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The Future of the Industry for 2014

We asked some of industry’s top executives to share their vision for the future of both F&I and the automotive industry as a whole for our sister publication AE Magazine. The responses were so great, we decided we had to share some of the highlights with you here as well. The executives discussed their thoughts and predictions about the industry, the economy and technology, and shared their insights on products they will be watching, with an overarching sense of optimism about what the future holds. To read the full article, watch for the print edition of AE Magazine, or catch it online as we share it there over the next several months.

The Economy
Most agreed that the economy has at least stabilized, if not improved significantly, and many see that growth continuing in 2014. A few executives postulated that legislation might have some impact on the industry in 2014, but others don’t foresee any major hurdles for the upcoming year. Overall, things seem to be looking up.

Tony Wanderon, CEO, NAC and Family First Dealer Services, felt things had begun to stabilize to a large degree. “Lending has opened up, and customers can come into the dealership and buy cars and we have seen the increase in volume to prove it. I believe we will get into normalized purchase times; there were a lot of customers in 2013 who needed vehicles and that helped us out, but I believe 2014 will be more of a normalized year than the past several. I don’t’ see a lot of things that will jump up and catch us – no major elections, no financial crisis at this point and everyone has strong balance sheets. I think the economy looks pretty good.”

Bob Corbin, president and CEO, IAS attributes the economy’s improvement, in part, to the automotive industry. He too, has a positive outlook for 2014. “I think the auto industry is part of the reason the economy is doing better. I don’t think the economy is driving automotive as much as automotive is helping the economy. Our industry affects one in five Americans in some way shape or form, and we think everything is very positive. Cars were are up about 8.5% for 2013 year over year, and we see that trend continuing, to somewhere north of 16 million new car units sold in 2014.”

While some may not see much change from 2013, many still foresee F&I to be strong, and predict growth within the industry as we head into a new year. As the economy has gradually improved, many people who have kept their cars for longer than historical averages are finally feeling confident enough to enter the dealership looking to buy or lease.

Joel Kansanback, president, Automotive Development Group, said he expected the first half of 2014 to look much the same as 2013. “In our market, car sales have been strong, credit has been loose and dealers have been profitable, but I would expect the results for lenders will deteriorate at some point, in probably the second quarter, and we’ll begin to see tighter credit in dealerships in the third quarter. Dealerships will have more difficulty getting loans, and there will be a big impact on special finance departments. In concert with that, the theme for 2014 will be that the sales will continue to be strong, and F&I will continue to be strong. The wild card, however, is if the major lenders follow direction of CFPB and put restrictions on finance reserve; if that happens, we could have a major shift fast, and that could happen as early as the first quarter.”

“The economy could be unpredictable because of the impact government legislation will have on individuals and companies with the Affordable Care Act,” said John Vecchioni, director of business development, United Car Care Inc. “The industry has benefitted from the down market only because of the limited sales production of the past. People have had to come out and replace vehicles as a result of the 2008 economic calamity. Leasing should become more predominant in 2014 as a result of economics.”

Technology and Products in 2014
The executives we interviewed were eager to talk about the technology and products they will be watching in 2014. The product category most mentioned: eContracting and eSignatures. Appearance protection also made the list, as did the increasing trend toward using mobile technology in a variety of ways.

eContracting and eSignatures
As technology becomes increasingly more available for eContracting and eSignatures, dealers are beginning to utilize this technology in their operations; some more than others. Many of the executives we spoke with believe that 2014 will prove to be a year we will see a great increase in the use of this technology across the board. Some dealers are eager to increase technology and even go paperless, while others remain somewhat resistant.

For product providers, the time to start actively pushing for the use of eContracting and eSignatures is now; even the banks are beginning to take a closer look at the technology, and dealers and agents are beginning to demand the option.

“eContracting is one topic a lot of people will talk about,” said Brent Allen, president, StoneEagle. “And there are all kinds of perspectives on that. A lot of people say it’s stagnant, and some are successful and some are not, but OEMs are pushing it very hard. They are getting the loans in that format, so they are successfully moving that needle forward; I know of one that is pushing 80% eSignatures on the finance side. What we’re seeing is, because of that, the finance side is starting to reach out to get a seamless deal jacket. We have, however, seen a lot more success on eContracting than on eSignatures. There is quite a bit of success on the data, but the signature is the hook. It is the one piece that, for the most part, is not electronic today. Once you can capture that properly, the whole deal can be electronic. It is the lynchpin, and I think that will grow a lot in 2014. There are still things to overcome – how many signatures do you need for example. Can you do it once and apply to all documents? Probably not today; step one would be great if we could figure out how to get all the forms together so they can be delivered from there, so it is a single experience.”

