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Recovery Yet to Reach Showrooms

June 2010, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

(Left to right): Dan Berce, Americredit Corp.; Jeff Enright, Park Cities Ford-Lincoln; Amy Martin, Standard & Poor's; and Rich Apicella, Benchmark Consulting

A new term was unveiled at the National Auto Finance (NAF) Association’s 14th annual conference: “below-prime auto financing.” The change is symbolic of the industry’s push to rid itself of the negative connotation associated with the terms “nonprime” and “subprime.” So far, according to show presenters, it’s working.

Even the association’s conference reflected the change, which was held June 2-4 in Fort Worth, Texas, under the “Below-Prime Auto Financing Conference” name.

“In the office, we call it high-yields,” joked Dan Berce, president and CEO of AmeriCredit Corp., during his keynote address at the conference. “Many pundits wrote off subprime auto. By contrast, our industry survived.”

Plenty of evidence pointing to a market rebound was presented during the course of the two-day event, but three dealer panelists reminded the lender-filled audience that the rebound has yet to reach their doorsteps.

No Value for Dealers

The biggest issue confronting dealers is the value-selling movement. Consumers are flocking to information Websites and arming themselves with pricing data. That’s killing dealer margins, and still-tight lending practices are making it difficult to fill the profit gap with F&I product sales.

“We’re trying to learn how to operate with more transparency,” said Jeff Enright, managing partner of Dallas-based Park Cities Ford-Lincoln. “It’s tough to find inventory. The new-vehicle side is being impacted by the Internet. On the used-car side, customers are finding prices on the Internet, which is cutting into margins.”

Kurt Hornung, a regional F&I director for AutoNation, said he has hired 32 F&I managers in response to the 22 percent increase his Texas region experienced in May. His stores are selling more cars but, as he said, “That doesn’t mean the profitability is popping back.”

The situation is worse on the special finance side of the business.

“We, today, have as many customers in subprime as we did one year ago, three years ago,” Hornung said. “But we can’t get them financed.”

Enright agreed, saying his special finance business is only one-third of what it once was. The problem is his operation can’t make enough on the front and back end of deals. “We still want to do that business,” he said, “but when you can’t make the money …”

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