As a wave of new tools designed to digitize the car-buying process crashes into the industry, the question posed to an F&I product provider rep, three software makers, and an F&I director was this: “Does this mean the F&I process has to move online?”
That’s how F&I Administration Solutions’ Kumar Kathinokkula opened “Presenting F&I Products Online,” a panel discussion held at the P&A Leadership Summit in August. The session featured representatives from American Guardian Warranty Services, IAS, Cox Automotive, and The Impact Group, as well as Justin Gasman, the F&I director for Boulder, Colo.’s McCaddon Cadillac Buick GMC.
Representing Cox Automotive, Brett Pomerantz boldly asserted that consumers will self-close themselves if they read about F&I products online. He used Amazon.com as an example, noting that a significant part of the ecommerce site’s sales are the result of clicks generated by the “Customers Who Bought This Item Also Bought” section of its checkout screen. “I think that’s a pretty good model for us to think about,” he said. “You didn’t come to the dealership to buy a warranty, but if we took the time to educate our customers about [why] they should buy some of these products, they would come in with a better view and perspective.”
The Impact Group’s Mark Thorpe was quick to respond. “We’re at a moment in time where car grosses are at an all-time low and F&I profits are at an all-time high,” he said. “And we think this is the time to take some of this interaction out of the hands of F&I managers and to do it virtually.”
Pomerantz was unmoved. “My belief is that the consumer that’s coming in with a ‘No,’ our job is not to make them say ‘Yes,’ it’s to educate them and give them a better experience so they do want to say ‘Yes.’”
“But they won’t say ‘Yes’ if we don’t ask them to,” Gasman interjected. “We’ve got a better selling plan than they have a buying plan.”
The Online Push
There are a number of well-funded firms looking to do away with the dealership experience, including online pre-owned retailers Shift Technologies, Beepi, Vroom, and Carvana. Collectively, they’ve attracted more than $850 million in venture-capital funding. The big news heading into the summit was Amazon’s entrance into the car-shopping world, which Kathinokkula referenced to open the discussion.
“Amazon came out with the Hyundai ‘Prime Now. Drive Now.’ event, where you can book a test drive online,” he said of the pilot program for Amazon Prime members, which launched 11 days before the panel session. “They’ll bring the car to you without having to ever visit a dealership. … So the fact of the matter is the big guys are making a lot of moves to go more online.”
Driving the digital push is a chorus of studies pointing to consumer dissatisfaction with the current dealership experience. The one referenced most often is Autotrader’s Car Buyer of the Future study. Released in March 2015, it showed that only 17 out of the 4,002 consumers the firm surveyed in the summer of 2014 preferred the current process.
Cox Automotive’s MakeMyDeal also studied the F&I experience in its 2015 Finance & Insurance study. The firm found that 83% of the 500 car shoppers and buyers surveyed were interested in learning about F&I products before entering the dealership, and if they could, 63% would be more likely to buy F&I products. Thorpe, whose firm offers a customizable electronic menu called Fusion, remained unconvinced that moving the F&I product sale online is the answer.
“I want to see some hard data that indicates that, by going down this road, we’re going to sell more products, we’re going to be more profitable, and we’re going to have happier customers,” Thorpe said. “If you can’t answer those questions in the affirmative, then you need to be rethinking.”
Fixing the Experience
American Guardian’s Daniel Lievrouw expressed mixed feelings about online F&I presentations. “Do I think what [MakeMyDeal] is doing is the future? I think we know it’s gonna go there at some point in time,” he said. “The online explanation of benefits doesn’t worry me. But history tells us all that version 2.0 will be, ‘And here’s what it costs.’ And that’s where it really worries me.”
Several months prior to the P&A Leadership Summit, on the show floor of the 2016 NADA Convention & Expo, product providers Zurich and Allstate offered a similar assessment of the online F&I push.
“We are pretty confident that, in the very near future, all of this is going to be online,” said Vincent Santivasi, vice president of business development for Zurich. “The one hurdle, from a traditional standpoint, is dealers have to get past that, ‘Don’t talk about [F&I products] until the car is sold.’
“But if you look at the technology we’ve developed, there’s no reason why we can’t take this online,” he added, referring to the company’s “illuminate” iPad application and F&I sales process. Unveiled at NADA 2015, it comes with product videos Santivasi said could be used on dealer websites.
