I asked the question several times while walking the show floor at the National Automobile Dealers Association’s convention in New Orleans. But it was obvious no one was ready to put their finger on when this economic crisis will turn the corner.
One exhibitor responded: “The sad thing is it’s going to be the year of the used car, and it ain’t going to be that stellar a year.” And even when Paul Taylor, the NADA’s chief economist, put U.S. light vehicle sales at just short of 13 million this year, he did so by saying his prediction was dependent on the credit markets loosening up.
While lead generation, inventory management, service and parts, and improving dealer Websites were the talk of the convention, most of my conversations seemed to end on the same note: The job of the F&I manager is going to be crucial this year.
A dealer’s ability to move metal over the curb will really depend on how well his or her F&I department is at selling our new customer: the Lender. You heard me right … our new customers are lenders.
See, there just isn’t enough capital out there to meet the needs of both dealers and customers, which is why financial institutions will be selective when it comes to the dealers with which they partner.
I know many of you hate talking about compliance. It doesn’t make money, right? Well, that’s not exactly true these days, as a good compliance program is really going to be the key to your survival.
And if you still don’t believe me, check out our F&I Dealer of the Year profile on The Suburban Collection (page 18). This dealer group’s ability to demonstrate a good compliance program was the main reason why this once leasing-heavy group was able to shift gears when captives and some financial institutions changed course.
The importance of compliance was further supported during my visit with Reynolds and Reynolds’ Terry O’Loughlin. Before I could even ask my first question, the former regulator with the Florida Attorney General’s office handed me a business card for a representative from the Federal Trade Commission. Apparently, the rep wanted to know where the industry was in regards to a possible new regulation that will require dealers to inform customers of their credit worthiness before they even put a pen to a credit application.
But wait, there’s more. In California, a state senator introduced a bill that would require dealers there to post the nation’s highest bond to operate their businesses. The bill was proposed in response to a number of cases where auto dealers took trade-ins with remaining loan balances, but went out of business before paying off those balances.
If the bill passes, a franchised new-car dealer’s bond would increase five times its current amount. Can you believe that, especially at a time like this? What dealer is going to qualify for such a bond, especially in a state the NADA’s Taylor listed as one of the 22 problem states for car sales?
Listen, attempting to figure out what went wrong in the financial services market is understandable, but don’t regulate it to a standstill.
I also jotted down a couple of notes after attending the American Financial Services Association (AFSA)’s Vehicle Finance Conference, notes I thought would be of interest to you.
First, it’s all about transparency. Second, there is recognition on the financial services side of the fence that technology’s evolution in our business must continue. Much of it will be driven by your need for cash flow, but ADP Dealer Service’s Paul Rindone said there was another reason.
“Today’s younger generation will want to buy a car with their iPhone,” he said. “I think everyone knows this is where we’re supposed to be.”
But even software companies recognize technology isn’t going to get us through this time, as your survival will really come down to people and processes.
Finding a new funding mechanism for finance companies was another issue raised at the AFSA show. But until that happens, let’s hope AFSA is successful in getting the White House to expand the Term Asset-Backed Securities Loan Facility (TALF) so finance companies in our arena can get back in the game.
And while it didn’t get everything it wanted, kudos to the NADA for getting Congress to include tax relief for new-car buyers in the final version of the $789 billion stimulus package. See, everyone? We’re all in this together.