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Ringing In a New Era

December 2009, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Yup, this is the magazine formerly known as F&I. You know, I hate change. In fact, I’m one of those guys who’ll buy multiple shirts and pants of the same style and color if I really like the way they look and feel. But you know what? Nothing can stop them from looking a little outdated at some point. So what does this have to do with the magazine? Well, let me tell you.

First, as you surely noticed, the magazine is now called F&I and Showroom. We’ll be introducing new sections and features in the coming months, so keep a look out.

Now, if you think we’re leaving our roots behind, think again. In fact, our coverage of finance and insurance will only strengthen as we expand our focus into other areas of the dealership. As you know, what happens in every other department affects what happens in the business office. In other words, this change reflects the “new order” that is automotive retailing in the 21st century.

Think about it. If the water is polluted upstream, where do you think the pollutants will end up? So, how can you talk about improving F&I profits if deals aren’t structured correctly, customer expectations aren’t managed, your lot isn’t filled with financeable vehicles, and your Website isn’t saying the right thing to consumers about the car-buying experience?

See, we can talk all day about how to unify the front-end, but the reality is nothing can really be accomplished without bringing those other departments into the discussion. What I’m getting at is we’re focused on one thing: getting more deals — more profitable deals, for that matter — over the curb. The first example of what I mean is on page 14, a story about inventory management. Hopefully it gives you something to think about. And hey, if you have something to add to that subject, send me an e-mail at gregory.arroyo@bobit.com.

Now here’s the most exciting part: When talking to my sources for the story, every one of them mentioned how important inventory management is to the success of F&I. As I said before, if the water is polluted upstream, it’s bound to trickle downstream.

Another thing I hear quite often is how far behind auto retailing is when it comes to making data-driven decisions. We’ve tried to tackle that issue in F&I this year, but it’s not easy. Technology companies are helping to bring this data together through software, but even they maintain that having a good read on your market is really what it’ll take until the volatility subsides.

The problem is that not even good data analysis could have predicted the market’s movement this year. In other words, there was no substitute for those dealers who had their hands on the pulse of their market. But what they also say is that now is the time to develop processes to read and analyze your dealership’s data. After this wrinkle in time passes, that data and how well you utilize it is going to be the key to success going forward.

I think back to a conversation I had back in September with Zurich’s Glenn Roberts at our F&I Conference and Expo. Like everyone else in attendance, we were waxing on about when we thought the economy would turn. Roberts then talked about the road ahead and how the industry is in for a demographic shift come 2015.

See, the baby boomer generation, which boasts about 79 million U.S. citizens, is quickly moving out of its peak spending years. Unfortunately, the generation behind, Gen X, touts 28 million fewer people. The good news is the generation behind X, Gen Y, is about as big as the boomers. “They’re going to drive the economy like the boomers,” Roberts said.

That’s why we need to be smarter about our business decisions, because these next two generations will have an unprecedented wealth of information at their disposal as they enter their peak spending years. Yes, they’ll know what they want, but they’ll also know how much — or how little — they can buy it for. Face it, folks, our industry is becoming more and more transparent to the people we serve. It’s a good thing, but it also demands that we know more than they do.

In the near term, we’re really going to have to trudge through this recovery. There were some positive signs entering the third quarter, particularly on the financing side. But my sources tell me that finance sources are still buckling down for what appears to be a long road to recovery. However, a lot of those bad vintage originations from 2006 and 2007 should reach their peak loss periods by the first quarter of 2010. So, if we can just get those employment numbers moving in the right direction, we might see credit opening up a bit. Let’s just make sure we’re ready.

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