Tim Brugh, president, American Auto Guardian Inc., noted that some dealerships are being held back because they lack the infrastructure needed to house the newer technology. “I don’t know if it’s a trend or not, but while we’ve had technology forever, it’s been rough getting everyone acclimated to using it. The younger generations are used to not touching a piece of paper; they either have everything on computer, or on their phone or iPad. But my generation still likes to touch the paper. We’re still trying to get people to accept that change, but once you get dealers and providers past that, we will see them doing everything online. It will get there; it’s just a slow process. One of the problems is that a lot of dealerships still don’t even have the infrastructure to house the technology in the first place. They don’t have fast enough lines, or computers with memory or hard drives to get them where they need to go. It is all part of an education process – it is already changing, and we will see more changes coming, but at the end of the day, it all depends on how much a dealership wants to embrace the change.”

“With the numerous recalls and quality issues of many manufacturers, I believe that we will continue to see growth in the VSC arena,” said Kelly Price, president, National Automotive Experts. “It is getting harder and harder for people to say ‘It’s a Honda/Toyota/etc. and it won’t break’ – especially with all of the electronics comprised in a car these days. But I do see eBusiness solutions as definitely taking hold. We are seeing more and more of our business processed electronically. eSignatures are going to be more of an issue with each state, and whether they are an acceptable form of signature; we will be ready when they are.”

Everyone we interviewed seemed to agree that it will be a slow process for dealerships to increase the integration of technology, one that will likely occur over the next several years before eventually becoming mainstream. And the sooner the better; already, there seems to be a correlation between dealers who are pushing eContracting and increased sales volume growth, according to David Trinder, CEO, F&I Administration Solutions LLC.

“All of our customers are eContracting at one level or another,” said Trinder, “Some are receiving well above 90% of their contracts electronically, while others are still at the 30% level. It has all been a matter of effort. The more providers push agents to push dealers to eContract, the more successful they have been. It is also interesting that the providers pushing eContracting the most have also seen the greatest sales volume growth. What I am certain of is that in 2014 most providers will feel more push from the other side – the dealers and agents will start insisting on eContracting, so the percentage of eContracting should show a healthy increase in 2014. eSignature is another matter. The requests for it have increased significantly in the past few months, but the demand is not there yet. I expect use of eSignature will grow in 2014, but it will not be mainstream for a year or two at least.”

“I see the product offerings as more evolution than revolution,” said Jimmy Atkinson, COO, AUL Corp.“ The way products are presented will change more than the products themselves. Customers will be able to interact with products through tablets or enhanced software at the dealership. I certainly think things on that front are getting faster, but there are still some challenges there. For example, I recently bought a car, and it was going to be a paperless transaction – and it was in that I signed a touchpad. But then there was the biggest printer I’d ever seen, and they printed out reams of paper, so I am laughing at the idea of paperless. We really do still have a ways to go on disclosures and legalities to where it’s truly paperless. But I do see the trend to move in that direction accelerating.”

Appearance Protection
Although they are not new, last year consumers really seemed to sit up and take notice of appearance protection products. This is a trend our executives expect to continue in 2014; our executives predicted that the appearance protection category will be the biggest seller this year, outside of the product mainstays of VSC and GAP in the F&I office.

“The big three products are always vehicle service contracts (VSC), then GAP, then tire and wheel. I see appearance protection products being resurgent in 2014 however,” said Corbin. “They are a great value for a consumer – consumers don’t go to Best Buy to take pictures of their new fridge, but they do take pictures of their new car. They love their cars, depend on them and want to have a good-looking car, and that is what providers who provide protection are giving them. I see a resurgence in that product in dealerships in terms of penetration.

Mobile Technologies
While mobile technology is just emerging in many senses, our executives predict its use will continue to become more widespread and diverse in the coming years. Today, you see it in the cars themselves and in the offices where F&I is presented and sold. There are a few dealerships that have already embraced it and are having great success; however, those are few and far between. For the most part, dealers have either not experienced this success or simply have not yet looked at the technology. Mobile technology is definitely a product our experts will be watching in 2014 and beyond.

