Nine months after cofounding Principle Auto in May 2014, Mark Smith knew something had to change. The sales process employed at his four locations was allowing payment-conscious customers to reach the F&I office before producers discovered they couldn’t afford the vehicle they landed on.
With his staff frustrated by the slowdown those situations caused, Smith, who serves as the dealer group’s president and COO, began researching the new wave of digital tools that promised to put more qualified buyers in the showroom and more vehicles over the curb. That’s when he found VehicleXchange, an auto-loan equity tool and marketing platform developed by Dallas-based Pearl Technology Holdings LLC.
Principle Auto’s leadership team had reservations about making the process alterations the software tool would demand, and he admits he was ready to ditch the tool two months into the experiment. But he refused to let the emotional attachment he and his staffers had for the old process dictate his decision. So he let the data make the decision for him, and the data voted in favor of the new system.
“When we started using it, like most products, we struggled with it. We looked for reasons why it probably wasn’t working, but the data kept saying it was,” Smith says. “The more we used it, the more it worked, and the more cars we sold.”
Back Them In
Principle operates three stores in Texas and one in Tennessee, with a fifth location set to open this month. Smith saw the biggest change at BMW of San Antonio, where sales grew by 36% in the same year the dealership installed VehicleXchange. In the first two months of this year, Smith says, sales grew another 20%.
The numbers are impressive in their own right, but they are particularly impressive given that the current automotive climate has not been friendly toward highline sales. But what has impressed Smith the most is the change in customer satisfaction, as VehicleXchange has allowed his sales and F&I teams to quickly determine whether customers can afford the vehicles in which they’ve shown interest.
“It’s really about [the customers] knowing what they can afford,” Smith says. “Otherwise you go through the whole process of selling the car, and they get to F&I and go, ‘I can’t afford that.’ Then you end up doing crazy things, like putting people on 84-month contracts. They’ve already fallen in love with the car and didn’t realize it was going to be that payment based on their credit score.”
Bruce Thompson, CEO and founder of Pearl Technology, says VehicleXchange is currently installed in more than 1,000 dealerships across the United States, including stores operated by Sonic Automotive. Rolled out in 2014, the platform was designed as an equity mining tool for the service department, extracting from a dealer’s DMS information on all customers with a service appointment. Then, through a connection with Experian Automotive, VehicleXchange performs a real-time prescreen using only the customer’s name and address.
Thompson says that means dealers can obtain a credit score and make a credit offer without putting a hard inquiry on the customer’s credit report. Users can also access the customer’s auto loan information, including the current balance, interest rate and monthly payment. The company is also partnered with GM Financial to use that information to prequalify customers for credit.
It’s the system’s prequalification capabilities that caught Smith’s attention. He notes that Principle’s previous equity mining and marketing tool accomplished many of the same tasks that VehicleXchange performs, but it was missing the ability to prequalify shoppers.
“If someone is a 720 [credit score] or better, they’re an A. If they’re a 675 to 720, they’re a B. Basically, I could create my own categories,” Smith explains. “Then [VehicleXchange] would tell me they’re an A, B, C or D, and then I could marry that up with my banks and programs every month and say, ‘If they’re this, then I would have an interest rate of X. If they’re this, I have an interest rate of Y.’”
It’s that feature that eliminated the chance of customers landing on cars they couldn’t afford. There was something else VehicleXchange corrected: His sales staff no longer had to wonder when it was the right time to reach out to past customers about trading in their vehicles. The group simply merged its database into the system, allowing it to automatically flag customers who are in a positive equity position on their current vehicle.
“There’s never really been a way to tell a customer, ‘It’s a good time to trade.’ Now we’re telling them, and we’re allowing them to make the decision to go online to look at and engage us,” Smith says. “So I think it’s very customer-friendly, instead of the guy on the service drive going, ‘Hey, man. We want to buy your car.’
“Now we know their credit score. We know the car in their driveway. We know what their payment is,” he adds. “We also know what the value of the car is within reason. … Ninety-nine percent of the time, it’s extremely accurate.”