Allstate’s new tablet tool, GRASP (Guided Retail Automotive Sales Platform), operates on MaximTrak’s FLITE platform. Like illuminate, the system uses a survey tool to collect ownership details and configures a protection package based on the customer’s risk profile. “One of the things we’ve done on the F&I side is to try and cut down on the time customers are in F&I and help make it a more interactive process for the customer,” said Allstate Auto Dealer Program’s Ron Stouffer.
CreditMiner, a credit data reseller that offers an F&I platform designed to prescreen or prequalify consumers for vehicle financing, is also looking to change the experience. But rather than push the F&I product sale online, it unveiled at NADA 2016 DealerAR, a presentation tool that uses augmented reality. Dan O’Neil, the firm’s general manager, said it can be used in the showroom and in the service lane to illustrate repairs, but he believes the tool’s true calling is in the F&I office.
“What’s the first thing a customer says when they walk in the door of the F&I office? ‘I don’t want anything,’” he said. “If I’m a good F&I manager, I say, ‘Listen, I’m obligated under the law to present to you these offerings. If you don’t want them, there’s no problem. But I’m going to do my presentation anyway. Before we get started, I want to show you what your manufacturer’s warranty looks like.’”
That’s when the F&I manager hands the customer the system’s clip-on 3D glasses, which pulls the vehicle DealerAR is displaying right off the screen. The producer then reviews the factory warranty, spinning the floating vehicle in any direction while using the tool’s stylus to highlight components the warranty covers. O’Neil said it’s the perfect transition into the service-contract sale.
Even solution providers operating outside the F&I space are looking to improve the finance process. At The Next Up in Anaheim, Calif., developers are bringing the traffic and sales management solution the company was founded on eight years ago to the F&I office. “Transact” allows sales managers to see which F&I producers are available once a customer is ready to be turned over to finance.
“We’re eliminating the cherry picking in finance that happens,” said Tom Cuzzo, the firm’s COO, noting that Transact also records how long customers wait to get into F&I, how long they’re in the office, and the overall transaction time.
“Transaction time is huge right now. The customer experience is huge,” he added. “What dealers don’t know is if the customer is waiting 15, 30 minutes to get into F&I. Now we’re going to be able to track that information. So if it takes, on average, 20 minutes, but on Saturdays it takes two hours, well then maybe we need to get a finance guy for the weekends.”
Then there’s Reynolds and Reynolds, which has spent the last seven years reengineering its software solutions, including its docuPAD F&I selling system, to operate as one retail management system. Jon Strawsburg, the firm’s vice president of product planning, refers to the concept as “built as one to work as one.” He noted that the changes are designed to deliver profit-saving efficiencies.
“Now we’re able to tie all the dealership operations together … where we can start pulling supplier, lenders, and those folks into the sequence system and make it all very manageable,” the executive said at NADA 2016. “So we won’t have the funding packets, you won’t have delays in getting funding after you’ve spot-delivered a vehicle. So there are those advantages that come with taking paper out of the stream and replacing it with an electronic workflow.
“What it will allow us to do that’s, in my opinion, very exciting, is to start interfacing that documentation with the people the dealer does business with, the lenders,” Strawsburg said of the company’s pursuit of econtracting through Open Dealer Exchange and through its connection to RouteOne’s econtracting portal. “So we’ve got this sort of ecosystem now that doesn’t require a physical deal jacket, and also takes care of all that back-end stuff that used to fall on the floor.”
Stealing the spotlight at NADA 2016, however, was the shared booth between Cox Automotive’s MakeMyDeal and its then-newly acquired Dealertrack and Dealer.com brands. The latter two flanked a kiosk showcasing MakeMyDeal’s online deal-structuring solution. Cox Automotive’s Jason Barrie said the display illustrates how MakeMyDeal will serve as the connection point between Dealertrack’s transactional heritage and Dealer.com’s digital marketing platform, as well as Cox’s consumer engagement brands like Autotrader and Kelley Blue Book.
MakeMyDeal founder Mike Burgiss, who now heads Cox Automotive’s mobile strategy, says his platform can deliver needed efficiencies to the sales process by allowing dealers and consumers to negotiate terms online. “So the biggest cost in selling a car today is selling the car. It’s not advertising the car. It’s not floorplanning the car. It’s not processing the paperwork in the F&I office,’” he said, citing a stat from NCM Associates that put the average cost to sell a new car at $750.
