As December 31st rolled around, it felt like everyone was holding their breath, ready to put an extremely difficult year behind them. Then, the realists reminded us that the changing of a date really doesn’t wipe away all the challenges we are currently facing.
The 2021 challenges for the auto industry look much the same as they did in 2020. According to The Conference Board’s economic forecast issued January 13th, several factors will impact the US economy in 2021, including:
- scale of the ongoing COVID-19 resurgence and any resulting lockdowns;
- status of labor markets and household consumption;
- size and timing of additional fiscal stimulus;
- timing and availability of a COVID-19 vaccine; and,
- degree to which volatility in the US political transition affects consumer and business confidence.
Strategic dealers used the challenges faced in 2020 as opportunities to innovate new ways of serving customers while driving critical F&I performance. While F&I has always played a strategic role in increasing dealer profitability, what is clear is that this area continues to gain even more importance with the changing dynamic in the retail automotive industry. According to Automotive News, F&I profits on higher-than-normal transaction prices contributed to records at public retailer groups in the third quarter and at private stores across the country. Economic uncertainty in 2021 will continue to make market-differentiating F&I products vital in the race to generate sales and revenue.
Consumers have been demanding to complete more of the vehicle purchase online for years.
Today’s buyers are more educated about the vehicle-buying process and F&I products than ever before; and they are searching for added value and confidence in their purchase decision – both online and off. Last year, stay-at-home orders and state COVID-19 restrictions forced dealers to swiftly migrate to a hybrid online/instore sales model. And, until we get to the other side of the pandemic, this trend will stay in place. The fact is, consumers have been demanding to complete more of the vehicle purchase online for years. Now that they have it, most dealers recognize they will need to continue offering the model once the pandemic ends. Online retailing is here to stay, and it can only get better from here as the industry tackles the important task of evolving how F&I products are effectively presented and sold online. To date, F&I currently represents more than 30 percent of a dealer’s profitability. For those that get it right, there is actually potential for dealers to ultimately increase their penetration while holding PRU in this new environment.
But there will be hurdles to overcome. The digital retailing evolution has brought about some new challenges for dealers to tackle in 2021, such as how to verify identity online and how to clear red flags. Overcoming these challenges will mean identifying the tools needed for a seamless online transaction, requiring many dealers to continue conducting much of the finance process in the store. While the evolution on the hybrid online/in-store model should continue this year, it is critical that dealers invest in the sales and compliance training and technology to effectively manage the F&I process online.
Just like in 2020, there are ample opportunities for dealers to differentiate themselves with customers with value-added protection in the F&I office and by optimizing their online and offline sales process. The team at EFG Companies brings a wealth of strategic business acumen and tools to drive value for our dealer clients. We’re not just your F&I provider – we are your long-term strategic business partner. Contact us today to learn more about our profitable solutions for your business.