I recently attended the annual Auto Finance Summit at the Red Rock Casino in Las Vegas. Given the mood of the crowd, it probably should have been held at a funeral home. Given the state of the business, and the fact that during the three days of the conference the Dow Jones average dropped more than 1,400 points, short of spiking the iced tea with Prozac, there wasn't much that could have lifted the attendees' spirits.
The question is what to do now. The options are curling up into a fetal position and staying in bed all day, or fighting forward. Despite the gloomy projections and tough lending environment, there are still going to be 13 million new cars sold next year and 50 million overall when you count used vehicles. And that means there still will be loans made, and products sold.
There are steps a dealership F&I department can take to help their store navigate and thrive in this environment, as well as increase revenue. It's not going to be as easy as it was a few years ago, or even a few months ago, but the reality is that an F&I manager will have to adapt to the environment and help the store continue forward.
The lenders that presented at the conference provided serious insight into their plights — some self-inflicted, others just caught up in the state of the market. But they also outlined steps that dealerships can take to improve their relationships and help get more deals done. It's a back to basics environment, where underwriting is done on a deal-by-deal basis rather than fully automated decision-making. Equity position is vital, and the personal interaction between F&I and lender is key.
And while this may sound contradictory, it is important for dealerships to strengthen their associations with their key lenders, while actively looking for new finance sources. Not to go old school, but years ago, strengthening your relationship with a bank included buying a round of golf or several rounds of drinks. In other words, personal relationships mattered. Maybe it's time to get back to that.
The skill of underwriting and presenting a loan package has diminished due to automated decision making; FICO scores versus reading the bureau report; and the easy shotgunning of credit applications.
Meanwhile, the market creates opportunity, and new lenders are already looking to fill some of voids created by the sub-prime players retreat. Several upstarts were at this conference and looking to grow.
Leverage 20 groups and industry guides to identify new finance sources. And yes, discounts are likely back, bigger than before — at least for higher credit scores, and here to stay for a while.
Additionally, credit unions are still actively growing, and there are easy-to-use systems to help tap into this broad array of choices.
It is also time to expand the products offered.
DealerTrack, IzmoCars and a few others have automated accessory tools that provide consumers with an easy way to access and finance the customization of their vehicles. Since customers likely will be in those cars for a while, they might as well make them nicer.
Create an email and phone campaign with a link and example on what can be done and how easy it is for the consumer to dress up vehicles. This is a $33 billion market that is almost completely overlooked by dealerships, and represents an opportunity and fresh revenue source.
I've also written about implementing a service-contract followup program several times in this column, but now more than ever this is the time to start. There are several companies that do this at little or no cost to dealerships. It can quickly and easily generate extra revenue and repeat business for the store. Some are even able to offer the dealer's own service-contract products, and that improves service business and retention.
Recessions have occurred before, and the business has continued. It's just time for dealers to operate smarter than ever before and look for new partnerships and revenue to weather this storm. n
F&I consultant Bryan Dorfler works with dealerships, lenders and aftermarket providers nationwide. He is at [email protected].
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