The NADA’s leadership takes a tour of the show floor at the association’s annual convention.

The NADA’s leadership takes a tour of the show floor at the association’s annual convention.

When asked for his prediction for new-car sales this year, Ron Lamb produced a line graph tracking new-vehicle sales through the Great Recession. The president of Reynolds and Reynolds Co. then pointed to the 16 million-unit trajectory the industry was headed on before the economy collapsed.

“If you calculate the rough math of this dropoff, there are 20 to 23 million vehicles that didn’t get sold,” he said. “There’s almost a year and a half of retailing that’s still out there.”

In February, at the National Automobile Dealers Association (NADA)’s annual conference in Orlando, Fla., finance executives, vendors and even dealers talked freely about what they feel could be a banner year for car sales. For attendees of the American Financial Services Association (AFSA)’s Vehicle Finance Conference a day earlier, it was already a familiar sentiment.

Attendees of both shows offered good reasons for their optimism: Auto finance is back, the average age of vehicles on the road is at historic highs, the housing market is rebounding and product is on target — factors the NADA’s chief economist, Paul Taylor, cited when he offered his 15.3 million-unit prediction for this year.

But the factors standing in the way of Taylor’s forecast also became apparent over the course of industry’s weeklong get-together.

Challenges Revealed
During the two-day Vehicle Finance Conference, the AFSA polled its attendees, the majority of whom were lending executives. They were asked to rank the main issues standing in the way of the 15 million-unit mark. The No. 1 concern: government regulations.

“I thought because we got to Reg. Z that that was the last regulation we’d have,” joked Forrest McConnell, president of McConnell Honda and Acura in Montgomery, Ala., and the NADA’s 2013 vice chairman.

“There is a need for regulation, but there’s a limit,” he continued. “Personally, I think we’ve gone past that limit.”

JM&A, which is celebrating its 35th anniversary, continues to push its Auto Sales2, a CRM tool that mines a dealerships data to identify customers who may be eligible to trade or upgrade their vehicle based on inventory and incentives.

JM&A, which is celebrating its 35th anniversary, continues to push its Auto Sales2, a CRM tool that mines a dealerships data to identify customers who may be eligible to trade or upgrade their vehicle based on inventory and incentives.

In the room were representatives from the Consumer Financial Protection Bureau (CFPB), including Richard Hackett, the bureau’s assistant director. Hackett is tasked with overseeing the installment and liquidity lending markets. He restated the areas the bureau is interested in, including credit reporting agencies, the buy-here, pay-here industry, sales to military personnel, negative equity advertising, and privacy issues. He also announced that the CFPB would soon issue guidance on lender policies related to dealer participation.

About a week later, Bloomberg reported that “at least four” finance sources, including Ally Financial, were warned they could face lawsuits under the Equal Credit Opportunity Act (ECOA) for policies that allow dealers to mark up interest rates in exchange for services rendered.

Hackett’s appearance at the Vehicle Finance Conference also came 42 days before the CFPB issued a bulletin stating that finance sources that allow for dealer markups could be held liable for unlawful, discriminatory pricing.

“We recognize that the people in this room are critical to the economy, and that the [asset-backed securities] market for the industry is robust and growing without federal assistance,” Hackett said. “Our job is to spot trends. We have a congressional mandate to protect consumers and we will continue to do so.”

The Vehicle Finance Conference also revealed another challenge when organizers staged a live focus group. On the stage were nine car buyers from Florida who described their online shopping experience. Some panelists said they spent up to three months comparing vehicles, but the majority said the first call they made to inquire about vehicle financing was to their credit union. Seven of the nine shoppers said they stuck with their credit union’s finance offer.

One of the panelists who didn’t was identified only as Nanette. She made clear her distrust of dealers and was set on financing through her credit union — until she met the dealership’s F&I manager. She liked the quick meet and greet he conducted with her before jumping into his process, and she appreciated the patience he showed throughout. Ultimately, he rewarded her with a lower rate.

“My finance guy was great,” she said, noting that he had won her trust.

Nanette added that she was overwhelmed by the amount of paperwork she had to read and sign. Her fellow shoppers agreed, recommending that dealers use their websites to educate consumers about the F&I process and the amount of paperwork they’ll need to digest and acknowledge with a signature.  

And that’s what finance sources and even software providers lining the aisles at the NADA Convention and Expo were focused on. As for F&I product providers, the CFPB’s focus on dealer participation has them focused on weaning F&I offices off of finance reserve.

