Dealers' finance & insurance departments offer a “tremendous opportunity” to bolster revenues and profits in the face of a domestic-brand sales slump.
With sales of domestic new units on the downside lately, dealers are relying on their F&I managers to “pursue all possible sources of sales on pre-owned vehicles, as well as new units.”
So says Michael McHugh, senior vice-president of F&I provider Universal Underwriters, which has added a new vehicle security system to its portfolio.
In addition, a record 3.3 million vehicles in the U.S. are coming off lease this year alone, according to Manheim Auctions' chief economist, Tom Webb. At least two-thirds of them are heading back to dealers via auctions, with another slice bought back directly by dealers who handled the original lease deals.
Pre-owned marketing specialists say that means a windfall for dealers facing new-vehicle resistance — and opportunities for F&I activity never before presented with such magnitude.
“We've got a huge number of Ford Credit leased vehicles heading back from March through May,” says John Evans, president of Stu Evans Lincoln Mercury's two stores in Clinton Township and Garden City, MI.
He adds, “That'll be a challenge, but it's a market stimulus for release as well as pre-owned and new-vehicle sales and resulting F&I business we've never had since leasing became such a factor in retailing vehicles.”
To bolster the sales side, the Sonic Automotive dealership network is taking another novel step, particularly in its slumping domestic-brand stores.
The Charlotte, NC-based megachain, second largest in the U.S. with about $6.1 billion in gross revenues last year, is spurring all its 108 dealers to pursue sub-prime financing on new and off-lease vehicles.
Says Jeff Rachor, Sonic's operations vice-president, “Special finance departments are being organized throughout our system to take advantage of the fact that many OEM captive lenders are sub-venting loans and leases on new units as well as certified pre-owned vehicles.
“We view special finance, which is 100% non-recourse paper, as counter-cyclical to cope with the domestic-brand decline — not only in 2001 but as the leasing return phenomenon goes on in future years.”
“There's no question of the potential for increasing F&I volume and profits…”
— George Jackson American Financial & Automotive Services
F&I exhibits at the NADA convention last month in Las Vegas witnessed another fast-developing trend designed to combat attrition in new-vehicle demand: business development “opportunity” centers.
JM&A Group and American Financial & Automotive Services, among others, rolled out as featured themes of their exhibits F&I-related centers aimed at expanding what can be added to vehicle sales at delivery or later on.
“We have introduced the ‘opportunity center’ concept into all our F&I training classes,” says American Financial vice-president George Jackson. “This focuses on customer follow-up for purchase of extended service contracts, gap insurance or prepaid maintenance policies.”
He adds, “There's no question of the potential for increasing F&I volume and profits by staying in touch with the lessee or loan customer on the dealer's web site or on the phone or by fax. F&I is the main resource for making maximum use of the follow-up.”
The JM&A/World Omni exhibit debuted a “performance development center” as a dealer business development installation designed to help dealers expand their F&I opportunities.
Training programs at JM&A also have been attuned to the “performance” or “opportunity” center approach. That seeks to enhance the role of the F&I manager to establish within the dealership a customer-retention department that tracks payments and pursues long-term opportunities following an initial purchase or lease.
The record-breaking fiscal performances of GMAC and Ford Credit last year, while their parent automaker companies suffered sharp profit declines, underscores the role played by F&I in good and bad times.
What's more, Sonic's decision to add sub-prime providers illustrates opportunities for special finance as new-unit sales take a hit.
AmeriCredit and WFS Financial Services, after record-breaking years as nonprime providers for dealers, were citing added growth in 2001 at their NADA exposition booths.
Bigger NADA displays for GMAC sub-prime partner Nuvell Financial Services and Ford Credit's nonprime pair, Triad Financial and Fairlane Credit, attest to their increased importance, as well.
Credit Acceptance Corp. and Daimler Chrysler Services, meanwhile, reportedly were planning an expansion of used-vehicle pilots for special-finance loans and leases.
As a theft deterrent product for F&I sales, the Universal Underwriters “Universal Security Guard” is being released nationally this year.
Described as an alternative to window etching, the system has three components-eight 3M-made security labels, two warning labels and a limited warranty that provides the customer with a cash benefit if a vehicle is stolen and not recovered.
Janice P. Woods, Universal's F&I marketing manager, says, “Multiple program options are available that allow dealers to choose term and benefit amounts best for the dealership.” Cost to the dealership ranges from $40 to $75, with consumer costs set by the dealers themselves.
Terms range from three to five years, with total benefit amounts ranging from $2,000 to $5,000.
Ms. Woods says pilots at dealers in 12 states have demonstrated a broad appeal of the new anti-theft system, which she calls a customer-dealer connector.