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Crisis Control

December 2008, F&I and Showroom - Cover Story

by Gregory Arroyo - Also by this author

Dave Duncan isn't one to beat around the bush. The senior vice president for Safe-Guard Products International says the industry is definitely in a bind, but says there are several things dealers can do to weather the storm.

Gregory Arroyo: There were several media reports about the credit markets being frozen in October. Dealers I've talked to said the market was tighter, but not frozen. So what's the reality?

Dave Duncan: Basically, dealers have to get the moons to align. They've got to have customers with equity, a good credit score, the right income-to-debt ratio, and they have to be on the right unit. Lenders are also not willing to extend terms liked they once did.

There's been a writer at Business Week who's been picking on AutoNation's Mike Jackson. His stories have Mr. Jackson saying the problem is the frozen credit market, but this writer keeps saying it's consumer confidence. I agree 100 percent with Mr. Jackson, because consumer confidence is a broad term, and a customer who has the confidence to walk into last your dealership to get a loan approved is a part of consumer confidence. So I think whoever is trying to downplay the credit markets is fooling themselves.

GA: Do you think the Chicago Automobile Trade Association was right in launching a campaign to promote the availability of credit?

DD: I think it's something that needs to be done, but let me tell you something we've been telling our agents. See, dealer agents are supposed to help develop income in the F&I department, teach them menu selling, make sure they're compliant, help them overcome objections, and make sure they have the right products. Well, one of the jobs they haven't been required to perform in more than 10 years is teaching F&I managers how to hang paper. Dealers need to know what banks to use in certain situations, and how to develop lender relationships that endure.

So we've been advising our agents to sit down with the F&I managers to find out which banks are doing what, because you're right, the market isn't frozen. There are just fewer finance sources out there and dealers have no idea where to find them. We've actually started putting together a matrix here to help identify what lenders are doing, as it's clear lending today is becoming more regionalized.

GA: So who's active and where?

DD: The real question is who's not buying at all. I will tell you that Citibank, Chase and SunTrust are still buying. Credit unions have become increasingly aggressive and offer a great alternative. Aside from Toyota, which has remained steady with its buying habits, the captives are just not buying. And that's the biggest issue, because many dealers have been reliant on captives. So where do they go?

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