Credit Unions Open for Business
Tony Boutelle, president and CEO of Credit Union Direct Lending (CUDL), was in the audience during the focus group. After the panel, he was quick to note that 78 percent of the panelists stuck with credit union financing. He then described what his company is doing to help both dealers and credit unions capture the business.

Richard Hackett, the CFPB’s assistant director, took part in a panel discussion during the AFSA’s Vehicle Finance Conference. Serving as moderator was Bill Himpler, the association’s executive vice president.

Richard Hackett, the CFPB’s assistant director, took part in a panel discussion during the AFSA’s Vehicle Finance Conference. Serving as moderator was Bill Himpler, the association’s executive vice president.

“What we’re trying to do is make it easy on the dealers,” he said, noting that CUDL processed 2.3 million loan applications and originated more than 600,000 auto loans last year.

Boutelle explained that CUDL is focused on driving a deeper integration into the finance process. Last year, the company rolled out a portal that gave dealers access to credit reports from 700Credit. It also teamed up with Open Dealer Exchange to drive a better DMS connection with ADP and Reynolds. The company also is working to improve its AutoSMART marketplace, which he said can pre-approve customers for a vehicle loan simply by entering a vehicle’s VIN.

Boutelle also hinted that F&I products could soon become part of that pre-approval process, and revealed that a new version of the firm’s AutoSMART marketplace is being tested in Canada.

“Credit Unions are back making loans,” Boutelle said. “During the downturn, banks got out first, but [credit unions] stayed in back in 2009. Then regulators came down hard on credit unions. It’s just now loosening up.”

Looking at year-end totals, Melinda Zabritski, director of automotive credit for Experian Automotive, said total loan balances reached a six-year high in the fourth quarter 2012. But she noted the market still favors prime customers, with the subprime market now accounting for 33 percent of the business. Prior to the Great Recession, the segment accounted for about 40 percent.

“The market is strong right now. It’s not back to 2005 to 2006 sales figures, but the market is coming back strong,” Zabritski said. “But it’s the high population states covering most of the balances.”


One indicator of the auto finance industry’s health is that 78 percent of new-vehicle purchases had a lienholder on the title, up from 71 percent just before the recession. Additionally, leasing’s share of total vehicle financing rose to 24 percent, about 100 basis points higher than 2007.

But the most telling sign of the industry’s health is the stretching of loan terms, with 72-month terms grabbing a 42.69 percent share of new-vehicle originations in the fourth quarter.

Transparency Drives Change
Ally Financial exited 2012 as the No. 1 auto finance source with a 6.78 percent share of the market, according to Experian Automotive. Mark Manzo, vice president of alliance sales, said Ally is after a bigger chunk of the market this year, as well as other markets like the recreational vehicle segment — where it owns a 5 percent share — and the highline segment.

“As the industry moves forward, we’re trying to stay out in front of that,” Manzo said. “So, we’re excited about the opportunity to grow.”
On the NADA show floor, Ally showcased its Performance Development

Center, a new, web-based education and training platform. But the tool that spoke to a major trend at the show was the company’s new Relationship Management System.

The CRM tool is designed to help dealers take advantage of the 24 million leads Ally delivers to retailers annually. Subscribers of the web-based service can use the data to create customer lists. The system then creates customized e-mails and mailers that can be issued within 24 hours. The tool also offers a reporting feature to measure open rates, spot bad e-mail addresses and more.

“When a customer calls in to get a payoff, we don’t do anything with that right now. And that’s a hot lead,” said Kathy Ruble, Ally’s director of alliance sales, performance and development. “Now, once we have their info — and know they’re in the market — we send the dealer that lead.”

Finance executives participating on the Vehicle Finance Conference’s CEO panel, which included reps from Nissan Motor Acceptance Corp. (NMAC), Wells Fargo Dealer Services, Ford Motor Credit Co. and Huntington National Bank, described similar services they’re offering to dealers. Their goal is to help dealers improve the customer trade cycle, but they also admitted to ulterior motives.

“The competition is extremely fierce,” said Mark Kaczynski, president and CEO of NMAC. “You have to find ways to differentiate yourself.”

Finance sources said they are targeting customers who call for payoff amounts on their current loan, are at lease end or find themselves in a positive equity position and are ready for a trade. Technology is the driving force, executives said, but they also want to be closer to the transaction with the CFPB looming.

“I worry that the best day for the dealer, our industry, was yesterday,” said Nick Stanutz, an executive with Huntington Bank. “There’s more regulation and consumers are more knowledgeable. It will have an effect on our industry. Dealers will sell more cars, but will make less gross profit on them.”

