Tag Archive | "F&I"

The Evolving F&I Experience

In last month’s staff blog, we touched on the fact that more and more, consumers are looking to do research online of not just their vehicle brand and model, but of the F&I products available to go with it — and they are finding, for the most part, little to no information. But it goes deeper than just buyers looking for online information — the F&I experience can be unpleasant. We can try to rationalize it any way we want, but the fact remains that not even those of us in the industry are immune from having F&I “horror stories.” And that’s a problem.

Speaking on condition of anonymity, several industry executives relayed those stories. They help illustrate that it isn’t a lack of knowledge on the customer’s part that can make the process so painful, but rather a system that hasn’t evolved much from the way it was first conceived and sold.

These stories come from executives with similar problems. Both are incredibly busy, but knew exactly what car they wanted, what F&I products they wanted to purchase, and exactly what they were willing to pay for it. In the first case, the executive in question called several local dealerships, trying to find someone willing to do the deal over the phone, so he could have the contracts ready to sign when he arrived later that day to pick up the car.

That proved next to impossible. What he had thought would be a way to shorten his time in and out turned into a week-long back-and-forth game of calling dealerships and either being brushed off completely, or being strung along until it came time to talk numbers, at which point they started insisting he come in to do it in person. Which was exactly what he was trying to avoid.

At that point, he started calling dealerships outside his immediate area. In the end, he bought a luxury brand, with F&I products, from a dealership several hours away, who was more than happy to do the deal over the phone. He drove up on a Saturday, turned in the trade vehicle, signed the papers and got out. And he still takes the car for service to the local dealership who refused to do business the way he wanted. But that dealership lost out on all the profit from the initial sale because they would only do business with him if he would do it their way.

In the second case, the executive in question had a similar dilemma — he was too busy to take a day to go sit at a dealership, so he went online. Like in the first case, he went through all his local dealerships of the luxury brand he wanted to buy — he even talked to the F&I manager of one that he was acquainted with. That manager told him that Internet buyers aren’t a priority, and aren’t really “serious,” so they are routinely ignored.

In the end, like with the first executive, this one ended up finding a dealership located hours away, who was willing to work with him via email exchanges. He spent a great deal of money on a new vehicle with upgrades and F&I products, and this after his local dealership wrote him off because he wasn’t considered “serious.”

Both of these examples illustrate the fundamental flaw in F&I today — as an industry, we have “always done it this way” — we have always had the office in the back room where the customer comes in after the sale, and, in almost every case, the customer spends hours going through the process. But today’s world is quite a bit faster than it used to be, and consumers, more and more, just aren’t willing to give a dealership that much of their time — they recognize that their time is a valuable commodity, and they are far more stingy with it than they were in years past. And the Internet, and the culture that has grown up with it, will only continue that shift.

Dealerships who insist that only the traditional customer who doesn’t place a value on their time is worth pursuing will find themselves struggling to hold on to business. As these examples show, people are aware that the local branch isn’t the only option, and that they can get the exact same car elsewhere, with a dealership who recognizes that people today want options. And not just on seat trim and technology packages, but on how they go through the sale process itself.

So what should providers be doing to help capture this market? First of all, providers need to make it easier for dealerships to educate and sell to those alternative customers. They are a small subset today, but that number is growing exponentially every year. Providers who make their products and process easily accessible to online or phone researchers and buyers are going to have a much easier time retaining dealerships and signing up new clients.

Second, providers, either direct or through their agents, need help educate dealers that customers who are looking for alternative buying experiences are still customers — people who want to spend money with the dealership. To treat them as throw-aways or “not serious” means losing a customer, and possibly more than one, as that person talks about their experience to others. A lost customer for the dealership means a lost customer for F&I products as well. There’s no guarantee that the dealership the customer ultimately buys from will be selling your products.

It’s to everyone’s benefit to stop looking at online and phone customers as lesser than the ones who show up in person. As an industry, we need to spearhead that shift in attitude, so that everyone, from the dealers, to the customers, to the providers, can find a process that is profitable and satisfies the convenience and speed factors that today’s up and coming consumers are looking for.

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F&I Pacesetters Named, One will be Named F&I Dealer of the Year

F&I and Showroom selected its six F&I Pacesetters of the Year. These operations are now in the running for the magazine’s F&I Dealer of the Year. Each winner will be sending a representative to the Paris Las Vegas for the Industry Summit 2012, where one of them will be named the 2012 F&I Dealer of the Year.

“This has been one of the toughest years for our judges,” said Gregory Arroyo, executive editor for F&I and Showroom. “Not only did we receive the most nominations in the seven years I’ve been here, but the field was fantastic. Just about every entry had a great story to tell. Now we have to narrow the field of six down to one, and that operation will be our 2012 F&I Dealer of the Year.”

