F&I: DealerTrack really does have an in-the-trenches view of what’s happening in the credit markets. Can you talk a little bit about what you’re seeing among lenders?

RVP: Well, we’ve seen a number of lenders leave the indirect lending segment, the biggest one being HSBC. More than 40 lenders have exited or have been acquired in the indirect lending space. We’ve also seen a very large contraction among lenders in terms of the number of dealers they’re working with. Quite simply, lenders are more focused on efficiencies right now. So we’ve seen a marked decrease in the number of dealer-lender relationships.

F&I: How have dealers reacted to this shift in focus?

RVP: We’ve spoken to some of the big dealers out there and many are recognizing the need for balance when it comes to their lender portfolios. Having a preferred lender list just doesn’t work anymore. We even have dealer groups that are specifically looking for credit unions. It’s tough because they need a separate group of credit unions for just about every dealership they have, because credit unions are so widely dispersed around the country. It’s quite a dramatic change in view from a year ago.

F&I: You mentioned credit unions. I hear they’re pretty active these days. What are you seeing?

RVP: As I said before, dealers are now realizing the need for a balanced portfolio of lenders. So we’ve seen a growing awareness of credit unions and a definite increase in the amount of dealers approaching that lending segment. Still, the balance of banks, finance companies, and credit unions on our network remains the same, as we’ve seen a lot of credit unions leaving the industry as well. Having said that, I think dealers are realizing that credit unions can really fill some holes, so to speak, in the FICO spectrum. So credit unions are in favor right now.

F&I: How many credit unions are currently on the DealerTrack network?

RVP: Well, we have two ways for dealers to access credit unions. Dealers can get direct access to approximately700 lenders on our network,445 of those being credit unions. We also have administrators of credit unions on the network. These aggregators have a number of credit unions that they service. Basically, a dealer will select the aggregator, and the aggregator will choose the credit union for the dealer. Combining those two tiers, we have about 550 credit unions available through DealerTrack.

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F&I: Any tips for working with these aggregators?

RVP: You should have one or two on your list. Remember, credit unions do have limits on what they can loan out. Some of that is based on the amount of money they’ve brought in through deposits. So an aggregator has more places to go and there’s less chance that a credit union will be loaned out at any point during the month.

As for tips, all a dealer has to do is run a ZIP code search on our Website, and use the e-mails and numbers listed to contact those lenders. Just remember you want a balanced portfolio of lenders. But here’s the key — don’t shotgun all these guys. Rather, send opportunities to them, but make sure you send them deals you think they’ll buy.

F&I: I’ve also heard regional banks are also pretty active right now.

RVP: They certainly are, as dealers are realizing they really need to take a look at that segment. However, things have tightened up across the board. I think the most significant thing to happen is finance companies on the subprime side have really contracted their business because of their inability to get funding. That’s the part of the business that’s really hurting right now.

F&I: So, how has this crisis changed things for F&I managers?

RVP: I think the industry reached a point where dealers felt they understood what lenders would buy. That’s not the case anymore. I have asked myself what the lender situation is going to look like two years from now, and I just really don’t know. I think this crisis is going to make dealers focus more on profitability and efficiency. I also think dealers are going to be looking for partners they can rely on in the good times and the bad. I also think there’s going to be a better appreciation for the profits that can be made per vehicle sold. So I think there will be a better appreciation for aftermarket products such as extended warranties and GAP.

F&I: So are there any positives?

RVP: Not many. What’s happening right now is a combination of two things. First, despite all the money going to lenders through the financial bailout, lending habits have not loosened up. The second thing that’s happened is people are worried about their jobs, so they’re delaying their purchase. It’s coming from both sides.

With that said, consumers still need to get their vehicles serviced. So the dealerships that were well run over the last few years — dealers that kept their overhead at a reasonable rate — will be fine, as service work will get them through this time. It’s not like everyone is failing. A well-run dealership is going to survive this. The question is, what is it going to look like on the other side?