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Ready to Charge Ahead

It’s clear that lenders and dealers are feeling good about the road ahead. The two sides met at the 2011 Vehicle Finance Conference to reaffirm the importance of their relationship.

March 2011, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Ally Financial’s Tim Russi, Mercedes-Benz Financial Services’ Dietmar Exler, Toyota Financial Services’ George Borst and GM Financial’s Dan Berce weighed in on the current state of the auto finance industry.
Ally Financial’s Tim Russi, Mercedes-Benz Financial Services’ Dietmar Exler, Toyota Financial Services’ George Borst and GM Financial’s Dan Berce weighed in on the current state of the auto finance industry.

The mood at this year’s Vehicle Finance Conference, held at San Francisco’s Westin St. Francis Hotel immediately prior to NADA 2011, was exponentially more positive than in 2009 and 2010. It was clear from the way finance executives discussed the strategies they fell back on during the credit crisis that they’re feeling a lot better these days. Dealers serving as panelists wondered aloud about whether that would mean a return to the way things used to be.

With the economy on the upswing, members of the host organization, the American Financial Services Association (AFSA), and dealers in attendance spent much of their time on the dais reaffirming the importance of their relationships. But there was also a call from dealers for lenders to be more available, look beyond credit scores and restore the personal interactions they once had with F&I offices.

“Let’s not focus on credit score, let’s buy the customer,” said Michelle Primm, director for the National Automobile Dealers Association and managing partner of Cascade Auto Group in Cuyahoga Falls, Ohio. “Tell me how to get my paper bought, don’t just look at your rate chart.”

Stephen Wade, president of Stephen Wade Auto Center in St. George, Utah, would take over as the NADA chairman for 2011 a few days later. Addressing the AFSA crowd, he called for a return to the days when F&I managers interacted with the same buyer on every deal.

Cindy Kanellis, the F&I director for Freemont Automotive Retailing Group, had her own request. “We’re working weekends and we’re working nights,” she said. “We need our buyer. We need them on weekends.”

Not Out of the Woods

The state of the still-recovering economy wasn’t lost on dealers, either. William Underriner, 2001 NADA vice-chairman and president of Underriner Motors in Billings, Mont., talked about reports that foreclosures could rise again this year. “The sooner that happens, the better off we’ll be as an industry,” he said.

David Wyss, chief economist for Standard & Poor’s, confirmed the recession is over. But, he added, “It just doesn’t feel like a good expansion.” The biggest problem, he said, is the housing market, which is coming off one of the worst periods for home building since World War II.

Wyss said it could take another six months before that market gets into balance, and noted that four states — California, Nevada, Arizona and Florida — were responsible for half of the nation’s foreclosures.

If the economy slips back into decline, Wyss said the Federal Reserve  will not be able to lower the federal funds rate as it has in the past. Because it’s near zero, the Fed is looking at other types of rates to lower. Despite fears of inflation, Wyss said the Fed has no other choice.

“[The economy] is too squishy for the Fed to take its foot off the gas pedal,” he said.

Wyss said all markets had bottomed out by March 2009, less than four months after the financial market froze in the fourth quarter of 2008. “It was like we all joined hands and walked off a cliff,” he said.

As for when he thinks the 8.5 million jobs lost during the downturn will be restored, Wyss said he doesn’t expect to see any major improvements until the third quarter of 2012. Others speakers at the conference said it won’t be until 2016 before the national unemployment rate falls to 5.3 percent. The good news, said Wyss, is that jobs are coming back faster than they have during previous recessions.

“Payroll usually recovers last. In 2001, it took 17 months for employment to come back,” he said, noting that it was the American consumer who pulled the economy out of the recession.

“They kept spending,” Wyss said. “I’m not sure that will work again.”

The good news is the American consumer is borrowing less and saving more. The term “down payment” is no longer viewed as a relic of a concept. But what’s good for the consumer may not be good for the still-recovering automotive industry. And, as Wyss pointed out, there are more registered cars than registered drivers.

He finished his thoughts with this: “Cars will need to be replaced.”

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