Contributing Author: Steve Roennau Vice President EFG Companies
There were a couple of surprising bright spots in April, as retail automotive dealers continued to deal with the impact of COVID-19. According to Autodata Corp, sales of the highly lucrative pickup segment dominated cars in the U.S., for the first time, by more than 17,000 — 186,417 pickups vs. 169,234 cars. In addition, with sales for April and early May coming in stronger than expected, automakers are already starting to rehire people and open up operations. While these are only two data points, they do provide a bit of good news in the dismal daily drumbeat.
The fact remains, however, that we are in uncharted waters. The good news is that not all steps forward are countered by a step back. Consider these data points:
Step Forward:Affordability – Interest rates are at an all-time low, making financing a vehicle pretty attractive.
Step Backward:Job Market – In April, the unemployment rate skyrocketed to 14.7% with 23.1 million people unemployed, but some industries are experiencing tremendous demand.
Contributing Author: Eric Fifield Chief Revenue Officer, EFG Companies
When presenting F&I products, are your F&I managers focusing too much on the product details? How’s that working for you? Are you happy with those product penetration rates?
Think about when you review long lists of information, you start to tune out, right? The same thing happens when F&I managers approach a product presentation from the standpoint of selling what the product does. Tallying off coverage levels, terms, systems, and parts is the fastest way to disengage from the customer and get them watching the clock instead of listening to the presentation.
At EFG, we teach professionals to approach the F&I product presentation from the standpoint of WHY. Why should a customer purchase a certain product? How does it benefit them? You could say that the product benefits customers by listing off everything it covers, but once again, that long list isn’t directly relatable to most customers.
Contributing Author: Eric Fifield Chief Revenue Officer, EFG Companies
When I’m in a dealership talking about conversion rates, the team members often focus on the process of transitioning a potential customer to a confirmed sale. I hear about engagement rates and digital touch points. But often, the biggest struggle isn’t with closing a sale, but rather with effectively managing lender look-to-book metrics. This critical component can often make or break a sale. What are your lenders’ look-to-book requirements and how can F&I departments optimize their conversion rates?
Some F&I managers still feel tempted to use the “free-for-all” approach – offering all deals to every lender on their list. This approach relies heavily on automated approvals, but fails to factor in specific lender criteria. This often results in several denials, especially if a percentage of your business happens to fall in the subprime space. In the prime space, this approach can jeopardize lender relationships if your team sends several lenders applications that they all approve. Your team can only select one lender, which alienates the rest.
A more prudent approach is adopting a preferred lender process, wherein your F&I managers select a group of lenders to send the majority of your contracts. This requires that your team has good working knowledge of each lenders’ requirements to ensure that every deal submitted is approved. Dealers should approach preferred lender candidates based on the needs of their operations, as well as the types of lenders available including those who offer wholesale financing, retail financing, automated vs. manual credit decisions, etc.
Making the Cut
These days, lenders set volume targets and keep a close eye on losses. A lender using a look-to-book ratio considers it an indicator of efficiency, as well as the percentage of approved deals that are booked as loans. Lenders are also segmented into the type of loans they approve – ranging from super-prime to non-prime. It makes no sense to offer an application with a FICO score below 640 to a lender that is only interested in super-prime credit.
