that bet. I figured an extra $1,250 on the Journey might be the explanation for its relatively strong sales volume despite its age as a platform.

Concerning leasing, I wonder if any OEMs use leasing as a tool to attract low FICO customers? While leasing historically has been for higher FICO customers I've read some pitches that "Lease here/Pay here" makes more sense than "Buy here/Pay here" because it's easier to repossess vehicles that are not titled in the customers' name and there's no risk of losing a vehicle to bankruptcy like there is if a lender extends financing.
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Old 02-08-2018, 11:37 AM   #11
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they have a total budget for this program that I would expect is not too high. So i think that they are getting as much of this program as they want. I have made several suggestions on how the money might better be allocated, such as dealer cash, but they (The factory) thinks the money might go to gross rather than helping the customer. I believe that the rebate would just go to pay the fee
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Old 02-08-2018, 03:26 PM   #12
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Money goes to gross!!!! CAN'T HAPPEN. God forbid you guys make a profit!
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Old 02-08-2018, 08:51 PM   #13
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It definitely all comes down to 'take rate' too. Put an incentive out there that you can advertise and market but make a small sliver of the buying public actually qualify for it. You now have a legitimate incentive to advertise but don't have to pay out very often. We have seen this time and time again since 2009.

There were conquest incentives aimed solely at VW customers early in the Fiat stewardship, other targeted conquest offers more recently...

Returning lease offers that can get somewhat restrictive (or bonus returning lease offers for current Town and Country lessees entering into a Pacifica but no other model).

It's all just a game of using the least number of national incentives as possible on each deal. The Business Center specific incentives are a little more genuine and make sense with things like regional bonus cash, auto show bonuses, conquest offers and the like, since I am pretty sure the regional incentive budgets are still "use it, or it goes back to the house."
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Old 02-10-2018, 12:36 PM   #14
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According to my "self-analysis" report the non-prime incentive is one of my MOST used incentives. About 15-20% of my sales have this incentive code on the sale. We are very subprime focused and routinely hit 300-400% MSR on the Journey submarket.
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Old 02-10-2018, 02:02 PM   #15
mryan55
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It's crazy what geography and buying habits can do. We are Chrysler-Jeep only so we don't have the major non-prime plays on Journey and Grand Caravan, but I can go a month without using a non-prime retail incentive.

I am guilty of thinking everything in terms of the lease business since we are 80%+ lease. For us it's the IDL programs and returning/conquest lease offers that we are off the chart with as far as frequency of use.
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