“It is too early in the game with tablets and mobile devices, but I strongly believe that they will be the trend over the next three years,” said Kaizer Siraj, CIO, Safe-Guard Products International LLC. “You can think in terms of point-of-sale – how do you make products more visible? Mobile would allow consumers to evaluate the products, and there is very neat opportunity across the board for that. The second area mobile will impact is the service drive. Take a step back and think about it: the customer comes in with a problem, and we want to make the experience compelling and smooth. Mobile devices and tablets integrate with other back office systems to make that happen. Mobile will play a key role in the future, but the enablers will be about integrating with multiple lenders and multiple partners. So the mobile tablet is in the early stages, but I see that as the direction the industry will ultimately head in.”

Leasing, Pricing Options, Combo Products and End-to-End Solutions
There were a few other trends continuing from 2013 – not as vital, but still of interest – that were mentioned by our experts. One product category many predicted will continue to be on the upswing in 2014 is leasing. With more and more products designed to appeal specifically to lease customers, every dealership should be targeting this segment of the market with F&I products that will give customers peace of mind when they turn in their lease, if they aren’t already doing so. Appearance protection is expected to grow – already the largest product category for lease customers – with wear and tear following close behind.

“Lease products are going to keep increasing penetration,” noted Brugh. “Things like ding and dent, or excess wear and tear. We have seen some nice maintenance programs with a little service contract tied to them. I really think the lease products have seen a lot of growth over the last two years through both OEMs and dealerships. They give the customer a lot of good coverage, so I believe those products will surge forward in the leasing market.”

When the economy was at its worst, offering biweekly payments as a pricing option became a popular solution for those who weren’t able to make traditional payments. Now, even though the economy has improved, there are still many in the economy’s wake with credit problems who need to purchase vehicles. Our experts view this as a trend that will continue in 2014, and feel that dealers need to have these options available. By continuing to offer biweekly pricing options, dealers are given more options to get into cars and consumers are better served, more satisfied customers, who are ultimately, more likely to become return customers.

“I think you’re going to see increased interest in biweekly products,” said Michael Tuno, president, World Class Dealer Services Inc. “It means the buyer is able to take those longer loan terms and afford a purchase, but be able to pay it off and get back into the trade cycle in a shorter period of time. There is a growing awareness of that product; the seven-year loans rampant in our industry are detrimental to the dealer in getting the customer able to trade their vehicle and get them into another car in a reasonable period of time. Biweekly products keep both the dealers and consumers interests best served.”

No one doubts that top selling products will remain the same in 2014, however a number of our executive believe that the trend of bundling several products together – often referred to as combo products – will surge this year as dealers begin to see this an elegant way to increase products on the menu without overwhelming buyers. In addition, by offering several products bundled together, the dealer is able to offer a slightly discounted price, thus further increasing consumer appeal.

“The menu is pretty full right now,” noted Steve Amos, president and CEO, GSFS Group. “All of the insurers out there are looking for the next new product we can put in play and gain a lot of revenue, but right now we have to consider the menu – it can’t get too big. I think a lot of the jostling for positions is really falling into place; VSC and GAP are big, and the big riser for us in 2013 was prepaid maintenance. I see tire and wheel as a solid product, continuing to increase year after year, and I believe we will see more bundled products next year a well – bundles will be combined with windshield, paintless dent or tire and wheel, all sold in one package at a reduced price. I think in 2014 we will see that become more prevalent, as it has really become mainstream now. Ancillary prods have also become more acceptable, with providers more comfortable with their risk, but as far as what’s new, not a lot will go on the menu unless it’s a product that will replace something already there.”

The systems and software that tie all the processes together in a dealership – tracking a customer from when they walk on the lot until they take delivery – are referred to as end-to end-solutions. While end-to-end solutions are nothing new, they continue to evolve and improve as the technology driving them gains momentum. While our executives don’t think this will be a major trend in 2014, our executives believe this is a category most, if not all, providers will be working to implement in the upcoming years.

“I think we’ll see the emergence of more desking tools in 2014,” said Charlie Robinson, president and COO, Resource Automotive Group. “They are out there now, but I believe they will continue to gain popularity. They will put F&I and the front sales team more in concert; the dealership wants to watch how deals are negotiated, to make sure they’re done correctly. Some of them will print out reports that will show managers the deals, so desking tools that track the way sales are negotiated will become more popular as time goes on. This is all part of an end-to-end solution. Everyone has been promising products for 10 to15 years that allow the CRM to feed into a desking tool, to feed into the back office, etc. I think the industry has been struggling for those seamless systems to evolve and work as they should, and I think we’re finally starting to see them take center stage.”