The Next Step
This month, BMW of San Antonio’s showroom floor will be outfitted with six-foot, four-inch kiosks with large, digital touchscreen displays as part of Pearl Technology’s pilot program. Sales associates at the dealership will also be equipped with tablets running the same program as the kiosks: Pearl Technology’s new ShowroomXpress.
The new offering debuted this month at the National Automobile Dealers Association (NADA)’s 2016 convention. Thompson describes ShowroomXpress as a “clicks to bricks” retail platform that gives dealers access to the same online capabilities AutoNation invested $100 million to build.
ShowroomXpress is designed to work in unison with VehicleXchange, the latter feeding the retail platform prequalified leads from the service drive as well as from the dealership’s equity mining activities and sales campaigns. It can also operate on its own, allowing customers to begin the shopping process on a dealership’s website or on the kiosks, dubbed “Genius Stations.”
Thompson says ShowroomXpress leverages Experian’s prescreen technology to calculate auto loan payments to the dollar in 10 seconds without a Social Security number. All that’s required is a driver’s license and a vehicle’s VIN to pull up three competitive rates from the dealership’s list of finance sources. Loan terms and mileage limits on leases can also be adjusted right on the kiosk’s touchscreen display.
Sales associates can also complete any of those steps on their mobile tablets at any point in the process. Smith says it’s the tablet integration of ShowroomXpress he’s most excited about, as well as the ability for customers to begin or finish a transaction online at their leisure. In fact, he’s confident ShowroomXpress will shave another 20 to 25 minutes off of the sales process on top of the 25 minutes VehicleXchange has already trimmed.
“SRX is a game-changer, and there’s nothing on the market even close to its capabilities,” Thompson claims.
Eliminating the F&I Dungeon
There’s one more piece to the ShowroomXpress puzzle. Through integration with F&I Express, the system will be able to rate F&I products from the latter’s network of more than 110 providers. It will then instantly calculate selected products into the customer’s monthly payment. Thompson says the kiosks will also be outfitted with product videos produced at the firm’s studios in Dallas.
“Our intention is to not replace the F&I manager,” Thompson explains, adding that users can set product pricing and interest rate markups. “We just want to make him more efficient.”
Eliminating his F&I manager isn’t in the cards for Smith, but he does see a future where sales and F&I no longer operate as separate departments. As he says, dealerships need F&I managers who are knowledgeable about F&I products and the regulations governing that process.
According to Smith’s vision, the dealership of tomorrow will have a central hub housing a team of greeters, product specialists, a sales manager and an F&I manager. Each of them would be paid a salary vs. commission, and they would be available to answer customers’ questions at any point in the sales process. And using tablets equipped with the ShowroomXpress program, every associate would be able to complete a deal anywhere in the dealership — even while sitting in the customer’s new vehicle.
“So we’re going to build a little team that operates independently of how everything else operates, and we’re going to see how it goes,” Smith says, noting that his F&I operations currently average well north of $1,000 per copy.
And just like he did when he first installed VehicleXchange, Smith is going to let the data decide if his vision is correct. This experiment, he says, will continue for six months. During this time, he will see how much better or worse his new sales team performs compared to the rest of the dealership.
“We’re going to run them side-by-side and measure them every which way we can: how much time is spent with the customer, what we made on the car, the F&I products the customer bought, the markups on those, what percentage of the products they bought versus what they didn’t buy,” he says.
Smith is aware that his strategy will be met with some criticism. He also knows that some salespeople and F&I managers might have reservations about it and possibly worry about their job security. But he says their jobs aren’t going anywhere, just evolving.
“The good news for us is we’re a growing company,” Smith says. “The majority of our salespeople we hired were tested, so we knew they were smart enough to be sales managers. So we’re just going to have to work through it, because I really have no intention of losing anybody.”
As for Thompson, this isn’t the first time he’s tried to bring change to the industry. In 2001, he developed one of the first inventory management platforms in American Auto Exchange (AAX), which he sold four years later to JM Family Enterprises. He also founded lanelogic, a now-defunct marketplace for dealers to sell and buy used cars. He was also the creator of RedBumper, another inventory management platform now owned by CDK Global.
“We’ve had the same process in this industry for decades, and I think consumers, especially Millennials, are ready for change,” Thompson says. “And I think dealers are more than ready for this.”