Insight On The Automotive Journey And The Future of Retailing

Articles In This Edition

  • FINANCE: “Dealers grapple with online F&I
  • DIVERSITY: “This is why few women stay in dealership jobs
  • DISABILITY: “Dealership ordered to defend disability suit
  • AUTO DEALERS: “Dealers push automakers to simplify incentives
  • RETAIL FUTURE: “Where does F&I fit in the digital retailing puzzle?

Dealers grapple with online F&I

https://www.autonews.com/finance-insurance/dealers-grapple-online-fi

Excerpts from Automotive News article March 9, 2020, “Dealers grapple with online F&I”:

DEALERSHIP PERSPECTIVE

F&I profits account for a hefty portion of dealerships’ gross profits. F&I makes up about 4 percent of revenue at the nation’s top public retailers but accounts for roughly 30 percent of their gross profits. AutoNation Inc., the No.1 public retailer for F&I profit per vehicle, pegs $1,350 of its nearly $2,000 per-car F&I profits on product sales.

CUSTOMER PERSPECTIVE

Nearly 3 in 4 customers prefer to get deal-specific information online, including F&I products, according to Cox Automotive’s 2018 Future of Digital Retail study. About half of the 2,550 in-market shopper respondents said they wanted to structure the deal online themselves.

CTR PERSPECTIVE

Vehicles are advertised at a low price to MSRP and dealerships offer deep discounts off MSRP (and below invoice).  These businesses have very high expenses to stay profitable (examples include large number of employees, high utility costs for heat and light, large facility construction and maintenance).   To cover the high cost of doing business they rely heavily on profits from the service department and F&I (Finance and Insurance) department.  Top things CTR Community should know in preparation:

  • Know your credit score.  Your score will affect the price the dealership charges for you to get a loan or lease a vehicle. 
  • Know how much your current (trade-in) vehicle is worth.  Use an online estimating tool and properly account for high mileage, dents/dings, engine repairs, tires, cracked glass, interior rips/tears.
  • Know the automotive loan and lease rates from a local credit union and community bank.
  • Understand the pros and cons of dealership “high profit” but often high customer value products which include: GAP Insurance, Extended Vehicle Service Agreements, Pre-Paid Maintenance Programs, Wheel and Tire Protection
  • Understand the pros and cons of leasing vs loans, the importance of keeping lease terms below 40 months and loan terms below 72 months

This is why few women stay in dealership jobs

https://www.autonews.com/commentary/why-few-women-stay-dealership-jobs

Excerpts from Automotive News article March 2, 2020, “This is why few women stay in dealership jobs”:

DEALERSHIP PERSPECTIVE

In 2018, the most recent year for which data is available, women held 19 percent of jobs at U.S. dealerships, according to the NADA Dealership Workforce Study. Female turnover was 50 percent, with sales consultants, F&I managers and service advisers experiencing the highest turnover. Five out of 10 women walk away.

CUSTOMER PERSPECTIVE

…dealers, ask yourselves: When you hire women, how do you ensure they reach their earning potential? Do you talk about their career path and how to achieve their goals? When you see a young, professional woman, do you see a daughter? A potential girlfriend? A prospective employee who could one day become a general manager or more?

CTR PERSPECTIVE

Automotive dealerships and the automotive industry has always been a difficult place to achieve work/life balance and that has caused the sales and service environments to often be less than inviting.  Examples include: 60+ hour work schedules, high pressure sales environment, extrovert personality type expectations and process rigidity remain obstacles to attracting the most talented and diverse work force of women and men, young and old, from all backgrounds.

Dealership ordered to defend disability suit

https://www.autonews.com/dealers/dealership-ordered-defend-disability-suit

Excerpts from Automotive News article February 25, 2019, “Dealership ordered to defend disability suit”:

DEALERSHIP PERSPECTIVE

Read the entire article to understand the excuses auto dealers lean on to avoid one of their obligations to the Americans With Disabilities Act (ADA).

CUSTOMER PERSPECTIVE

A California Toyota dealership must defend a lawsuit accusing it of wrongfully refusing to install portable hand controls on vehicles for a customer paralyzed from the waist down to test drive.

CTR PERSPECTIVE

Auto dealerships want your money, business and loyalty but are TOO OFTEN unwilling to make the simple accommodations to earn that business. 

Dealers push automakers to simplify incentives

https://www.autonews.com/dealers/dealers-push-automakers-simplify-incentives

Excerpts from Automotive News article March 9, 2020, “Dealers push automakers to simplify incentives”:

DEALERSHIP PERSPECTIVE

Industry-wide, consumer incentives have long been a double-edged sword. They increase sales volume but lower brand value and cause consumer skepticism when the same vehicle sells at different price points. They can also be challenging for dealers to manage.

“Incentives obfuscate for customers the value of the car and make it difficult for us to convey the value of the brand and the market price of the car,” said Flow.

CUSTOMER PERSPECTIVE

The automaker wants to move more units off the lot. The dealer wants to generate gross profit. And the customer wants to purchase the vehicle at the lowest price possible.

CTR PERSPECTIVE

Automotive dealers are businesses that survive and thrive when they sell products and services.  Automotive manufacturers thrive when dealerships purchase their vehicles for eventual sale to consumers.  This can often lead to difficult situations like: excess inventory, model year changes, equipment package changes, seasonal sales campaigns that can lead to conflicting priorities.

When brands advertise the quality of the car but consistently mark it down, they’re conveying a discontinuous message, he said. And when discounts vary depending on the day, customers become even more leery.

Where does F&I fit in the digital retailing puzzle?

https://www.autonews.com/finance-insurance/where-does-fi-fit-digital-retailing-puzzle

Excerpts from Automotive News article March 9, 2020, “Dealers push automakers to simplify incentives”:

DEALERHIP PERSPECTIVE

“I do think the F&I office is a key part of the sales process. That’s where a lot of the profitability for the dealer is coming from,” Moss said. “I’m kind of in the camp [of], you’re not really generating much more than sort of a super lead if you’re not able to go deep” into financing.

Christian Storm, training and development manager for Planet Hyundai/Genesis of Golden and Planet Honda in Golden, Colo., said that when his dealerships began using digital retailing provider Roadster, the perception among some finance managers was that F&I revenue would decrease because customers would balk once they saw the extra cost the products would add to their payment.

CUSTOMER PERSPECTIVE

There is agreement generally around the idea that customers increasingly want a car-buying experience that matches what they’re accustomed to from nonautomotive retailers — seamless, convenient, quick, efficient — and dealerships have to evolve to deliver it.

An updated report last year found that filling out paperwork and negotiating vehicle price were customers’ top frustrations with the buying process, but less than 1 in 10 customers took those steps online, “likely because access and availability of these options are currently limited,” Cox wrote.

CTR PERSPECTIVE

Americans have learned the benefits of purchasing many items online.  Auto dealers rely heavily on the profits gained from F&I purchases, which often come through high pressure tactics that work best in a closed office, face to face with a Finance Manager.  These products often have value but are offered to customers at highly inflated prices that drive up monthly payments beyond a buyers comfort level.  Auto dealers and the automotive industry have ignored consumers desire for online expereince because it was inconvenient for them.  Dealers are now thining about ways to satisfy this need out of their need, not the consumers.  Now that the door is cracked, it is now the consumers job to swing it open and make this a regular way of shopping, interacting and purchasing a vehicle.

The value prop of what you’re selling in the F&I [office] doesn’t change because you’re suddenly doing it online,” Reid added. “If you’re selling the solutions, educating consumers and giving them the option, it shouldn’t be an issue.”

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