“So $700 per car to get a ‘Yes.’ And how many cars are sold by dealers every year? Thirteen million. So that’s a $21 billion [expense] to get a ‘Yes,’” he added. “But if we can … take that $22 billion expense down to $11 billion, think about what that means from a dealership profitability standpoint in this [margin-compressed] market. So let’s pull that efficiency level, and if we can have a much better customer experience at the same time, hallelujah.”
Not far from Dealertrack and Dealer.com was the Pearl Technologies booth, where founder and CEO Bruce Thompson was showcasing the company’s new ShowroomXpress. “With MakeMyDeal, you’re going to have a range. Customer enters an estimated range of credit and the payment might vary by $75. We provide down-to-the-dollar payments. It’s like Lending Tree.”
Through ShowroomXpress’ connection to Experian’s Instant Prescreen technology, buyers simply enter their name and address to allow the system to perform a soft pull of their credit. It then calculates payments to the dollar on every vehicle in the dealer’s inventory. Then, through its integration with finance sources, the system presents the three most competitive finance and lease offers, with the dealer’s markup included in the rates displayed.
The systems also differ in how they value customer trade-ins. MakeMyDeal uses Kelley Blue Book’s trade-in evaluation tool, while Thompson developed a proprietary evaluation platform called Trade-In Concierge. Offered as a free app for consumers or as a website widget, the tool features a video assistant that guides prospective buyers through a process designed to provide used-car managers with details, including photos, market data, and book and auction values, they need to submit a bid on the buyer’s trade-in. The tool currently powers Cars.com’s Quick Offer tool.
Where the two companies intersect is in their desire to add F&I product sales to their online processes. Both companies are using F&I Express to connect their systems to product ratings from the technology firm’s more than 110 F&I product providers. In both cases, dealers set their pricing markups.
Are We Ready?
MakeMyDeal rolled out its F&I Connect tool last November, while Pearl Technologies introduced its F&I sales tool at NADA. Burgiss and Thompson acknowledged that consumers may not be ready to add F&I products to their online deals, but they believe their platforms can make them educated — and more willing — buyers once they reach the F&I office.
At the P&A Leadership Summit, Matt Nowicki, vice president of retail software for IAS, asked audience members to raise their hands if they owned an iPhone. “Out of that, keep your hand up if you have AppleCare?” he asked.
“Now raise your hand if you went to the Apple Store and they aggressively sold you on buying AppleCare,” he said as hands shot down. “So there are different ways that [service contracts] can be sold. And I’d be willing to bet that a lot of you who do have AppleCare had some issue with your device at some point in time, and so you basically sold yourselves on the need for AppleCare.”
Thorpe chimed in once again. “My way of thinking is it’s not inevitable that we’re going to be successful when we wind up putting these transactions online,” he said. “I think what’s inevitable is that retail customers for generations have told us the same thing — that they hate the car-buying experience, they hate the F&I experience. They don’t like anything about the automotive industry.
“So I’m wondering if we’re sort of chasing a solution to a problem we haven’t fully defined,” he added.
Kathinokkula followed up with another question: “Is there really a risk, though?”
Thorpe said the risk lies in customers making up their minds to refuse the sale of any F&I products before they get to the dealership.
“And the customer says, ‘You know what? Thanks very much, but I did go online and I did look at everything, and I’ve decided I’m not interested in hearing about any of this,’” Thorpe said. “As a former business manager myself, I’m thinking about how do I overcome that objection.”
Gasman said keeping information about F&I products away from customers in a mobile world may be a futile effort, but for the customer, the decision will still come down to price. “Well, how are you gonna do that when you’ve got 75 different service contract options with terms and years, and deductibles, and disappearing deductibles, and levels of coverage?” Gasman asked. “Is it exclusionary? Is it stated value?
“… And maybe it’s because I’m in Boulder, Colorado, and I work for a family-owned store that has been around for 60 years and has done business the right way,” he added. “But I do get a lot of people that come in and say, ‘Oh yeah, I want that service contract.’ Those are the 10 percenters. We’re talking about the people that come in and we go through our needs analysis and start having a conversation and they go, ‘Let me stop you right there. You’re gonna go over the warranty, aren’t you? Let me just save you some time. I’ve got a turkey in the oven and I’ve gotta go.’ The iPad isn’t gonna overcome that objection.”