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Myers Says NADA's Revised Ethics Code to Encourage 'Transparency' in F&I Departments

November 1, 2002

The National Automobile Dealers Association (NADA) is revising its code of ethics, and Chairman H. Carter Myers III said transparency in F&I deals will be covered under the new code.

According to Myers, the ethics code revision will remind dealers that they have a responsibility to their customers and employees to operate in an honest and ethical manner.

“Our free enterprise system is dependent upon it, and our country is founded on that,” Myers told F&I Management and Technology. “We as business people have to set an example, and I think dealers have the opportunity to do that.”

Myers said that in the past customer misunderstandings have been primarily in the sales and finance area. “I think we’ve just all got to pay more attention to customer needs there, make sure our processes are more transparent, and that customers understand what they’re buying, what the cost is,” Myers told F&I. “We need to make sure that their purchases are voluntary, based on the information that’s shared with them.

“I think by reviewing and bringing our ethics code up to date and distributing it to our dealers and putting it on the forefront, we just increase heightened awareness of the need to pay attention to all parts of our business,” Myers said.

“We want to make sure the process is transparent to the customer and that they understand what’s going to take place, what is happening, what they’re paying for, and what they’re getting for their money,” Myers said. “We want to make sure customers feel comfortable making purchasing decisions of finance and insurance products, just as we want them to feel comfortable with buying the vehicle.”

Myers said hands-on dealer involvement is important in the quest for ethical F&I transparency. “Maybe it’s going to require some micro-management by the dealer to make sure that he’s aware of everything that’s taking place,” he said.

According to Myers, the industry as a whole does a good job. “We’ve had tremendously positive news this year with respect to customer satisfaction with the buying experience,” he pointed out. “I think the headlines and the news articles that we’ve seen in a few cases that talk about the bad apples and some bad situations are very much in the minority.”

Myers cited a recent consumer sentiment study by the University of Michigan which found that automobile purchases were the only consumer product that’s had a 10-year increase in customer satisfaction. “We’re now up there near the top,” he said. "We’re nine points ahead of the computers that were slated as the great new buying experience.”

Other studies support this conclusion, according to Myers. “Ernst & Young came up with 87 percent. Wirthlin Worldwide did a study through Automotive Retailing Today, a joint venture of the manufacturers and the dealer associations. They had 78 percent of customers extremely or very satisfied with their buying experience; 16 percent were somewhat satisfied. So that’s 94 percent,” Myers said.

“We know that the F&I experience can affect the whole buying experience. So, overall, if the satisfaction level was not good in the finance and insurance part, it would have tainted the entire buying experience,” Myers told F&I.

“I don’t think there’s ever been a year in automotive history when there’s been more good reports come out about the trend in increasing customer satisfaction with the retail buying experience,” Myers emphasized. “Still, we don’t want to see ANY articles that are negative. So we’ve just got to get everybody to reinforce and make sure that they don’t have something that the trial lawyers and a negative press could get ahold of.

“The finance and insurance companies – the Resource Dealer Groups, the JM&A’s – I think all of them are tuning in very, very quickly and making sure that they’re teaching the latest techniques that will share with the customer the information that they need,” Myers said

According to Myers, the transparency of the process, rather than the particular process used, is what's important. “Menu selling is something that NADA has looked at. NADA is not recommending a process; NADA is recommending that it be transparent and that whatever process is used be factual, open and honest. Make sure that the customers know what they are buying, that they make voluntary purchases, and that there is no discrimination of any sort.”

“We want a process that is open,” Myers said. “It just happens that the menu system has been used recently, and it seems to lend itself to more open, full understanding by the customer. But it’s not something that we’re specifically recommending. I know it’s very much in the training forefront of all the more modern finance and insurance training sessions."

According to Myers, the it's important to look at ethical practices in the dealership as a whole, rather than isolating the F&I department. “It’s got to all come together,” Myers said. “Many of your problems in finance could have started in the sales process. I don’t think you can just laser in on finance and insurance. We need to have the dealerships look and make sure that their total processes are customer friendly and appropriate. I think that will help the finance departments.”

Myers hopes the revised ethics code is adopted before the end of his term in February. He said he would like to see the code posted in every franchised dealership.

“If the dealer says, 'I’m going to post this ethics code, and this is the way I want my business to run,' that’s going to lend itself to all departments, including F&I,” Myers said.

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