Customer Retention
Customer retention will continue to be a hot topic in 2014 and well into the future. Our experts strongly agreed that F&I plays a huge role in getting customers back into the dealership. With products like pre-paid maintenance, the dealership is kept at the forefront of the customer’s mind, so when it comes time to purchase a new vehicle, the customer is increasingly more likely to buy from the same dealer. And that is the ultimate goal.

A related trend we began to see at the end of 2013, that some executives expect to continue and increase in 2014, is selling products in the service drive. One hurdle that will have to be crossed is the resistance by service managers to sell products. Providers will need to work closely with agents and dealers to present the right products the right training to overcome this reluctance.

“I think there’s an evolution of products right now,” noted Glen Tuscan, president, Dealer Commitment Services Inc. “But any dealer not doing their own maintenance plan is missing an opportunity. They are designed for dealers to bring customers back, and then to take that customer and turn them into a client. If dealers are not using something like this, they will always be buying customer business instead of earning it, and planned maintenance is truly one of the best products for building that relationship. And that will help the dealer through the coming year, because now he’s got customers committed to his business instead of defecting elsewhere. That, to me, is the number one staple product. That is, essentially, building two departments: the dealer is capturing business in F&I, and then turning them into a customer in the service department. That will reap benefits years down the road.”

“We’ve had conversations with many partners, and one of the trends they are all seeing is the idea of customer retention,” said David Pryor, CMO, Safe-Guard Products International LLC. “It is becoming an increasing focus in terms of products in the marketplace. Dealers are looking at providers with higher frequency and opportunity to use F&I products to build relationships with their customers. Thinking about that, it kind of sets it up for things like prepaid maintenance, tire and wheel and service contracts. Things that keep that customer coming back – the ultimate goal is selling them another vehicle when they’re ready to trade it in.”

What the Future Holds
Our executives shared their insights on what they expect to become prominent and the changes they see coming, both in F&I and the automotive industry as a whole in the near future. The constantly evolving influence of technology and the Internet is a major trend our executives will be watching. As younger generations who grew up with the Internet are now of a car-buying age, their entire idea of purchasing a vehicle is viewed from a different angle than that of their less Internet-savvy parents’ generation. Dealers will have to find a way to adapt if they want to corner this coming-of-age market segment. This is where providers will need to step up and make sure they have the right suite of products to entice these consumers. Providers will also need to be more involved in finding better ways to present the products to these consumers; agents, provider and dealers will need to work together to find and implement the best solutions to reach this market – and then continue to adapt as the technology changes. The percentage of buyers looking for this type of buying experience is currently small, but is sure to increase over time, and everyone in the product lifecycle needs to start preparing.

Continued consolidation – both of providers and dealers – is another major trend the executives we interviewed discussed. As we have been seeing in 2013, they predict it will continue to become harder for smaller providers and dealers to compete. Compliance is a major part of that – as providers scale their operations up, the burden of compliance is easier to spread around. Smaller providers will have a much more difficult time with that aspect of the business as time goes on; it won’t be impossible for them to compete, but they will need to be nimble and efficient to do it effectively.

“It is imperative that lenders, providers and dealers alike focus on compliance not just on the state level, but also on the federal level,” said Matt Croak, president, Wise F&I. “This is evident by the growth in membership of such F&I-related trade associations as GAPA, SCIC and MVAPA. I also think that changes in the vehicles themselves may require a thoughtful look at the benefit coverage options in the F&I products so that they align more closely with the underlying vehicle.

“I think menus will continue to be critical part of the transaction in F&I, and that F&I managers will be much more engaged in the sales process, not just focused on what is happening in F&I,” noted Tuno. “It is siloed right now, but I think there will be more integration between the consumer buying the vehicle and everything that happens up until they get it delivered. All that technology is there today, it just isn’t too far along in its maturity, but I think there will be a push for an end-to-end solution. The technology will drive a more lean and efficient process, and retailers that have it down are the ones that can eke out the margins. The most efficient might see 5% return as a percentage of gross revenues, but most are going to operate at 2-3% – the 5% are the ones who have the process down from the front door to delivery of the vehicle. Technology will create a much more conducive solution, especially for the younger generation, which is used to communicating less with people in face-to-face environments. There is the whole idea of Internet, and millennials, gen x and ys – they all use it. Even baby boomers like me use the Internet a number of ways when purchasing a vehicle. This generation wants to show up at the dealership much further along in the transaction than in the past, and they don’t want to spend more time than necessary in the dealership itself. We already have the groundwork for that kind of business model, and I think we will see more of it in 2014.”

