There was a time, not long ago, when the notion of online financing was considered the rising star that would change the way automobiles were bought, according to Art Spinella of CNW Marketing/Research.

As with the projection and “high hopes” for online auto sales, proponents of Internet sales and financing failed to understand one key point, according to Spinella: The franchised dealer body is a vicious, competitive animal when its territory is threatened.

And, as many of you reading this undoubtedly know, when it comes to financing, the last person to talk to the customer is usually going to get the deal.

This common perception was confirmed by an in-dealership study of F&I managers conducted recently by Spinella. The study was conducted for the October/November 2003 F&I Extra Training Supplement which accompanies the latest issue of F&I Management and Technology Magazine.

More than 2,400 consumers were asked the reasons for not using online financing. A large -- but shrinking -- percentage say they don’t trust the security of the Internet and were afraid that their personal data could be stolen.

But far and away the dominant reason for not using online financing was this, according to Spinella: Dealers offered a better rate.

"While online loan providers advertise on occasion, the dealer body is throwing low-rate and low-payment advertising at customers virtually every day and twice on Thursday via local newspapers, TV and radio," Spinella said. "One would have to be deaf and blind to miss these special deals."

Conversion Rate is Key

Equally important to interest rate, however, is the conversion rate.

More than 40 percent of the folks who enter a dealership with a pre-approved loan from their credit union, bank or online lender are converted to a dealer-inspired contract, according to Spinella's research. And the reason is pretty much the same, said an overwhelming 68 percent survey respondents: The dealership provided a better rate.

How to Win Customers and Convert Loans

So the question becomes, how does the F&I manager do it?

With or without training, the numbers are simple. There are times when a zero-percent interest loan from the captive can be beaten by a low-interest loan from a bank if the customer takes the big rebate. And, according to Spinella, "the only person who can explain – and finesse -- the numbers to the customer’s advantage is a well-versed F&I manager."

In fact, of those folks who entered a dealership intending to use a zero percent loan, about one third were convinced to use an alternative financing method involving a low-interest loan and a rebate applied to the down payment, Spinella revealed.

The net result: Monthly payments that were less than those made with zero percent loans even though the interest rates were 2.9 and 3.9 percent.