Breaking Free from the Subprime Grind: A New Path

Let’s be honest. For years, many dealerships have relied heavily on conquesting strategies aimed at subprime buyers. It’s been the bread and butter for some, and when lenders were handing out approvals like candy, it worked. But times have changed. Lending standards have tightened, competition in the subprime space is fiercer than ever, and the pool of qualified buyers has shrunk.

It’s time to ask yourself: Is chasing subprime customers still the best strategy for sustainable growth?

The Subprime Squeeze: A Crowded, Risky Market

Subprime buyers…those with lower credit scores…have always been attracted to dealerships offering low prices and flexible financing. But now, nearly every dealership in the mid-market or below retail space is vying for this same audience. The result? An oversaturated, cutthroat market where price is the only differentiator.

Here are the challenges with sticking to this model:

1.Tighter Lending Standards: Lenders are no longer approving just anyone with a pulse. The bar for subprime buyers has been raised, and the available pool of customers is smaller than ever.

2. Auction-Driven Inventory: Many dealerships in this space rely on auction listings, competing for vehicles that fit their valuation tools. This often leads to purchasing high-mileage, lower-option cars that cater to subprime buyers but limit your profit margins.

3. Increased Risk: If lenders reintroduce recourse loans—which make dealerships liable for defaulted payments—operating in the subprime space becomes an even riskier game.

Subprime conquesting might have been the way forward in the past, but the current environment demands a shift in focus. That’s where prime-plus buyers come into play.

Prime-Plus Buyers: The Untapped Opportunity

Prime-plus buyers are those with solid credit scores who prioritize quality, convenience, and service over the lowest price. Unlike subprime customers, they aren’t hunting for the cheapest deal 200 miles away. They value relationships and are more likely to stay local if you meet their expectations.

Here’s why focusing on this segment makes sense:

• Lender Favorability: Lenders see prime-plus buyers as lower risk and are willing to incentivize these deals with better back-end money and terms.
• Better Margins: These buyers aren’t just looking for a deal.. they’re looking for value and options.This allows you to stock higher-quality inventory and achieve greater profitability per sale.
• Buy Cars not VINs-Feel comfortable standing tall for the right car. You have a list of clients who will pay
• Service Matters: Prime-plus customers are more likely to return for service, upgrades, and future purchases, building long-term loyalty.
• Gatekeepers: Odds are these buyers are lynchpins that will unlock bigger networks. They have influence

By shifting even part of your focus to prime-plus clients, you can build a more stable, profitable foundation for your dealership.

Changing the Game with Local Marketing

To attract prime-plus buyers, you’ll need a new approach. Forget conquesting based on price. Instead, think about nurturing relationships with your local market. These are the buyers who value trust, convenience, and a connection to your dealership.

Here’s how you can get started:

1. Leverage Data: Use your CRM to identify higher-beacon customers and create campaigns that speak directly to them. Highlight your dealership’s quality inventory and exceptional service.

2. Target Locally: Prime-plus buyers aren’t driving hours to save a few hundred dollars. Focus your efforts on dominating your local market with messaging that emphasizes convenience and community.

3. Build Trust Through Service: Offer perks like complimentary maintenance packages, trade-in bonuses, and personalized concierge services to differentiate your dealership.

Empowering Your Team for the Prime-Plus Shift

Your sales team is critical to this transformation. It’s not just about selling cars—it’s about building relationships. Here’s how you can support them:

1. Train for Quality: Educate your team on how to appeal to prime-plus clients by emphasizing value, service, and trust over discounts.  Have them read the book “Unreasonable Hospitality” by Will Guidara

2. Encourage Specialization: Have team members focus on their strengths. For instance, a salesperson who excels at selling SUVs could become your “Family Car Specialist.”

3. Provide Tools: Invest in resources like professional marketing materials, CRM training, and social media support to help your team connect with prime-plus buyers.

When your team becomes trusted advisors instead of order takers, they’ll attract the kind of clients who make a long-term impact on your business.

The Bottom Line

Subprime conquesting isn’t going away, but it’s no longer the only game in town. By expanding your focus to prime-plus buyers and nurturing local relationships, you’re positioning your dealership for sustainable growth in an ever-changing market.