The F&I Dealer of the Year award, sponsored by Resource Automotive, is handed out annually to a dealership with a highly profitable F&I department that demonstrates a commitment to regulatory compliance. This year’s winner will be announced on Monday, Sept. 10, during a special ceremony to kick off the annual convention.

Past winners include Tuttle-Click Automotive, The Suburban Collection and Lithia Motors. This year’s F&I Pacesetters are:

Dick Hannah Dealerships, Vancouver, Wash.
Hoy Fox Toyota Lexus, El Paso, Texas
Landers Toyota-Scion, Little Rock, Ark.
Nyle Maxwell Dealerships, Austin-Round Rock, Texas
Robbins Auto Mall, Humble, Texas
Southwest Kia, Dallas, Texas

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Three Dealer Groups Report Solid Q2 Profit Gains

AutoNation, Asbury and Sonic report solid second-quarter gains behind rising consumer demand and better credit conditions.

The 15 percent increase in new-vehicle sales in the second quarter, as reported by CNW Research, delivered solid profit gains for three of the nation’s largest dealer groups. One executive attributed the rise to increasing demand for new vehicles, an aging fleet and improving credit conditions.

Mike Jackson, chairman and CEO of AutoNation, said the pickup in new model introductions also helped drive consumers into showrooms. He said these factors combined should help new-vehicle sales reach the mid-14 million-unit mark this year, reported F&I and Showroom magazine.

“We’re finding that the credit environment is very strong with low interest rates and ample credit availability,” Jackson said during the company’s July 19 investor call. “AutoNation is well positioned to capitalize on the recovery with an optimal brand and market mix and a disciplined cost structure.”

Second quarter net income rose 9.3 percent for the nation’s largest dealer group, while revenue for the quarter totaled $3.9 billion, up 17 percent from the year-ago period. New-vehicle sales were up 29 percent, while used-vehicle revenue rose 8 percent.

Gross profit per new vehicle, however, fell 18 percent to $2,172, while gross profit per used vehicle declined by 10 percent to $1,624. AutoNation’s F&I revenue increased 28.1 percent from the year-ago period, with F&I gross profit per retail unit rising 3.7 percent from a year ago to $1,282.

Asbury Automotive Group Inc. reported its second-quarter performance today, and revealed a 49 percent increase in net income for the quarter. Earnings for the Duluth, Ga.-based auto group reached $21.1 million, up from $14.2 million in the year-ago period.

Revenue for the dealer group increased 11 percent from a year ago to $1.19 billion, while new-car revenue increased 16 percent to $663.4 million. Asbury’s Used-car revenue for the quarter increased 7.1 percent to $339.1 million.

F&I revenues for the dealer group increased 21 percent to $42.8 million. F&I profit per new-vehicle sold increased 8 percent to $1,200. Combined with used and parts and sales services, the three segments account for 46 percent of Asbury’s revenue, but represented 79 percent of the company’s gross profit.

“Consistent with what we are seeing across our industry, retail margins continue to be under pressure as Japanese-branded inventory levels and sales volumes recover,” stated Asbury’s Executive Vice President and COO Michael S. Kearney in a release. “However, we again demonstrated the diversity of our business by delivering growth in both F&I and parts-and-service gross profit.”

Sonic reported its second-quarter performance on Monday, revealing a 32 percent increase net income. Revenue for the Charlotte, N.C.-based group rose 12.3 percent from a year ago to $2.19 billion. The company sold 34,396 new vehicles in the second quarter vs. 28,125 units a year ago, with the dealer group earning $28.2 million from the quarter.

Sonic’s retail sales for new vehicles increased 21 percent to $1.18 billion, while used-vehicle sales grew 4 percent to $550 million. The company sold a total of 36,026 new vehicles during the quarter, a 19 percent increase from a year ago. Used vehicle unit sales rose 2.7 percent to 27,528.

Gross profit per unit came in at $2,039, down from the second quarter of the previous year’s $2,347. The dealer group also reported that F&I revenue was up 18 percent.

Other dealer groups — Lithia Motors, Group 1 Automotive and Penske — are scheduled to announce second quarter earnings throughout the remainder of the month.

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MaximTrak Technologies: An Interview With Jim Maxim Jr.

For this month’s View From the Top, P&A magazine visits with Jim Maxim Jr., president of MaximTrak, to learn how the entrepreneurial spirit has driven his company since it was founded.

Tell us about yourself and the path that led to where MaximTrak is today.

Well the story is long and traveled but I am going to try and give you the Reader’s Digest version and get to MaximTrak as fast as possible. The story really begins when my father was released from the Marine Corps in 1974, just as the Vietnam War was winding down. As a high school graduate from a family with limited resources from Penn Hills, Pa., he had limited options. In those days it was either go to work in the steel mills or turn your hand to a trade, and the latter welcomed his natural ability to talk to people.

