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Online F&I

It was a tale of two departments at Industry Summit, where dealers, technology execs and F&I trainers discussed the progress made by sales and F&I teams to convert and finance Internet shoppers.

January 2015, F&I and Showroom - Cover Story

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During Industry Summit’s “Building the Fully Online Sales Process” session, tech execs and dealer representatives spoke about the solutions connecting online customers to the in-store sales process.
During Industry Summit’s “Building the Fully Online Sales Process” session, tech execs and dealer representatives spoke about the solutions connecting online customers to the in-store sales process.

Today’s Internet shopper was at the center of two panel sessions staged at Industry Summit 2014 this past September. The first session, “Building the Fully Online Sales Process,” had directors from three dealerships and technology executives discussing how they’re connecting online prospects to their in-store sales processes. The second, “How to Protect F&I Profits in an Online Transaction,” had F&I trainers calling on F&I pros to carve out their place in the digital age.

Serving as a backdrop for both discussions were studies like one issued by AutoTrader last May. It showed that 79% of all car buyers used the Internet to shop for cars in 2014, up from 71% in 2011. But it was a tale of two departments: The first session revealed how stats like that have forced dealerships to alter their sales and marketing strategies; the second painted a picture of an industry resistant to change.

“It wasn’t that long ago that everybody in this room was being told that online car sales were going to replace brick-and-mortar dealerships. Do you remember that? It didn’t happen, did it?” said Peter Chafetz, national sales training manager for Allstate Dealers Services, during the F&I trainer session. “While this is a change, if you want to look at it as a threat, you’re putting yourself in the wrong mindset.

“The biggest threat dealers face today is fear — fear of change, fear of adapting to what the new reality is,” Chafetz added. “Quite frankly, you can shout at the rain, but you’re not going to stop it. So embrace it.”

Pressure to Perform
Provider Exchange Network (PEN)’s Ron Greer kicked off the F&I trainer session by asking, “How is the online shopping experience impacting F&I selling in the dealership today?” First to respond was The Warranty Group’s David Worrall, who served on the panel alongside Chafetz, Protective Asset Protection’s Rich Moore, Safe-Guard Products International’s Luis Garcia and Chrysler Capital Consulting’s John Lovin.

“It’s putting more pressure on F&I to increase dollar per car,” Worrall said, noting that the average profit margin on a new vehicle has tumbled in the last decade. “The problem for the dealer is that the price they usually receive from TrueCar or other online services is a lot closer to the minimum acceptable deal than it is to the price we would have maybe negotiated with that customer walking through the front door.”

Based on data from the National Automobile Dealers Association (NADA), F&I offices are helping to close the profit gap. In 2013, for instance, the association reported that F&I profits rose for the fourth year in a row, accounting for 38.8% of front-end gross profits. But there are concerns this trend won’t last as consumers continue to push for an ecommerce-type situation.

“How to Protect F&I Profits in an Online Transaction” was one of two closing sessions at Industry Summit. Panelists delved into challenges faced by F&I in the Internet age.
“How to Protect F&I Profits in an Online Transaction” was one of two closing sessions at Industry Summit. Panelists delved into challenges faced by F&I in the Internet age.

“That online buyer, you may not be able to offer them a service contract when they pick up the car,” Chafetz noted.

F&I managers are already seeing more and more consumers entering their offices preapproved for vehicle financing. The problem, Worrall pointed out, is today’s Internet shopper doesn’t have the patience to wait 45 minutes for an F&I manager to prepare paperwork.

“… Sixty-two percent of those folks, while they’re sitting there waiting, are on their smartphone shopping other dealerships. We don’t want to waste their time,” he said. “If a lot of this transaction can be completed online prior their visit to the dealership, the showroom visit is shortened up.”

Bridge the Gap
On stage with executives from Autobytel, Black Book’s Activator Division, Dealertrack and RouteOne, Karen Vance, director of finance operations for Virginia-based Jim Koons Automotive Cos., discussed how her organization is cutting down on transaction times. She said the dealer group was forced to make big changes to the way it accepts online credit applications to prevent customers from falling through the cracks.

“We had them coming from OEMS, coming from our website, coming from third-party lead providers. Each time an application would come in, our BDC would get notified, and they’d need a different password and user ID to go in and find the application,” she said. “Sometimes they didn’t know where to find the applications.

“It was a really bad customer experience when the customer would come in, because sometimes we’d have their applications, sometimes we wouldn’t,” she added.

So the group implemented RouteOne’s FinanceConnect, an online credit app, and made some strategic changes to its websites. Not only did the organization make the credit application button more visible on its store websites, it added the button to each site’s finance page. Now, when a customer submits an online credit application, FinanceConnect drops the information directly into the RouteOne platform and notifies the BDC, as well as three other designated employees.

“Our number of applications increased considerably, and the surprising part was the number of applications for prime consumers increased a lot,” Vance noted.

Representing RouteOne was Todd Mason, the company’s chief product and marketing officer. He said stories like Vance’s are not uncommon, especially as the industry continues to witness a sea change in consumer expectations.

“With FinanceConnect, we’re seeing an 80% completion rate,” he noted. “The completion rate is important, but it’s really about engagement. It’s really about setting that first expectation with the consumer before they come in.”

F&I Online
The high expectations of today’s Internet customer is why Chrysler Capital Consulting’s Lovin believes dealers need to improve the F&I sections of their websites. He listed several examples of how some forward-thinking dealers are doing that, including one dealer who allows Internet shoppers to calculate the impact F&I products have on their monthly payment.

“On the payment calculator page, they can click ‘I want tire and wheel’ or ‘I want dent and ding’ and it adds nine dollars to the monthly payment,” he explained. “The people who go to the Internet and who want information, the dealers that are good at it are the ones who are giving them all the information.”

Garcia also lauded the benefits of being more transparent in the F&I office. “The Internet customer wants to catch us at our own game,” he explained. “They want us to wait until the very last minute to pull out the menu so they can go, ‘Aha! I knew you were going to do that.’”

The trust gap between car shoppers and dealers was highlighted in results of a poll TrueCar issued last June. Respondents guessed that dealers make about a 20% profit on the sale of a $30,000 vehicle. But according to the NADA, profits on new-car sales have fallen from 5.5% in 2003 to 3.8% in 2013. Such findings are what have Garcia suggesting an unusual tactic: emailing Internet customers a menu before they come in to take delivery of their vehicle.  

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