While hybrids and electric vehicles are not new to the market, as that technology improves and their prices drop, they are rapidly becoming the choice of more consumers. Our executives predict this will be a continuing trend in the future, which presents an opportunity for providers to look beyond their traditional offerings and come up with F&I products that are especially tailored to fit these unique vehicles.

“At Protective, we are keeping an eye on similar trends that we have been monitoring for the past few years, such as the steady growth of alternative power systems (like hybrids), technology and connectivity,” said Scott Karchunas, president, Protective Life Asset Protection Division. “Consumers are bombarded with new forms of technology, and their desire for more efficient vehicles is growing at a steady rate. We are working hard to stay ahead of these trends to develop F&I products that meet these evolving needs both today and well into the future. For F&I specifically, for the past year and a half, we have been keeping an eye on the developments with the CFPB. Even though most auto dealers are not directly subject to CFPB regulation, this has obviously become a hot topic for the auto industry. Over the course of the next year it will be interesting to see how the industry adjusts processes to meet the potential impact of CFPB guidance. At the end of the day, the need to support F&I operations with reliable products, training and administration remains intact, regardless of whether the CFPB takes further action affecting auto sales and financing. Dealers and their F&I staff need products that provide value to their customers and they need to know these products are backed by a financially stable organization that is interested in helping protect their reputation.”

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The Dodd-Frank Act: The Creation of the CFPB and How it Impacts F&I

One of the sessions that garnered a lot of attendance and attention at the Industry Summit show at the Paris Hotel and Casino in Las Vegas last month was the Dodd-Frank panel, moderated by Bob Harkins, vice president/director of training, AFG Training Academy; president, RAH Consulting. It tackled subjects such as the Consumer Financial Protection Bureau (CFPB) and other regulatory bodies that impact the F&I office across the board.

As outlined by the panel, the Dodd-Frank act was signed into law in July 2010, and that set into motion the creation of the CFPB, which is the federal agency “causing the most uproar in recent memory”. It was officially created in July 2011, and currently has approximately 1,400 employees – about 700 of whom are attorneys. The problem, and the cause of much anxiety throughout the F&I industry, is that the CFPB has issued only vague, general statements, but hasn’t provided any concrete rules or guidelines that dealers, agents and providers can follow. This leaves a legal “grey area” with everyone uncertain as to what is expected of them.

“It’s been a very interesting trip for us,” said Damon Wiener, senior vice president and general counsel, Safe-Guard Products International LLC. He went on to compare it to a marriage – “They claim they have authority over me, they won’t tell me what the rules are, but they punish me when I break them,” he said, to laughs throughout the room.

Nicole Munro, partner, Hudson Cook LLP, agreed, noting that the CFPB is impacting her legal practice every day. While Wiener compared it to a marriage, she used the analogy of a two-year-old on a sugar high, noting that the agency might be young, but it’s been very, very active. “You should be very prepared for their intervention,” she noted.

Part of the reason the CFPB is so active, and something to be concerned about, is that it is extending and augmenting it’s authority by incentivizing the state Attorney Generals, noted Terry O’Loughlin, director of compliance, Reynolds and Reynolds. He explained that the Attorney General doesn’t have the same limits that are in place to constrain the CFPB, so the agency is encouraging them to adopt and prosecute its policies, extending its reach.

The key to staying out of trouble, noted Dave Robertson, executive director, Association of Finance & Insurance Professionals (AFIP), is to take a proactive approach – dealers, agents and providers should all be looking at the F&I process and asking themselves what can they be doing on a day-to-day basis to stay in compliance.

One of the key points the CFPB is targeting is the issue of dealer compensation and the ability for dealers to price credit. “The CFPB has agreed that dealers should be compensated, but the debate is how they get compensated,” said Andrew Koblenz, executive vice president, Legal and Regulatory Affairs, and general counsel, National Automobile Dealers Association (NADA). His agency has been one of the industry players looking to educate the CFPB, among others, on how dealer compensation works, and why it is important. At first, he said, they were looking at the possibility of eliminating it altogether, but once it was explained how it adds value to the consumer, and provides access to credit that many consumers would not otherwise have had, they were persuaded not to slash compensation completely. Now, however, it is trying to find the middle ground where dealers are compensated fairly, and consumers are protected from unfair practices.

