With so many industry insiders and experts weighing in on how the Great Recession has changed the dealer business, the magazine sat down with Ron Martin for a one-on-one discussion about what all the chatter really means. Read on to learn what the president of The Vision of F&I and VisionMenu has to say about the industry’s biggest threat and why a more customer-friendly selling system could be the answer.
FI: Ron, you’ve often talked about the need for dealers to adopt a more customer-friendly selling system. Can you define what that is?
RM: I recently saw an Ally Bank commercial that reminded me of how some dealers sell units and F&I products to their customers. In the commercial, a gentleman is sitting with two school-aged girls. He asks the first girl if she wants a pony. She answers “Yes,” and he hands her a toy pony. He asks the second girl the same question and she also says “Yes.” However, rather than handing her a toy pony, he brings out a real pony. When the first little girl sees the second girl’s pony, she tells the man, “You didn’t say I could have a real pony!” The gentleman replies, “You didn’t ask.”
Unfortunately, that’s how many front-end departments operate these days. They either withhold the payments until the customer gets to the F&I office or they give the customer the payment and hope they won’t ask what the price is.
This withholding of information — as even the little girl in the bank commercial knew — isn’t good business. When customers have to continue probing to get all the information they need to make an informed decision, dealers are not building trust. Give them the information upfront and allow customers to focus on the decision.
FI: I recently wrote a story on inventory management, and several of the sources I quoted said the Internet has really changed the game for that part of the business. The reason, they said, is because it’s brought transparency. Is that what you mean in your call for more transparency?
RM: Not only is transparency important, I believe our long-term existence is predicated on it. For example, I recently had a conversation with a dealer in a small town that echoed what your sources said. Using the Internet, a customer can search a 100-mile radius and look for the best price. This dealer even had a few customers who were willing to drive 100 miles just to save $300.
Obviously, that situation has worked to his advantage, but the point I’m making is, even small-town dealers are affected by the ease of the Internet. Customers can now find all the information they want, and that’s not going to stop anytime soon. So, if we aren’t transparent, we could easily be replaced as the distribution point for bank and auto loans.
FI: Can you describe what transparency means for the salesperson, the desking manager and the F&I manager?
RM: For the salesperson, it’s sharing all pricing and payment information with the customer. That doesn’t mean you need to promise an “A”-tier interest rate before you know they’ll qualify. Until the customer’s credit information is received, I recommend the salesperson present the customer with a list of financing, cash and leasing options based on an average interest rate.
For the desk manager, it’s empowering the sales staff with the information they need to make the process transparent to the customer. It also requires an evaluation of the customer’s trade-in with information to back up their appraisal. For the F&I manager, it’s describing all of the benefits available to the customer, then closing them on package options or individual product options.
FI: What role does technology play in bringing this about?
RM: It plays a crucial role. Providing the customer with options requires that sales and F&I execute those options on the fly. Not only can technology facilitate this by allowing a dealer to present multiple payment options, but it can also ensure that the information is accurate and presentable. And that’s important, because a customer is not going to put much validity in information if the forms you hand them are handwritten. And from a compliance perspective, a dealer can only be sure that the right information was presented when the software dictates what information is presented.
FI: Earlier this year, sources told me the recession could do what technology providers have been trying to do for years: Get dealers to embrace technology. Have you seen this play out?
RM: The Great Recession brought the pain we needed to get everyone to focus on changes to grow our economy. And this is occurring in all parts of the economy, the latest being healthcare and job creation. In the case of automotive, the recession has brought about changes with respect to what vehicles are being built and how they are being distributed.
And yes, the Great Recession has even affected us in the F&I industry. Financing is a key component of the decision-making process for the consumer. I think we are seeing the need for a low-cost, high-quality sales process for the consumer. I think that means simplifying technology tools, cutting back on unnecessary features and focusing on what the dealer needs to do to sell more units, accessories, aftermarket and F&I products.
FI: It’s funny you should say that, as several technology providers have echoed that statement to me in the past year. No longer is the focus on having all the bells and whistles. Instead, technology providers are concentrating more on dealers using the features their software solutions offer.
RM: I’ll say the obvious: Software is only as good as how much of it is used. I think the point of adding all those bells and whistles was to “wow” dealers. Unfortunately, some companies have created so many layers for the users to maneuver through that the complexity discourages people from using it — or, in many cases, to use only the parts of the application they can quickly grasp. I think the shift will be to provide an easy-to-use program that, if used in its entirety, will lead to more profits. And the tools should be simple enough that everyone uses them, including the sales staff.
FI: Let’s talk about the F&I office for a second. We know the credit crunch changed the game for F&I managers. Can you talk a little bit about the adjustments that department needs to make to meet these new challenges?
RM: When credit was easy, F&I managers were spoiled. It wasn’t a matter of if I was going to get the deal approved; it was a matter of who would approve the deal. That’s why finance departments are having such a significant impact on sales. Building solid lender relations is still crucial, as F&I managers need to know how to position their dealership and the customer paper to get the most deals approved. The skill set to obtain results includes evaluating credit, interviewing the customer, having a solid relationship with the right number of lenders, and building relationships that involve a little give and take.
FI: What’s at stake for the F&I department if it doesn’t embrace this change?
RM: As I said earlier, we can be replaced. By ‘we,’ I mean the people who facilitate the financing process and the F&I product providers. People don’t have to secure their financing at the dealership, and they can buy a service contract anywhere. If we don’t embrace change to make our process more transparent for customers, they will simply quit using our services. Simplifying our process to make it simpler and quicker for the customer is crucial for us to maintain our control over auto financing.
FI: I’m not saying it’s notably better than it was, but I hear from several dealer sources that communication between the front-end departments has gotten much better. We know how important it is for F&I managers to communicate to salespeople what banks are looking for and what they’ll accept, but what can sales do to help get more deals approved?
RM: Cash is king! This is not a new concept, but it has recently come back to the forefront. Lenders are qualifying deals more than ever before. Approvals and rates are tied to advances, so the down payment should not be an afterthought. It needs to be one of the primary focuses of the negotiation process. All first pencils should include down-payment options using an average interest rate. That’s all the help the F&I manager should need. If the customer wants an exact payment, then a credit application should be filled out and the customer referred to F&I.
FI: Can you talk about the desk manager’s role in all of this?
RM: The salesperson needs to be empowered with the information needed to close the deal. Sales managers should focus more on inventory management, advertising and customer follow-up. You really don’t need a desk manager to calculate a payment. You need a policy and process for the salesperson to access. If you calculate your dealership’s average interest rate — which software can easily do — and require that the customer is given options with a cash down payment for each, all you’ll really need at that point is the customer’s decision to buy.
FI: Are you hearing anything about lenders loosening up?
RM: It seems to me that lenders are most skittish on mortgages and credit cards, which means auto lending could get a boost. Lenders still need to increase revenues to offset losses, and it seems like a lot of customers are paying for their cars while they renegotiate their mortgages.
FI: Heading into the recession, we wondered what the F&I office would look like once things turned around. Now I think we have to ask ourselves how the whole dealership will change. So how has this recession changed the way a dealer conducts business?
RM: On one hand, it’s back to basics. On the other, it’s evaluating your systems, including technology. We now know what the bottom looks like. The good news is we’re now more likely to get the most we can from every deal. Making changes to the way you do business is important and I think the answer comes from aggressive selling, a quick and efficient process, and transparency for the customer.