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Dealership Training Economy

Positioning Leasing vs. Buying

Hollis Goode Blog Headshot

Contributing Author: Hollis Goode, Regional Vice President, Dealer Services, EFG Companies

Leasing continues to gain considerable ground in the automotive space as manufacturers place greater emphasis on lease incentives. Is your team taking advantage of this trend?

According to a recent report from Experian, leasing hit a record of 26.7 percent of U.S. new-vehicle volume in the first quarter of 2015. This represents a 1.1% year-over-year growth and the fourth time in the past five quarters when lease penetration topped 25 percent. With this growing trend, we can expect more manufacturer lease incentives in the second half of this year, meaning now is the time to ensure your sales team can not only close a sale, but also a lease.

Ask yourself, does my team know how to positional leasing versus financing? Not sure? Refresh your team by focusing on the basics.

Help customers understand depreciation. While they probably know that all vehicles depreciate as soon as they leave the lot, they probably don’t make the connection that vehicles depreciate at the same rate whether they lease or buy. The only difference lies in what they pay for. With leasing, customers only pay for the time/miles they drive. However, with buying customers commit to the entire cost of the vehicle, no matter how far they drive it or how long they keep it.

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Compliance

Rolling with the Times!

Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies

 

Contributing Author: Karen Klees, Certified Consumer Credit Compliance Specialist, EFG Companies

Recently, U.S. Bank issued a letter to its dealer partners describing the Bank’s policy in regards to fair and responsible lending. Well, that in itself is not news. Lenders have been issuing letters of that nature for the past few years. However, this letter did mark a significant milestone in the CFPB’s regulation of the automotive industry. In this letter, U.S. Bank became the first lender to explain a monitoring program with a heavy focus on how F&I products are priced and sold.

To date, dealers have had substantial leeway with F&I pricing practices. The only minor cap dealers have as far as marking up products is concerned, is how much money lenders are willing to fund. So, it’s natural for dealers to pucker when a lender like U.S. bank says they are watching for potential discriminatory practices in F&I.

However, from a lender standpoint, U.S. Bank is taking proactive steps to protect itself before any regulatory decisions are made. And, it’s possible that other lending institutions may follow suit, especially those who’ve already felt the influence of the CFPB.

As a dealer, you could simply say “Good Riddance!” to any lender who tries to restrict F&I product markup. However, you could be losing quality lenders in the process. And, then there’s the potential eventuality that the CFPB will have all lenders monitor F&I product pricing. Rather than purely reacting, a better option might be to begin the process of preparing your dealership now for industry trends that could impact your business.

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F&I Reputation Management

How are You Profiting from Addressing Subprime Consumer Needs?

Contributing Author: John Stephens

 

Contributing Author: John Stephens, Senior Vice President, Dealer Services, EFG Companies

As the nation continues to recover economically, we’ve seen the subprime market steadily expand. The debate rages on whether to slow or halt this expansion before a subprime bubble forms. Be that as it may, more people who experienced hardship over the last few years are returning to dealerships looking to replace their car, or get into a car for the first time.

For dealers, it’s easy to gain distance from the circumstances that drove more people into the subprime space and to only focus on numbers like PRU, penetration, sales volume, etc. But, as you evaluate your dealership’s future, it’s time to step back and take a deeper look at what consumers are dealing with.

Yes, the unemployment rate has dropped, but that does not mean everyone who lost their job in the recession have returned to a comparable position. The most recent report from the Bureau of Labor and Statistics states that 6.6 million Americans are classified as “involuntary part-time workers” – those working part-time jobs due to economic reasons.

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