So he decided to take a job in car sales. After many years of working in and around the dealership environment, he worked his way up the food chain and became the national sales manager for an international automotive electronics company, responsible for operating their national distribution network. In 1982, he had the opportunity to buy out a small distributorship in the Philadelphia market, and that is how The Maxim Group of Companies got started.

I joined the family business in 2003 after working for Lucent Technologies and General Electric in corporate finance and mergers and acquisitions for a number of years. I had been around the automotive industry my whole life but I didn’t really know what I was getting myself into — that is, until the day I stepped foot into an automotive dealership as a company representative.

At our company we believe that if you’re going to learn the business you had better do it from the ground floor up. So I spent time in just about every role that can be expected at Maxim and even spent some time turning deals in dealerships’ F&I departments.

We came to realize that our clients needed a consistent, sustainable and repeatable process in F&I, one that was more beneficial for customers and more profitable for the dealer. MaximTrak actually started out as a video process that F&I managers presented prior to the F&I sale and, from there, the technology and concept grew into what it has become today. I was fortunate enough to lead a team of professionals, using my background and prior experiences, but even more so in having the opportunity to do that with the people I work with every day.

Please share an overview of the company and the products you offer.

MaximTrak is a technology development company solely focused on the finance and insurance segment within the automotive, motorcycle and powersports industries. We service dealership clients all over the country, many of the top ten “megadealer” groups as well as clients like Harley-Davidson Financial Services, Nissan Extended Services North America, Chrysler Group LLC, Nations Safe Drivers, American Auto Guardian, Universal Warranty Corp., Premier Dealer Services, RoadVantage and a number of other providers and administrators. We pride ourselves on our open integration platform and integrate to roughly 100 various industry participants.

Our mission is to create a more enjoyable consumer buying experience that drives product sales through intuitive technologies that are integrated into our client’s sales processes and systems. We do this by developing a seamless approach to F&I sales, by providing powerful tools that aid in dealership management and by streamlining the back-end administrative systems through systems integration.

We segment our product offerings into three main product lines: MenuTrak, our flagship F&I Menu platform and is the backbone of our product offerings; Dashboards, our management reporting suite of services that includes real-time reporting technologies; and ETrak, our e-business platform, which supports e-Rating, e-Contracting and e-Signature, e-Registration and, coming soon, e-Pay.

Who are your target markets and what message would you like to give them?

We serve a wide array of clients in the value chain, starting with F&I managers and dealers, agents, providers & administrators, insurance companies, lenders, captive finance companies and manufacturers. In sending our message out to your P&A readers, sometimes the best way to do that is to use a little humorous analogy, one that I think will hit home for a lot of readers because they have seen it firsthand.

I have noticed that, in various breakout sessions at trade conferences, many providers like to ask their agents, “What differentiates you as an agent from the competition?” And, invariably the answer comes back, from each agent, one at a time, “We provide the best products, training and support to the dealers, better than anyone in the business.”

Then the moderator usually stands up and says something like, “Well, if all of you are offering the best training and support to your dealers, and you are all agents, then what makes you different from all of the other agents?” Usually a silence falls on the room, and the next topic of course is reinsurance, loyalty programs, or a new product that differentiates the product provider’s approach as a lead-in to capture the agents’ attention.

When I ask this same question to many product providers, similar to the agents, a common response is, “We provide the best products and administration on the market. Our knowledge of the business and support of the agent is second to none. Our insurance backing is strong with over “X” billions of dollars in assets and our product lineup and market presence is a real differentiator.”

This is just an analogy and, of course, with all respect, we have seen many product providers get innovative and come on very strong over the past few years. They really are working hard to develop ways to go to market and differentiate their companies.

If I were to ask one question to the readership it would be this, “What program or plan are you taking to your agents and dealers that will redefine and revolutionize the way business is done in the F&I department and the way your agents and dealers transact business with you?”

How does your approach differ from other providers?

First, I think it’s important to state that technology is a differentiator and can make it easy for people to do business with you. One approach would be to put a comprehensive plan in place to drive this change into your sales channels. This is a proactive approach that will position your company to gain and maintain business in the future.

Of course we would like to think that we have the best product on the market, but the reality is that what differentiates us has less to do with our product and everything to do with our people and our approach. It has everything to do with how we treat our customers and respond to their needs.

We also have a very strong development team led by our CTO, Paul Manili, and our IT development group. They are amazing at what they do and how they work together to approach the development cycle.

Customization and prioritization is critical in the process of keeping our customers happy. Our support teams all go through our F&I schools and work with field reps in the dealerships as part of their training. Empathy for the F&I managers that work bell-to-bell is key to great communications with our dealers.

Looking back over the past five years, how has the industry changed and how do you see it changing in the future?

