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Captives Speak Out

January 2008, F&I and Showroom - Feature

by Editorial Staff

With questions about what 2008 holds in terms of new-vehicle sales, captive finance companies said their focus is now on customer retention, but that’s not all they covered during a special captive finance panel at the magazine’s fourth annual F&I Conference and Expo last September.

Called “The Changing Landscape of Captive Financing,” the panel was moderated by Marguerite Watanabe. Participants included Chrysler Financial’s Kelly Mankin, Ford Motor Credit’s Todd Trese, GMAC’s David Jones and Toyota Financial Services’ Mike Groff. Each provided their take on how the market has changed and will change in 2008, and each talked about what their companies are doing to help dealers go forward.

The Changing Role of Captive Finance Companies

WATANABE: In the past, the captive role has been to sell cars at a profit. Has this role changed at all in the last several years?

GROFF: The business has changed quite a bit in the last 25 years. The role of captives is, first and foremost, to support the sale of vehicles from our respective companies, but the size of the new-vehicle market has not changed dramatically in the last several years. So that’s put more of a requirement on us to do a better job of retaining customers. That’s why Toyota Financial Services has invested heavily in our customer service centers. We’ve also made a significant investment in our Website, because there’s a lot of activity there. So, I think between that and the relationships we’ve built with our dealers, and listening to what they say their business needs are, we’ve tried to respond and react as best we can.

JONES: Looking back, 10 years ago we were pretty much driven just to help sell the car, but now our parents are demanding that we center our efforts on generating profit. We’re expected to be a significant contributor to the bottom line. Not only do we have to support their efforts to sell as many cars as possible, but we have to make a lot of money doing so.

MANKIN: From a Chrysler perspective, retail market share has been shrinking over the last few years, and the advent of credit unions and aggregation really forced us to be more of a customer-facing competitor. We’ve had to become keener about developing and reacting to our dealers’ needs, and developing our value proposition accordingly.

TRESE: At Ford the relationship between the manufacturer and the credit company has become more integrated. Ford Credit has given back $12 billion to Ford Motor Company in dividends over the last four years, which all goes toward new product development. Ford Motor Company can’t live without us, we can’t live without them, and we both can’t live without the dealers. So the integration for us has become almost inextricable.

A More Unified Relationship

WATANABE: The relationship with the OEM has become more and more of a crucial piece of the business, correct?

MANKIN: Yes, and in order to win games you have to be great at the basics — blocking and tackling — and those haven’t changed over the years. In fact, the need for those basics — consistency and support for brand partners and dealers — has increased. The captives’ role is to be there through thick and thin, to support a full spectrum, not cherry picked by product and FICO score. We have to take risk as it comes from the dealers and customers. I think what’s evolved in the OEM relationship is the need for us collectively to compete to react to those industry changes.

As Mike (Groff) said earlier, customer retention is a big part of what we do these days. Our advantage as captives is that federal privacy laws, by and large, preclude banks from sharing leads with dealers. On the flip side, we have joint marketing agreements that allow us to share leads and drive additional sales.

Technology is another area where we must compete. All of us at this table are investors in RouteOne. It delivers an outstanding credit aggregation system to dealers and it’s the only one that provides a central place to access both captive and bank sources. It also allows you to manage all those applications, and provides you with reporting that drives CSI and a better way of doing business.

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