The CFPB also is keeping an eye on the nation’s largest credit reporting agencies. But Joy Morgan, a senior executive with Equifax, said the firm isn’t too concerned about the oversight, mainly because the company has made moves in recent years to get a better read on customers.

“We are working with our lenders to understand how to buy deeper, maintain credit quality and manage risk,” she said. “What differentiates our company from other bureaus is we look at the customer’s entire balance sheet with our alternative data insights. We know your income, employment status, the mortgage of your home, how you pay utility bills — that’s what we’re bringing to bear.”

Dealertrack Technologies is entering the mobile menu arena with its new eMenu for iPad. The software maker also is expanding its Digital Retailing Suite.

Dealertrack Technologies is entering the mobile menu arena with its new eMenu for iPad. The software maker also is expanding its Digital Retailing Suite.

Morgan said the company studied the economic situation between 2005 and 2006 and came to the realization that credit scores weren’t nearly enough to measure risk. That led to Equifax’s acquisition of human resource services provider TALX in 2007 and the creation of Equifax Workforce Solutions in October 2012. The workforce data TALX collects provides Equifax with access to employment data and deposit information.

“Customers no longer have to go home to get their W-2s,” Morgan said, noting that the company’s data insights are being used by lenders to fuel software tools like Dealertrack’s FinanceDriver. “We already have it.”

Customer Touch
Helping dealers capture leads was also top of mind among technology providers. But as Reynolds’ Lamb pointed out, the industry still hasn’t recouped the loss of 20 percent of the dealer body during the Great Recession. It’s that realization that forced Reynolds to rethink how it delivers its solutions.

“I don’t think the industry is thinking about this bubble,” Lamb said. “So the question for us became: How do we create a system that saves time and increases effectiveness? … The gap in sales between 2007 and 2010 also means that some customers haven’t been to a dealership since the 2000 to 2001 time period. With all this technology, they expect a different experience.”

Lamb said the company began its transformation back in 2006 after it merged with Universal Computer Systems. The initial goal was to update the graphic user interfaces of its ERA-Ignite and POWER Retail Management Systems. But when the Great Recession took hold, the company decided to use the downturn to restructure all of its offerings.

The company consolidated and coded all of its solutions to feed data into a single database housed in its Retail Management System offerings, eliminating keystrokes and reducing the number of screens its ERA-Ignite displays by half. That also means its retail solutions now operate on top of the company’s RMS solution rather than through interfaces, which cut down on the number of logins users need to create while also providing a single entry point for pushing and pulling customer information.

“This is the first year we’re talking publicly about what it means,” said Lamb. “It differentiates us from our competitors, which are buying lots of different companies then branding them under one name.”

Dealertrack Technologies, formerly known as “DealerTrack,” exhibited under its new brand identity and showcased its expanding Digital Retail Suite. Through acquisitions and product development, the company is building what Allan Stejskal, vice president and general manager of sales and F&I solutions, described as an end-to-end workflow. But he admitted the company’s acquisition activity has forced it to make big investments in infrastructure to accommodate all the new tools.

“Part of the integration plan as we acquire companies is to figure out where and how this data fits in,” he said. “That’s a big investment.”

But the company isn’t growing its offerings through acquisitions alone. This year, it is jumping into the mobile menu arena with its new eMenu for iPad. It also introduced two new additions to its Digital Retailing Suite.

Ally Auto showcased a new CRM tool designed to help dealers take advantage of the 24 million leads it delivers to retailers annually.

Ally Auto showcased a new CRM tool designed to help dealers take advantage of the 24 million leads it delivers to retailers annually.

Last year, Dealertrack introduced an online payment calculator called PaymentDriver, as well as an online credit application and prequalification tool called FinanceDriver. This year, the company rolled out SmartFind, a website plug-in designed to allow car buyers to shop a dealer’s inventory by monthly payment. Also new is TradeDriver, which dealers can configure to allow web shoppers to appraise their trade-in.

“We’ve got this whole workflow advantage,” Stejskal said. “That’s what’s really important to us — that end-to-end solution that goes from an Internet lead all the way through to an electronic contract.”


More Than F&I
JM&A is celebrating its 35th anniversary but, like most vendors this year, its directors are looking toward the future. Last year, the company rolled out an e-contracting solution to 100 of its 3,100 dealers. At this year’s NADA Convention, it was about to pull the trigger on a new e-forms offering. Forrest Heathcott, company president, said it’s an initiative aimed at preparing dealers for the future of auto retailing.

