The Lines Are Blurring
I’m really going to need a therapist after this turnaround. Like everyone, I’m looking for that silver lining in every new market report or economic news, but nothing good seems to stick these days.
I’m really going to need a therapist after this turnaround. Like everyone, I’m looking for that silver lining in every new market report or economic news, but nothing good seems to stick these days.
First, there was a report about the California real-estate market showing signs of life, as prices held steady in February. And just as I was starting to feel good about things, a report came out the next day about California’s jobless rate reaching its highest point in 26 years (10 percent).
I also received TransUnion’s end-of-year delinquency report in March. Pete Turek, a senior executive with the company, sounded like an analyst who just discovered his formulas still worked, as he said delinquencies are becoming more predictable.
His report was hardly a sign of a turnaround, however. As Turek said, his now-working formulas show the delinquency rate reaching 1.13 percent by the end of the year, a “high-water” mark for auto delinquencies.
The news out of Experian wasn’t any better, as it reported 30- and 60-day delinquencies accounted for nearly $29 billion in at-risk loans by the end of 2008. Granted, much like a batting average, fewer originations means a higher rate, but the problem is credit continues to deteriorate at an alarming rate. Check out Experian’s full-length report on page 26 to see what I mean.
And as consumer credit continues to take a beating, lenders continue to raise their creditworthiness threshold. In fact, according to Experian, the average loan score for a new-vehicle loan stood at 765 in the fourth quarter 2008, 12 points higher than the average credit score for the year-ago period.
But here’s what I’m getting at: This month we’re rolling out a new feature for F&I magazine. We have integrated our sister publication, Special Finance magazine, into F&I Management and Technology. The best part is the section is removable, allowing both magazines to be shared between departments and employees.
Yes, the change represents our move as a company to do more with less, just as I’m sure many of your dealerships are doing at this time. But it also represents a change in the market. Bottom line, the lines between the credit tiers are blurring, which means 680 and even 700 credit scores don’t mean much anymore.
As Tony Dupaquier, an F&I training specialist for American Finance & Automotive Services, said in a recent article posted on the American Financial Services Association’s Website, “A beacon score is no longer F&I.”
Lenders are now looking at a person’s job type, where a consumer lives, and how many loans are defaulting in that area. That’s why I think some of the processes employed by special finance departments now come into play in traditional F&I operations.
It’s all about managing customer expectations. No longer is it about what they want … it’s about what the lender wants. That means we have to back customers into that finance-appropriate vehicle — regardless of how Internet-savvy they think they are.
I have to apologize to Harry Ackerman, a reader of www.fi-magazine.com. As many of you might be aware, our Website’s been redesigned. And its re-launch marked my entrance into the blogosphere. To kick things off, I resurrected an age-old vision of a hybrid front-end, where customers no longer have to travel from the sales department to the F&I manager’s office.
I know it’s not a new concept, but I raised it again because of some of the things I heard at the 2009 National Automobile Dealers Association’s conference in January.
Ackerman said he didn’t mind me raising the question, but wondered why I couldn’t end on a more positive note. Well Mr. Ackerman, here you go: I think, more than ever, the F&I manager is going to be the key to a dealership’s ability to weather this economic storm. In other words, we’re not going anywhere.
And if automotive retail one day does allow iPhone-wielding customers to buy vehicles with a couple of clicks, my money’s on consumers still having to come to the dealership to sign the finance papers. The lines between special finance and traditional F&I might be blurring, but the role of F&I inside the dealership is as solid as ever.
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