The industry is adopting technology at a rapid pace. Five years ago I would say the norm would be for an F&I Manager to infrequently use a pre-printed menu. Now I would say the norm is for dealers to be using some type of presentation tool or menu system. The platforms themselves have evolved to become a business platform that connects to an entire ecosystem of providers in an effort to streamline business. E-contracting is definitely here to stay, and we are now producing tens of thousands of digital contracts each month.

For the first time in my business career, that I can remember, consumer adoption of technology is outpacing business adoption. Businesses are trying to catch up and F&I is on the lagging end of that technology shift. The tools that dealers have at their disposal today, from CRM and marketing tools to F&I management tools is amazing.

What products do you believe will drive your future success?

Last Tuesday, I went to an Apple store, and it was packed wall-to-wall. There were 30 employees working the floor in blue t-shirts, all operating off of an iPad or iPhone. This is the way of the future. No one has done retail better than Apple and the product evolution in tablet devices,their approach to the market for everything from music and movies to applications and devices has changed the way we all need to be thinking. I would say the way we can communicate and interact with consumers has become so dynamic and integrated that this step change will drive all future products and services that we develop.

In February, we launched MobileTrak. It’s a completely mobile solution that renders our entire platform on tablet devices, including customer presentations, menus, compliance, credit and financing, DMS integration and our complete E-Trak platform for e-contracting services with integrated e-signature on the iPad and Android platforms. One of our strengths is bringing our partner connectivity to this platform so we have focused on integrating to every provider either directly or through an F&I exchange platform so that we can meet the dealer’s and agent’s needs.

It’s a complex environment at the agent and dealer levels,so we threw out our old integration models and have built new ones that are capable of handling an unlimited number of providers and integration methods into one interface. That allows us to call all the providers being used at the dealership with one click. The elegance is in the interface and the technology is behind the scenes. Making it the technology friendly for F&I managers is paramount to adoption, and adoption is what ultimately drives sales success.

We have changed the way we think and develop technology solutions to prepare for the future of F&I. We want to be prepared to aid our dealers in moving the F&I process more upstream in the car-buying process. We have worked with clients who want to enable inventory selection, financing and F&I processes right to the web so that consumers are able to go through a mini sales and interactive process before they come into the dealership. Although this may be several years off, we are already starting to see the demand. It’s a brave new world! Hang on to your hats!

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Saab Cars North America Selects Ally Financial as Recommended Provider of F&I Products

DETROIT – Ally Financial has been selected as the recommended provider of finance and insurance (F&I) products and services for Saab dealerships in the United States.

Ally Financial will offer its Repair Advantage line of vehicle service and maintenance contracts to customers through Saab dealers, along with a comprehensive suite of ancillary F&I products, including guaranteed asset protection (GAP), lease wear and tear, tire and wheel protection, appearance protection, and theft deterrence. Saab dealers can also take advantage of Ally’s commercial insurance products and services including wholesale inventory insurance as well as access to property and casualty insurance packages offered by third party partners for the dealership.

Ally was previously selected in March as the preferred source of wholesale and retail financing for qualified Saab dealers and customers in North America and internationally.

“Saab is pleased to have Ally Financial as a lending partner for Saab dealers across the U.S,” said Mike Colleran, president & COO, Saab Cars North America. “This relationship offers our dealers and customers more financial options to meet their individual needs. We appreciate the interest and support of Ally Financial.”

“Ally is pleased to build upon its strong relationships with Saab dealers and customers,” said Tom Callahan of Ally Financial. “As a market leader, we provide insurance programs with an experienced and dedicated sales team and leading edge technology. We are confident of our ability to help augment a dealer’s business while meeting customer needs.”

Repair Advantage provides vehicle service and maintenance products that can be tailored to meet the needs of customers. Ally also offers a fully integrated menu selling system for dealers. As an added service, the Ally team will assist dealers in complying with state and local regulations and also provide service and training.

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F&I Performance Down in 2009, NADA Reports

The recession’s effects on the industry last year wasn’t lost on F&I, according to the National Automobile Dealers Association’s DATA report, which showed declines in aftermarket income, F&I and service-contract acceptance rates.

Aftermarket income (combined gross from F&I and service contracts) fell to 25.7 percent of new- and used-vehicle department gross profit in 2009, down from nearly 30 percent in 2008 “as customers economized during the deepening recession,” the report stated.

F&I and service-contract penetration rates fell for new and used vehicles combined, as financing became difficult for customers with credit rated “Alt-A” and below.

Service-contract penetration for new vehicles held share at 32.4 percent in 2009, far from the relative peaks of 35 percent in 1986 and 34 percent in 2004.

On a positive note, 2009 did show some improvements from the previous year.

Gross profit margin on new-vehicle sales was 4.5 percent of the selling price in 2009, up from 4.4 percent in 2008 when gas prices were volatile.

Last year also saw a year-over-year improvement in new-vehicle F&I penetration, which stood at 55.7 percent in 2009.

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