The agency is also targeting “unfair or deceptive” advertising, which is where the vagueness comes in. They have not clarified what “unfair or deceptive” means, but they have issued orders noting that dealers should avoid them. When there are no clear-cut actions to avoid, what should the industry be doing? First, Munro, noted, providers and dealers need to look at each product and classify exactly what it is in each state – is it a vehicle service contract (VSC), warranty or insurance product? Then, she noted, examine whether that state’s law allows the financing of that type of product, and if so, how it needs to be disclosed. “The problem is in characterizing it,” she said. “Since if you get that wrong, everything else could be wrong too, and you might have violated state laws.” The challenge gets even harder when bundled or combo products start to come into play – she gave the example of adding an insurance product to a bundle of non-insurance products – and noted that it varies as to whether that changes the classification of the other bundled products as well. “You may only know you have an insurance product when you get a violation,” she said.

“Agencies prefer to be unclear,” said O’Loughlin. “Because it forces their targets to overreact, to overcompensate. It’s a great result, because it makes the industry more fearful of what else they might do.”

“There’s a lot of uncertainty out there,” said Wiener. “Everything right now is mostly speculation.” He did go on to note that while the orders have started to at least frame what the CFPB is looking to do, we are still in the early days of figuring out exactly what that is. He did say that the agency does not seem to be attacking the value of the products themselves – they are focused instead on how they are marketed to consumers. However, that does not change the need to make sure the product itself is compliant with all state laws where it is being sold, and that the sales practices themselves are buttoned-up. “We need to be careful, and pay attention to nitpicky details,” he said.

It also goes back to that jurisdictional issue that O’Loughlin pointed out – at the end of the day, what authority does the CFPB actually have, and what actions do they have available to enforce them? Munro does not believe that, legally, the agency has the jurisdiction to regulate product or service providers directly – but she believes it will be a fight to prove that and keep the agency out of this area. “I believe anything offered equally in cash or finance should be outside their jurisdiction,” she said.

“They will try to overreach, and we will have to push back,” agreed Koblenz.

Words Matter
While the CFPB orders might be vague, the panel agreed that they matter, and they will have an impact going forward on the ancillary products offered in the F&I office. O’Loughlin believes the impact will be more far ranging than just products, however. “They will issue very harsh demands, and will conduct audits where they collect tremendous amounts of data. The CFPB is going to share sensitive information [with state Attorney Generals] to identify patterns and practices – and that is a menacing prospect.” The problem is that the CFPB can gain access to sensitive information that the Attorney General could not have otherwise obtained without a subpoena. That worries him; right now, not all of the Attorney Generals are signing on to work with the CFPB, but he believes it is only a matter of time – there is too much money to be made for the state, he noted. The CFPB allows them to enact much higher penalties than the Attorney General could alone, and he does not see them refusing to go that route for long.

Munro noted that while the agency does not have direct access to dealers today, she agrees that the access to data is the most concerning. “They cannot go into a dealership [and collect information],” she noted. “But they can find information about the dealership through the sales of finance products, and pass that along to the Attorney General.”

However, cautioned Koblenz, there are limits. He noted that, like Munro, he sees jurisdiction issues coming into play, as to what the CFPB can and cannot do, and where their authority extends, and that could limit the effectiveness of their strategy in the future.

Disparate Impact – Where Does That Come Into Play?
One of the ways the CFPB is targeting dealers and providers is to claim disparate impact – which is when they go back and look at deals already made, and use an algorithm to determine if they believe discrimination happened. The problem is that it is illegal to collect information such as race when filling out loan or credit documents. So agencies like the CFPB use information such as the U.S. Census, or surnames, to try and assign race or gender. But, agreed the panel, that process is flawed. It can be misleading at best, and plain wrong at worst, leading the agency to make policies to prevent unintentional discrimination that, the panel noted, might not even exist in the first place.

“They have to look at other factors,” said Koblenz. “Things like credit risk – it costs more to place a subprime loan, regardless of race. And there are other variables such as inventory, the amount financed or the term of the loan.” A better metric for determining if everyone was treated fairly, he said, is to look at the dollars – if the goal is to have every deal generate approximately the same dollar amount, then the rates will be all over the place, based on all those credit and financing factors – race doesn’t play into it. Everyone is treated equally, based on their financial standing.

The frustration over disparate impact, Wiener noted, is that the CFPB is preaching transparency in all transactions to ensure every customer is treated equally and fairly – but at the same time, they are refusing to release the metrics they used to determine that there was discrimination in the first place. It is a double standard that leaves dealers, agents and providers to develop compliant policies, only to have to constantly keep adjusting them as the CFPB releases new bits of information.

“They’ve given us little information on how to code these loans,” said Munro. She pointed out that there is currently a case before the Supreme Court that might make it a moot point – the case is seeking, among other points, to have the court rule on whether disparate impact is a valid legal theory. She believes the case will eventually do away with disparate impact completely, which will change the entire conversation around the CFPB completely, yet again.

