A Revolution is Coming

Can you remember the last time you walked into a fast food restaurant and they filled your drink order? It was a short few years ago when the restaurants started handing you a cup and you dispensed the ice and your drink of choice.  The shift happened as consumers demanded a better, quicker experience.  Now, order kiosks are being introduced to eliminate further wait time.

While established dealership vendors have built iPad and Docupad platforms to improve the overall customer experience in the transition to F&I, this segment of F&I technology is about to burst with robust competitive offers. Startups are now beginning to appear on the scene with full online financing capabilities. In addition, manufacturers are now investing in online financing technology.

In December of last year, AutoNation launched its first online financing offering, allowing customers to value a trade-in vehicle, determine payments and apply for credit.

In June, CarMax, Inc., the biggest U.S. used car dealer, announced the rollout of a new online financing initiative to help customers pre-qualify for financing before entering the dealership.

In October, Automotive News reported on a dealership in California that was using Express Storefront, an online-buying platform from Roadster that allows shoppers to select a vehicle, get approved for credit, sift through F&I options, and set up vehicle delivery.

Even Equifax is dipping their toe in the online financing product market. This past month, John Giamalvo, the vice president of dealer services at Equifax, spoke at the National Remarketing Conference, discussing his company’s soft-pull tab for dealership websites that allows customers to get a free credit report without affecting their credit. In his presentation, Giamalvo stated that he sees growing evidence that car shoppers are ready to do more of the financing process online.

Also in November, a partnership between Drive Motors, RouteOne and Dealertrack made headlines with a collaboration that resulted in an online checkout feature for dealership websites. The feature allows customers to structure their deal online before finalizing and taking delivery of the vehicle. This creates a 24/7 sales funnel, where customers submit their information at any time of day or night. The information automatically populates into the dealership’s Dealertrack and RouteOne platforms, saving an enormous amount of time in the store.

Now, Hyundai is entering the fray, announcing its own direct-to-consumer fully-digital car buying, financing, and home delivery portal being launched in the UK.

All this to say, lenders have perfected online financing. You can get approved for a house, credit card, vehicle, student loan, etc. all online. Considering the vast head start lenders have in this arena, it’s a little shocking to not see headlines about lenders offering these services for their dealer partners.

Granted, dealers work with several lenders and you would expect a lender offering this technology to require that the dealer work solely with them. Of course, this doesn’t work with the current retail automotive model. So maybe it’s not so shocking that lenders aren’t mentioned in the evolution of dealer financing.

That’s not to say that lenders shouldn’t be more involved. While we are slightly ahead of the fast food industry in some respects, it’s becoming clear that the evolution of the auto dealership is about to go into hyper-drive. The horizon of someone perfecting the kiosk for automotive sales/F&I/service is not decades away, and the industry will follow quickly. As more capital is being funneled into financing technology, it’s important that lenders begin addressing how this technology will change their business model with their dealership partners.

As everything becomes more streamlined, cultivating lasting dealer relationships will become a higher priority. It will be all too easy to let deal submissions and approvals be automated. However, automated systems don’t take into account your institution’s look-to-book goals. You need strong partnerships with F&I managers to ensure your goals are met. How do you do this?

Get on a first-name basis with F&I managers. Spend a day in the finance office of a dealership to learn the ins and outs of the responsibilities and challenges of F&I managers. Have someone on hand after 5pm to review dealership applications. And, perhaps most importantly in an automated environment, when an application is flagged for denial, get on the phone with the dealership to discuss how to make the deal work.

Lastly, make your business relationship with your dealer partners sticky by helping them differentiate themselves in the market with complimentary products on your loans, such as a vehicle service contract or vehicle return. Remember, the more you work with dealers to boost their profit margin in a compliant manner, the more likely they are to choose your loans.

Providing complimentary products sets the stage for upsell opportunity, making it possible to increase your margins as well as the dealership’s PRU. By providing a valuable service to the end-consumer, it’s easier to familiarize them with the benefits of the product and position the upsell as just another way to extend those benefits.

While technology and automation are coming to the sales and F&I process, it’s important that lenders focus on how to differentiate themselves from an automated system. The last thing you want to do is get lost in the fray.