The Industry's Leading Source For F&I, Sales And Technology

Article

The Lines Are Blurring

April 2009, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

I’m really going to need a therapist after this turnaround. Like everyone, I’m looking for that silver lining in every new market report or economic news, but nothing good seems to stick these days.

First, there was a report about the California real-estate market showing signs of life, as prices held steady in February. And just as I was starting to feel good about things, a report came out the next day about California’s jobless rate reaching its highest point in 26 years (10 percent).

I also received TransUnion’s end-of-year delinquency report in March. Pete Turek, a senior executive with the company, sounded like an analyst who just discovered his formulas still worked, as he said delinquencies are becoming more predictable.

His report was hardly a sign of a turnaround, however. As Turek said, his now-working formulas show the delinquency rate reaching 1.13 percent by the end of the year, a “high-water” mark for auto delinquencies.

The news out of Experian wasn’t any better, as it reported 30- and 60-day delinquencies accounted for nearly $29 billion in at-risk loans by the end of 2008. Granted, much like a batting average, fewer originations means a higher rate, but the problem is credit continues to deteriorate at an alarming rate. Check out Experian’s full-length report on page 26 to see what I mean.

And as consumer credit continues to take a beating, lenders continue to raise their creditworthiness threshold. In fact, according to Experian, the average loan score for a new-vehicle loan stood at 765 in the fourth quarter 2008, 12 points higher than the average credit score for the year-ago period.

But here’s what I’m getting at: This month we’re rolling out a new feature for F&I magazine. We have integrated our sister publication, Special Finance magazine, into F&I Management and Technology. The best part is the section is removable, allowing both magazines to be shared between departments and employees.

Yes, the change represents our move as a company to do more with less, just as I’m sure many of your dealerships are doing at this time. But it also represents a change in the market. Bottom line, the lines between the credit tiers are blurring, which means 680 and even 700 credit scores don’t mean much anymore.

As Tony Dupaquier, an F&I training specialist for American Finance & Automotive Services, said in a recent article posted on the American Financial Services Association’s Website, “A beacon score is no longer F&I.”

Lenders are now looking at a person’s job type, where a consumer lives, and how many loans are defaulting in that area. That’s why I think some of the processes employed by special finance departments now come into play in traditional F&I operations.

It’s all about managing customer expectations. No longer is it about what they want … it’s about what the lender wants. That means we have to back customers into that finance-appropriate vehicle — regardless of how Internet-savvy they think they are.

I have to apologize to Harry Ackerman, a reader of www.fi-magazine.com. As many of you might be aware, our Website’s been redesigned. And its re-launch marked my entrance into the blogosphere. To kick things off, I resurrected an age-old vision of a hybrid front-end, where customers no longer have to travel from the sales department to the F&I manager’s office.

I know it’s not a new concept, but I raised it again because of some of the things I heard at the 2009 National Automobile Dealers Association’s conference in January.

Ackerman said he didn’t mind me raising the question, but wondered why I couldn’t end on a more positive note. Well Mr. Ackerman, here you go: I think, more than ever, the F&I manager is going to be the key to a dealership’s ability to weather this economic storm. In other words, we’re not going anywhere.

And if automotive retail one day does allow iPhone-wielding customers to buy vehicles with a couple of clicks, my money’s on consumers still having to come to the dealership to sign the finance papers. The lines between special finance and traditional F&I might be blurring, but the role of F&I inside the dealership is as solid as ever.

Your Comment

Please note that comments may be moderated. 
Leave this field empty:
Your Name:  
Your Email:  

Blog

So Here's the Deal

Ronald J. Reahard
Selling High-Mileage VSC Plans

By Ronald J. Reahard
How do you sell a $3,000 VSC on an $8,000 car? Top trainer offers a four-step process to ensure every customer gets the protection they need.

Selling Warranty Compliance Plans

By Ronald J. Reahard
Do-it-yourself customers will tell you they prefer to save a few bucks by performing their own maintenance. F&I trainer has the perfect response for this common objection.

Handling the ‘Last Car’ Objection

By Ronald J. Reahard

Sold But Not Closed

By Ronald J. Reahard

Done Deal

Gregory Arroyo
Rescinding the CFPB’s Auto Finance Guidance

By Gregory Arroyo
The editor debunks a few myths about the Consumer Financial Protection Bureau, then explains why the industry is on the brink of repealing the bureau’s auto finance guidance.

Still a Work in Progress

By Gregory Arroyo
The editor explains why he put another digital retailing startup on the cover and looks at two studies that point to online car buying and financing still being a work in progress.

It Is Unwise to Lower Your Defenses

By Gregory Arroyo

What's Really Behind the Subprime Pullback?

By Gregory Arroyo

Mad Marv

Marv Eleazer
Your F&I Backup Plan

By Marv Eleazer
Equipment failures can’t stop an F&I manager who is prepared for any contingency. His Madness lists four backup plans you can implement today.

Love It or Leave It

By Marv Eleazer
His Madness is reminded that excelling at F&I requires true passion for the craft. He offers a few suggestions for staying focused and mentally sharp.

G.O.Y.A.

By Marv Eleazer

The Little Things

By Marv Eleazer

On the Point

Jim Ziegler
Sharpen Your Survival Skills

By Jim Ziegler
‘Da Man’ has a plan you can use to survive the collapse of the car business and remain profitable through the dealer apocalypse.

Sales Rock Stars Still Exist

By Jim Ziegler
Da Man says $40,000-a-month sales rock stars still exist. He says you’ll find them on YouTube and Facebook Live.

The New Stooges

By Jim Ziegler

Is Your Quick Lube Driving Away Business?

By Jim Ziegler