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Threat or Opportunity

The editor weighs in on new technology in the F&I space and why solutions that appear threatening could represent new opportunities for sales.

March 30, 2016

I have to admit I wasn’t happy when I heard the National Automobile Dealers Association moved its 2016 convention from late January/early February to March. I have always used the event as kind of an editorial table-setter for the year. Well, given some recent developments, I think the wait might be a good thing.

See, if the convention had already happened, I wouldn’t have been armed with the results from a very recent FICO survey. The most alarming finding was that 19% of Millennials said they would use their credit card to buy a car. Does that mean it’s time to close the F&I office? That’s not the conclusion I came to, because the same percentage of Millennial respondents said they would finance their next purchase through a dealer.

But here’s the stat that makes me think this isn’t an F&I problem: While 82% of all 1,000 consumers surveyed said dealers were still the preferred choice for financing, Millennials were more likely to consider purchasing a car from online channels like Craigslist, eBay and Autotrader. In fact, 59% of them said they would buy from a private seller on one of those sites.

My conclusion is this: Millennials still don’t have the buying power their older counterparts have. And to me, this data indicates Millennials have the same concerns as credit-challenged customers: They want to avoid the embarrassment of being turned down for vehicle financing.

It’s hard to believe anyone would prefer a $15,000 credit card balance to a manageable installment loan. But the numbers don’t lie, and several of the software vendors exhibiting at this year’s NADA Convention & Expo have taken notice. They are aiming to bring big change to front-end dealer processes, and what they’re bringing to market goes beyond tablet menus and kiosks.

Understand that the evolution of retail automotive technology has been happening right before our eyes. Software makers have spent the last five to six years testing, studying, tinkering and learning from past attempts at revolutionizing the in-dealership experience.

Two years ago, I met with Black Book executives at the 2014 NADA Convention & Expo. They wanted to show me the firm’s latest innovation: Black Book Digital. It was designed to put all of the firm’s tools and market data in the hands of any dealer with a mobile device, including Google Glass. (Remember that?)

In response to my rambling question about technology advancements, here’s what Mike Williams, the firm’s vice president of direct sales and mobile solutions, said at the time: “The reality is when we started pushing things online, the adoption rate was slow. But with different technology, it started speeding up a lot faster. Not because the technologies were better, but because they were maturing — the users were maturing.”

See, the more you use technology tools, the more these software companies have learned how and where you prefer to use it. And it’s happening in the F&I office, too. No, I don’t get the sense that the mobile F&I menu has “arrived,” but I do believe tech makers view mobile technology a lot differently than they did when the first tablet F&I tool appeared on the cover of our March 2011 issue.

The new innovations that will be on display at this month’s convention aim to reduce F&I anxiety by letting the customer self-discover their APR, payment, terms or all of the above on a mobile device, desktop computer, some kind of in-store display or all of the above. Some use a connection to credit reporting agencies, employment-data providers or some other data source to prequalify customers for vehicle financing without requiring a Social Security number. Some vendors only require a swipe of the customer’s driver’s license to do that.

There are other tools that aim to create a Millennial-friendly F&I sales process, and many of them have received a cold reception. Our own Jim Ziegler views these solutions as a threat to F&I profits. Others, like the Association of Finance & Insurance Professionals’ David Robertson, say they represent the future of F&I. So be sure to check out Ziegler’s “On the Point” and Robertson’s “AFIP” columns on Pages 30 and 36, respectively.

So where do I stand? Well, I’ve always heard that the best way to avoid embarrassing situations with customers who don’t qualify for financing is to first determine their creditworthiness and then back the customer into the right vehicle. And I guess I can see why that might appeal to coming-of-age Millennials. Still, it’s not my place to tell you what’s best for your business. You’re a better judge of that. But if you were wondering what I was looking forward to seeing at this year’s convention, now you know.

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