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F&I Takes Center Stage

Establishing a better connection between the F&I office and today's Internet customer was top of mind at this year's annual dealer conference.

February 6, 2012

When you hear the NADA’s chief economist say he’s giddy about 2012, you can’t help but have a good feeling about the coming months. Companies lining the aisle ways at the industry’s annual dealer conference were also feeling pretty good.

Now, Taylor’s crystal ball has worked pretty well in recent years. When other industry soothsayers started talking about the possibility of sales eclipsing the 14 million mark last year, Taylor, who never shows much emotion, stuck with his 12.7 million prediction. And for the most part, his prediction was right.

This year, Taylor expects more than 13.9 million new cars and light trucks will be purchased or leased in 2012. The economist listed out several reasons for his prediction — pent-up demand being the leading factor. Remember, the age of vehicles on the road today is at a record high (11.1 years old).

Jonathan Banks, the main analyst for the NADA Used Car Guide, was equally as giddy. The used-vehicle market will be strong again this year, he said. He added that the supply and demand imbalance will continue to keep prices high, a situation that will benefit consumer trade-ins, lenders and hopefully new-vehicle sales.

Finance sources at AFSA's annual Vehicle Finance Conference also were feeling good. They like the used situation and don’t seem to be too concerned about what some call a pricing bubble waiting to burst. The reason is they believe used prices will ease into more normal levels as more late-model vehicles come back into the market in the next two years.

Also encouraging was that finance sources were no longer talking about how close they were to the brink of collapse four years ago. I personally was tired of that storyline and was glad to hear banks and finance companies talking about the road ahead.

What they also were talking about was Gen Y and the Internet shopper. See, they believe auto transactions will eventually migrate online. Yes, F&I was top of mind, but not for the same reason four years ago.

Yes, four years ago, F&I was front and center because dealers were simply seeing fewer buyers entering their dealerships, so the hope was that F&I make the best out of those fewer touches. This time around, insiders talked about the need to establish a better connection between Internet shoppers and the F&I office.

Yes, legal experts like the magazine’s Michael Benoit point to regulations like the Red Flags Rules as roadblocks to the digital transaction, but that doesn’t mean software companies and finance companies aren’t working on ways to get around those regs.

By the way, Benoit asked me to ask you this: How many of you out there have performed your “periodic” review of your Red Flags program’s effectiveness. Yeah, that’s part of the rule, too. And from what I heard, the Federal Trade Commission has begun auditing dealers in Florida, Pennsylvania and other states. So, get on it.

Also on the compliance front, RouteOne has launched a dashboard-styled control module that will allow users to manage the company’s suite of compliance offerings. What that means is only one username and password. Yeah, compliance software is getting a lot smarter and easier to use.

Floorplan finance also came into focus. Automakers now realize they can’t put all their eggs in one basket, especially after what happened to the capital markets three to four years ago. So, what they’re doing now is diversifying. Wells Fargo’s auto dealer services segment, for instance, will now act as an official floorplan source for General Motors. Apparently, the relationship is about three months old, but executives from Wells said the two companies are now pulling the wraps off the new partnership.

Speaking of Wells, the company is combining its consumer lending segments, from auto and mortgage to student loans. As Tom Wolfe, who is heading up this combined division, said, the company wants to be with its customers every step of the way. He added that the change will allow the company to get a complete view of a customer’s credit history. Obviously, Wells also is doing this to improve customer loyalty.

And if you saw last week’s e-newsletter, you know that GM Financial is working with DataScan to help it administer its floorplan program. So, if you’re keeping score, General Motors now has Ally, Wells, GM Financial and, as some of you know, US Bank handling its dealers’ floorplan needs.

What also made me think F&I is in focus is that companies like Reynolds and Reynolds and DealerTrack are talking about F&I again. In recent years, the companies have been pushing their customer and inventory management solutions. This year, Reynolds’ docuPAD and DealerTrack’s mobile F&I solutions were front and center. It was good to see.

My annual visit to JM&A revealed that the company continues to expand its footprint out West. It’s done it organically, but Forest Heathcott, the company’s top executive, said the company is still interested in expanding through acquisition.

By the way, Brazil is the new F&I hotbed. Companies like JM&A, Safe-Guard and others are heading down there in a big way. In fact, former JM&A executive Jim McDavid has launched a new income development company and he has his sights on that market as well.

One of the more interesting announcements on the F&I front was the one made by Allstate Dealer Services. The company is offering to help dealers open up insurance agent offices inside their dealerships. So, imagine, while your customers are waiting for the F&I turnover, they can visit with an Allstate insurance agent to set up their policies for their vehicles, home and more. And no, those insurance agents will not be offering GAP to your customers.

What’s clear is that the dealer division is getting a little closer to its parent company.

Now, the main reason I think F&I was back in focus was because of a conversation I had with Joe Castle. He’s the founder of SOCIALDEALER, an Oakbrook, Ill.-based company that offers a social media and reputation management platform. He told me there are dealers out there who are doing pretty well talking about auto finance and even F&I products on social media sites like Facebook, and he’s hoping his new platform will help F&I offices make further inroads into the social mediasphere.

Think of this blog as a tease for what my staff and I picked up at this year’s conference, so keep an eye out for post-show coverage in March. Also, several F&I focused companies told me off the record that they will be releasing solutions this summer – around our Industry Summit – that will help bridge the gap between the F&I office and today’s Internet shopper. So, be sure you’re talking to your managers and dealers about getting out to this year’s show, which is being held Sept. 10-12 at the Paris Las Vegas Hotel.

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