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How Finance Leads Generates More Profits

September 2007, F&I and Showroom - Feature

by Michael Snider - Also by this author

Who would have thought that online car marketing would be on pace to reach $4 billion by 2010? Ten years ago, only 47.1 percent of dealers surveyed by the National Automobile Dealers Association (NADA) said their dealership had an Internet presence. In NADA’s 2006 study, that percentage grew to 95.4 percent. Fifty percent of those dealers said they now employ a separate department dedicated to the Internet. So why is this important to a professional F&I manager? Online shopping will continue to increase, but credit quality won’t.

Today, nearly half of all Americans can be considered non-prime borrowers (borrowers who have credit scores below 660). Climbing interest rates and debt, as well as declining home prices and stricter personal bankruptcy laws, are likely to increase that percentage. Lender guidelines are also tightening, putting the squeeze on the subprime customer segment. This is where the opportunity lies.

Dealers need to acknowledge that a large number of customers, especially subprime customers, are actively surfing the Internet on a daily basis. That’s because the Internet allows customers with impaired credit to privately secure a loan in the privacy of their own home. The potential embarrassment or judgment of walking into a dealership and being turned-down is one of the reasons why online shopping has become a popular avenue.

The challenge is to harness this flow of leads and turn them into sales. Utilizing a company that serves as a connecting point between these consumers and dealers is an important part of a successful Internet leads department. A change in attitude toward the Internet and nonprime customers is also required.

Understanding the Conditional Buyer

Buyers are busy and do not have the time nor the desire to go from one dealership to another, which is why the Internet has quickly risen in importance in the automotive retail industry. Often times, when the GM or GSM discusses leads generation, F&I managers balk at the idea of creating an Internet leads department. Many believe such a department will only foster credit-challenged customers. However, that’s not always the case.

Some of the most successful finance managers in the country are now encouraging management to acquire leads, because this customer is a conditioned buyer, making the entire F&I process easier. Online shoppers tend to understand the value of GAP, warranties and other products offered in the F&I office. Why? Simply because the Internet offers customers the ability to research these products online, which helps them understand the value proposition. For F&I managers, this situation allows them to quickly address objections and jump into the sale since the customer is already familiar with the products offered.

Online shoppers responding to online advertising or direct mail are normally more conditioned leads who know what they want and what to expect. They are therefore easier to work and more likely to be receptive to interest rates and products.

F&I managers today face a more difficult job, and play a larger role in dealerships because today’s customers have more financing options. That being said, how do you convince F&I managers to change from “We’ve never done it that way before” to “Lets find new ways to increase sales and profits by taking advantage of changing consumer-buying habits?”

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