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What Will You Do?

The editor wonders if the F&I office’s days are numbered after reading some disturbing emails that arrived just as the FTC was gearing up to study the in-dealership experience.

March 3, 2016

It happened a couple of years ago. One of our contributors called me from a client’s store to tell me about a car buyer who had walked onto the lot with a certificate from a third-party lead site. What had him frazzled was the customer’s response when his sales trainee asked him if he was going to require financing.

The customer had already secured financing through the site’s affinity group marketing partner — which specializes in loans for servicemembers and their families — adding, “And I bought their service contract and GAP, so I won’t need to see your finance guy.”

It gets worse. See, that customer had never even been in the military. Apparently, the finance source’s rep called him with an offer minutes after printing the site’s buying certificate.

“This is scary stuff,” my contributor said.

I’m not going to name the third-party site or finance source, because bashing them isn’t the point of this month’s piece. I was just reminded of that conversation after a few press releases landed in my inbox that point to the scenario I described possibly becoming a regular occurrence thanks to advancements in technology.

Take the announcement I received from CUneXus in early January. The Santa Rosa, Calif.-based firm, which offers what it calls a “click-to-accept” consumer loan platform, said it was teaming with Edmunds to create new shopping and purchasing solutions. The two companies connected at Edmunds’ 2015 Hackomotive, a three-day competition that attracts innovators and entrepreneurs to “reimagine the future of car shopping.”

CUneXus, which was founded in 2007 as a technology provider to both banks and credit unions, was also invited to participate in Edmunds’ three-month Fastlane startup accelerator. Its prescreen lending technology analyzes a finance source’s customer information and lending criteria, along with the customer’s credit history, behavior and location. Once that information is analyzed, the platform is able to deliver credit offers to a customer’s phone, computer or tablet.

Here’s how their solution would work: Upon stepping onto a dealership lot, a customer receives a message on his or her smartphone with a preapproved loan offer for $40,000, which can be accepted on the spot. “When combined with Edmunds Price Promise dealer inventory, the resulting solution will elevate the car-buying experience to an entirely new standard, empowering consumers with unmatched tools and transparency,” the company claimed.

Then there was the late-January release I received from SpringboardAuto.com, announcing that it had added John Noone, former president of Ford Motor Credit, and Steve Linehan, former executive and treasurer of Capital One Financial Corp., to its board of directors.

SpringboardAuto.com describes itself as a new direct-to-consumer auto loan platform that aims to “reinvent the auto lending experience.” The company was launched this past December by auto finance veterans Jim Landy and Stuart Holmes. Landy founded CarFinance Capital, which merged with Flagship Credit Acceptance in January 2015 and was recently retired as an indirect finance source.

“SpringboardAuto.com funds loan applicants for a specific vehicle and funnels the qualified customer directly to the dealership at no charge,” read the firm’s December 2015 press release. “Even with the loss of rate markup, this transaction is a much more efficient below-prime transaction for dealers when you account for the elimination of any lender fees, discounts and lead fees.”

Landy, by the way, will serve as a panelist during the 2016 Vehicle Finance Conference later this month, where his session, “Future of Originations: F&I and Beyond,” will likely be attended by a crowd of auto finance executives.

Keep in mind these releases arrived in my inbox around the time the Federal Trade Commission (FTC) announced plans to interview at least 40 recent car buyers about their in-dealership experiences. The goal, according to the regulator, is to uncover potential issues it can address through enforcement initiatives, rulemaking or education.

They also arrived just about the time the commission hosted a Jan. 19 meeting to discuss the current state of the new-vehicle distribution system. At the event was Mark Johnson, president of MD Johnson Inc. — a law firm that serves franchised dealers. He shared his observations in an email:

“During Chairman [Edith] Ramirez’s opening remarks, I learned that the FTC has a stated position that the current system of auto distribution is: protectionists, special interest legislation; restrains trade; increases the cost of vehicle ownership to consumers over a direct distribution model; is outdated, antiquated and in need of revision or dissolution.”

No, I didn’t share all of this with you to tell you the car-buying process is broken. I just thought you should know.

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