At the end of the day, the CFPB is impacting F&I today, and will continue to have an impact in the future. But exactly what that impact will be long term, not even the panel could say for sure. There are still too many variables in play, and not enough information to go on – the best policy for anyone in the industry is to stay vigilant and create clear, understandable policies that apply to every loan and every product that is sold through the dealership – so even if a violation is cited, there is a clear paper trail showing the intent to be compliant and stay within the law.

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A Roundup of Combo Products

When it comes to the term “Combo Product”, while there are a wide range of products and philosophies around the strategy, there are a few things that seem to be universal.

First, is that a combo product isn’t simply bundling several products together on a menu. While that is one way to sell F&I products, the combo strategy involves one provider offering a bundle of their branded products, and for the sale of those products to happen on a single contract. Across the board, our respondents to this month’s roundup agreed that the benefits of having a single contract for a customer to sign – getting them in and out of the F&I office faster – leads to higher sales volumes and a higher profit on the items sold. They did note that, at times, it can backfire however. If a customer doesn’t see the value of even one product in a bundle, it can kill the sale of the entire contract. But for the most part, our industry experts agreed that this is a powerful sales strategy.

Second, what was interesting to note was that while there were some common products across the board – most providers we talked to started with a base of a vehicle service contract, and built their combo offering from there – the products that were offered did have some variety. Roadside assistance, dent and ding coverage and key replacement were three of the most cited products. Tire and wheel and appearance protection came in a close second, and most providers offered an average of three to four products in their combo packages.

One thing several providers mentioned is that they are always working with agents and dealers to bundle products together in new ways, but that state and federal regulations are something they keep a very close eye on. Key replacement, for example, is often in bundles today, but one provider noted that it’s possible that will be classified as an insurance product in some states in the future, which would disallow it from being included in combo packages.

If you are looking for insight into the exploded market for combo products, click on the companies below to hear their thoughts about the category, the pros and cons of selling combo packages, and where they see it evolving next.

Combo Product Roundup

American Guardian Warranty Services (AGWS)

American Guardian Warranty Services (AGWS)
Jon Anderson, SVP, Sales and Marketing

How do you define a “combo product”?

Combo appearance packages offer extreme value and represent the most relevant offering to a new vehicle or certified pre-owned customer. Customers love the appearance of new or certified pre-owned vehicle and they want to protect it. They give an F&I Manager the versatility to offer the appearance protection benefits most relatable to the customer.

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GSFS Group

GSFS Group
Alan Bond, VP, National Sales

How do you define a “combo product”?

To me, combo product means multiple products that have been combined into, in essence, one product or at least one form.

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Innovative Aftermarket Systems (IAS)

Innovative Aftermarket Systems (IAS)
Jeff Jagoe, SVP, Sales and Marketing

How do you define a “combo product”?

More of a concept than a product, IAS offers dealers the ability to bundle two or more IAS F&I products as a packaged deal on a single form with a single price. This completely customizable program, called Multi-Shield, utilizes a mix and match approach to meet dealership and customer needs and the perfect F&I price point.

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National Auto Care Corp. (NAC)

National Auto Care Corp. (NAC)
Curt Johnson, Senior Risk, Product & Compliance Manager

How do you define a “combo product”?

In our industry, when multiple programs are combined into one potentially easier-to-sell product it’s referred to as a “combo”. Typically, combos have a service agreement product base, with non-mechanically related vehicle services incorporated – like tire and wheel or paintless dent repair – to add value for the consumer and ensure F&I offers a fuller range of aftermarket products to each customer.

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National Automotive Experts (NAE)

National Automotive Experts (NAE)
Kelly Price, President

How do you define a “combo product”?

To me, it would be taking any combo of several offerings, and creating different opportunities based on needs of the dealer. We focus mainly on reinsurance for dealers, and we try to combine products that are good for reinsurance and high value to the customer.

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Randy Ross, SVP, Sales

How do you define a “combo product”?

Typically, a combo product, or a bundled product, includes three or more ancillary components offered together in a single, branded package.

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Safe-Guard Products International LLC

Safe-Guard Products International LLC
Dave Duncan, President

How do you define a “combo product”?

A combo product takes existing ancillary F&I products and packages the benefits into one product, sold on one form.

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Wise F&I

Wise F&I
Matthew Croak, President

How do you define a “combo product”?

