EFG Predicts Increased Focus on F&I and Service Drive to Foster Customer Loyalty in 2018

With more than 40 years of experience serving as an industry innovator of consumer and vehicle protection programs, we’ve seen our share of trends and cycles. This historical perspective – coupled with thousands of conversations with our clients and partners – provides us with some unique insights. We have gathered some of the brightest minds at EFG Companies to share their predictions for 2018.

John Stephens Headshot Brien Joyce Headshot Glenice Wilder, Vice President Adam Ouart Headshot Web Gary Biskup Headshot_NEW
John Stephens, Executive Vice President Brien Joyce, Vice President Glenice Wilder, Vice President Adam Ouart, Vice President Gary Biskup, Vice President

Retail Automotive Profit Margins and Customer Retention

Growth Potential in Auto Finance

Powersports Growth Challenges

Acquisitions and Engagement in Agent Space

Independent Dealers Diversifying Revenue Streams

Q.  What lessons from the 2017 natural disasters should dealerships keep in mind for their reinsurance positions?

Q.  What is the “State of Compliance” and how will it impact the auto lending environment?

Q.  Do you foresee any growth in the powersports market?

Q.  How will a second year of flat unit sales affect agents?

Q.  How will independent dealers address the challenges of another year of flat unit sales?

A.  One of the biggest take-aways from 2017 is that when a dealer decides to take part in a reinsurance position, they are acting as an insurance provider. Yes, reinsurance is a wealth management tool, but the key word in reinsurance is “insurance”. With reinsurance, dealers are insuring that they will cover the risk of an adverse event. In the case of GAP, they are insuring against a total loss. Unlike service contracts, GAP losses are impacted by both single event losses, such as vehicle theft, and catastrophic losses, wherein one event i.e., “Harvey” results in a significant number of total losses. A.  Going into 2018, the auto finance industry has some significant compliance wins in its belt. Now, for every new regulation the CFPB puts out, it must eliminate two. Because of this, we don’t expect to see many new regulations come out from the Bureau. In addition, the CFPB’s Arbitration Rule was struck down by Congress in the third quarter of 2017. However, these wins have not affected lenders when it comes to maintaining their compliance practices. Lenders spent a lot of time and money adjusting their compliance practices in recent years. One government entity losing steam will not cause lenders to quickly reverse policies and procedures.  A.  We expect the 2018 to look much the same as 2017, with one caveat. Pre-owned unit sales will outpace new unit sales. The reason for this is simply consumer demand. New bikes are priced outside of what consumers today are willing to spend, and those consumers who held off on purchasing a bike in 2017 will look to get more for their money on gently used bikes in 2018. In addition, price-sensitive Millennials consider pre-owned as a more appealing option for their already strained budgets. Because of this, powersports dealers will look to outfit their pre-owned inventory with late-model bikes that either have a little bit of manufacturer warranty left, or are just outside of manufacturer warranty coverage. A.  Going into a second year of flat unit sales, dealers will be looking to agents for more solutions on how to maximize their back-end profit. Today’s slow down comes with higher vehicle prices and deeper manufacturer incentives, resulting in extremely thin front-end margins. To help dealers recoup as much profit as possible, agents will focus on installing market-differentiating products and increase their scrutiny on income development.  Dealers will also increase their focus on customer retention. As such, agents will be tasked with providing products that can be sold in the business office that tie consumers back to the service bay in some way. A. 2018 is looking to be another year of flat unit sales. Because of this, independent dealers are operating on razor-thin front-end margins, and are looking for solutions to increase their back-end profit. We’re already seeing dealers become much more selective when it comes to inventory management to make sure that all the vehicles they sell can be covered by the F&I products they sell. More independent dealers are going to auction looking for off-lease vehicles, with either a little bit of manufacturer warranty left, or just outside of manufacturer warranty coverage. These vehicles offer the most opportunity to sell F&I products on the back-end.
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