“It would be nice to get some legislation to simplify the process,” he said. “Once you do that, you open up the whole web transacting, which we’re preparing our dealers to do.”

JM&A also is paving the way to the future with its Auto Sales2 CRM tool. It works by mining the dealership’s data to identify finance customers who may be eligible to trade or upgrade their vehicle based on inventory and incentives.

“We have a lot of dealers who are doing 30 to 50 vehicles a month off their own lists, where before they were probably doing some but they weren’t tracking them,” Heathcott said. “Now they’re bringing people in early, and the customers like it.”

Allstate Dealer Services is about a year and a half into its own transformation, which began with the hiring of Douglas Herberger as president in February 2011. The goal was to leverage the Allstate brand and expand the company’s offerings. That push culminated in a program launched last year that had Allstate Dealer Services teaming with Allstate Insurance Co. to install in-dealership, full-service insurance agencies.

Herberger said the company added its 35th dealership to the program two weeks before the NADA Convention, and said the company is aiming to at least double that number this year. But he also admitted that the first year of the program revealed some challenges to the business model.

“The formula, I’ll say, has changed a little bit. But it still centers around what I call a full circle of protection,” Herberger said, referring to the program’s four dealer components, which include access to Allstate’s F&I product and property and casualty insurance offerings. Dealers can also sign up to offer employees secondary healthcare coverage through Allstate Benefits, as well as register their body shop to be part of the Allstate Good Hands Repair Network.

Herberger said the main problem with the program was some insurance-related requirements didn’t mesh well with dealership sales processes. He added that there were some internal issues to contend with as well, namely the four- to six-month onboarding process, which he said the company is working to streamline.

“The plans are to double that number, or more than double that number, by the end of the year,” Herberger continued. “That’s somewhat of an ambitious goal, but we think we can do it.”

Allstate also showcased several new products, including Allstate Complete Protection, a four-tier product offering that bundles everything from cosmetic wheel repair to key recovery and replacement. The company also exhibited a new vehicle service contract, as well as a new combo product called Allstate Paint & Fabric Defense. It was developed through a partnership with Scotchgard and 3M.

Dent Wizard also is getting into bundling. This year, the St. Louis-based company rolled its Ding Shield Preferred into a combo product. The eight-year-old product will now include Safelite AutoGlass windshield repair and cosmetic wheel repair.

“Menus are driving this,” said Aaron Cooper, the company’s national director of F&I. “Everyone is trying to consolidate to a four-to-five product range.”

The company also used the NADA Convention to roll out a new program called Mint. It’s designed to help dealers generate additional service profits. Dealers can install dedicated reconditioning facilities inside their operations, and Dent Wizard will install its repair processes and cover the capital investment in equipment and staffing.

“Auto malls are ideal for this kind of thing,” said Lindsey Bird, vice president of aftersales, adding that the company hopes to put 250 fixed sites inside dealerships this year. “The recession moved the focus to used cars and maximizing sales, and dealers have to make those cars feel worth the extra markup.”

Under new President and CEO Randy Ortiz, a former Ford exec, LoJack also is on the move. The company teamed up with TomTom on a new fleet management solution and launched a program designed to certify dealership service technicians to install its vehicle recovery system.

“This is the first time we have a CEO with auto industry experience,” said Hal Dewsnap, a former Ford executive who joined the company in January as senior vice president and general manager of U.S. sales. “In many ways, we clicked ‘Refresh.’”

Dewsnap met with the media to discuss the Canton, Mass.-based company’s new relationship with TomTom. For now, the solution can be used by dealers to track and locate vehicles on the lot, but Dewsnap said the company is testing other consumer-facing features at North Hills, Calif.-based Galpin Ford. He also hinted that the company could leverage TomTom’s GPS- and cellular-based technology to expand the range of its core product, as well as venture into location-based marketing.

“Some of the things we’re working on with our dealers is expanding our level of support, expanding how we work with the customer before, during and after the sale, and providing resources to engage the customer before the come to the dealership,” Dewsnap said.  

His sentiment seemed to echo from booth to booth and from conference to conference. As Lisa Wooten, regional director of financial services for Asbury Automotive Group, said, it’s going to take a unified effort to move 15 million units.

“Our job is to get our customer what they want and what they need,” she said. “And as long as we approach this as a partnership, we can all be very successful and our customers will be very content and happy.”

About the author
Gregory Arroyo

Gregory Arroyo

Editorial Director

Gregory Arroyo is the former editorial director of Bobit Business Media's Dealer Group.

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