A “combo product” typically includes coverage benefits of multiple ancillary products in a single contract. These multiple coverage benefits may be offered in several formats including bundled, à la carte or a combination of both. A dealer’s ability to offer a single contract with multiple coverage benefit options allows for a more personalized solution and enhanced value to the customer, as well as additional profit opportunities for the dealer.

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Safe-Guard Products International LLC

Dave Duncan, President

How do you define a “combo product”?
A combo product takes existing ancillary F&I products and packages the benefits into one product, sold on one form.

What types of products are you including in your combo packages today? Why?
Today, tire and wheel is the lead product for combination products, followed by paintless dent repair, windshield protection, key replacement and appearance protection. The most common combination is tire and wheel, paintless dent repair and windshield protection. Roadside assistance can also be part of a combination product. However, sales of combination products with roadside assistance have declined during the past few years, since many vehicle service contracts include roadside assistance. By being smart about how you combine products, you can really offer tremendous value to the customer.

We offer combination products to package more benefits for our customers while also setting the stage for compliant filings by using tire and wheel as the base product.

What are your top reasons behind offering combo products?
Combination products offer more benefits at a lower cost than purchasing the products separately, creating more value, more bang for the buck, for the customer. They also protect against the most common perils of ownership: flat tires, door dings and windshield chips and cracks. It’s easy for consumers to see the value.

What, if any, reasons would you have to not offer them?
Compliance — certain state regulations require that the products be sold separately and not combined. Compliance is at the core of everything we do at Safe-Guard.

Is the sales process for a combo product different than for an individual product? Can you give an example?
The sales process is the same as with any F&I product. First, you create the need. The customer interview will give you a good idea of how the customer thinks and what specific needs you can meet with a combination product. Then, you build value by explaining the benefits. Finally, you ask for the sale. It’s pretty straightforward, but probably a little easier since combination products offer so many benefits.

Do you believe the combo product strategy will evolve in the future? What types of product combos do you anticipate in the next 2-5 years?
I see combination products with key protection and appearance protection becoming a lot more common in the marketplace. These products really enhance the core products from the customer’s point of view.

Is there anything else you would like to add?
Menus currently only include five or six products at the most to accommodate consumers’ attention spans. When we can offer one product that has four or five distinct benefits, more products can be presented on the menu, allowing for a more efficient process.

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Sylvia Taylor Joins Safe-Guard Products as Top Human Resources Executive

Atlanta – Safe-Guard Products International LLC hired Sylvia Taylor as senior vice president of human resources.

“Sylvia will lead the next phase of Safe-Guard’s organizational growth. The addition of a number of marquis clients to our portfolio will require significant growth in our capabilities to ensure we are well positioned for the future. I am excited to have a leader with Sylvia’s capability and experience on the Safe-Guard team,” said Randy Barkowitz, CEO.

Most recently, Taylor led human resources at The Weather Channel, where she was responsible for more than 1,000 employees in the United States and the United Kingdom. Previously, as the top human resources executive at AutoTrader.com Inc., she was instrumental in designing, recruiting and managing the 2,400-employee organization and driving AutoTrader’s success. Taylor has been recognized by Savoy magazine as one of the “Top 100 Most Influential Women in Corporate America.”

“Talent, leadership and culture are critical elements that drive high performance in an organization. Safe-Guard is committed to maintaining a high-performance organization and investing in the critical elements necessary to do so,” Taylor said. “I am excited to join the strong leadership team at Safe-Guard. I look forward to leading key organizational initiatives that will help propel Safe-Guard through its next stages of growth while driving value for its customers in the dynamic F&I marketplace.”

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Safe-Guard Canada Ltd. Established to Serve Canadian F&I Dealers and Customers

Atlanta, Ga. – Safe-Guard Canada Ltd., a wholly owned company of Safe-Guard Products International LLC, is now managing all claims on Safe-Guard programs sold in Canada. The Mississauga, Ontario office was opened to provide specialized service for Canadian consumers. All French customer service calls are also handled by the office.

“Safe-Guard has been protecting Canadian customers for more than a decade,” said Gary Volino, senior vice president, operations. “As we look to expand our product offerings, service and compliance are two of the key areas that we are focusing on in the Canadian market. Having a dedicated Canadian office helps us provide additional resources to our agents and OEM partners in Canada.”

In anticipation of further growth in Canada, Safe-Guard Canada Ltd. also has established a Web site in English and French, www.safe-guardproducts.ca. Customers and partners can access claims and customer service contact numbers for the Canadian office. In addition, information about products available to Canadian consumers is available online.

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