Whether you are a franchise or independent dealer principal, you want to offer the perfect blend of F&I products that match your inventory and your customers – as well as delivering the highest revenue. It can be tempting to pick and choose products from a couple different providers, in search of the perfect mix. But at the end of the day, there are many drawbacks to taking an ‘a la carte’ approach to your F&I menu. Let’s consider a couple of case studies to shed some light on the challenges of an ‘a la carte’ approach.
Independent dealer streamlines F&I, sees business and revenue boost
Novak Motors prides itself on the quality, value, and level of service offered within each rooftop, and has been recognized as the nation’s #1 lease return outlet. With locations in Texas, New York and New Jersey, this leading independent dealer has been recognized by CarGurus, CARFAX, and DealerRater. But with all of these accolades, there was one major issue. Novak’s sales, F&I and back-office accounting teams were expending vast amounts of valuable time reconciling around three very different F&I providers.
Contributing Author: Steve Roennau Vice President EFG Companies
Those of us who are active on social media likely have created an “avatar” – an image designed to represent ourselves digitally. Defined specifically in computing language, an avatar is the graphical representation of the user or the user’s alter ego or character. The avatar image says, “This is the image I want to project,” but it might be less than accurate.
Even the person actually walking into your dealership might not be who they say they are – even if they have legitimate data, like a valid social security number tied to a legitimate address, to support their claim.
Synthetic fraud is the fastest growing form of identity theft in the U.S., comprising 80% of all new account fraud. The fraudulent tactic uses a combination of real and fake personally identifiable information (PII) to create new credit profiles and pump up credit scores, allowing the criminal to access goods and services.
The most common method of synthetic fraud is professional criminals using a variety of methods to make money exploiting the systemic weaknesses of the U.S. credit system. It may involve theft of a child’s real identity and applying for an employer identification number (EIN). Then, the criminal builds a synthetic credit profile with the victim’s real name, social security number, and date of birth (DOB), with a different address or phone number. Next, the professional criminal applies for credit through mortgage refinancing or a car loan, which pulls the report from all three major U.S. credit bureaus (Experian, Equifax and TransUnion). While the application may be denied, the process of reviewing the application creates a new credit profile at all three bureaus (also known as “tri-merging”) with the synthetic information. A few more steps and the fraudulent profile is complete, including lines of credit, employment history, mail received, etc. And now that criminal looks legitimate on paper.
With synthetic fraud, everything may seem legitimate at first blush. For the dealer, they move a car off the lot. For the lender, they have a loan in good standing. Unfortunately, the person who was originally assigned the particular social security number has no knowledge of the loan, and may never find out until the loan defaults or fraud is uncovered.
Contributing Author: Eric Fifield Chief Sales Officer EFG Companies
Electric vehicles (EVs) are gaining traction in retail automotive. According to Forbes, the U.S. passed 1 million total EVs sold in 2018. Looking forward, consumers expect to have more choices in EVs, as automakers announce expansions of their product offering. 2019 marks the first year the average battery range for all models is greater than 200 miles. While analysts do not believe 2019 will be an inflection point for EVs, they do expect costs to continue to drop. Lithium-ion battery prices have decreased an estimated 80% since 2010, and are expected to fall another 45% by 2021. As battery prices decline, vehicle prices should decrease, especially since battery costs currently compose nearly half the price of an EV.
In the F&I office and service drive, EVs pose a different challenge. Historically, warranty administrators underwrite the risk of mechanical breakdown in automobiles so that consumers don’t have to worry about those unanticipated financial shocks. Service contracts are priced based on the likelihood of each part failing times a projected cost to replace the part. In other words, the price of the service contract implicitly includes an assumption around the probability that, say, a fuel injection pump might fail and what it would likely cost to replace it.
For traditional internal combustion engines (ICEs), administrators have decades of data on part failure specific for every vehicle model. Every time an OEM rolls out a new drive train, administrators reprice the risk in the coverage and begin building loss history. EVs are a different story, with far fewer mechanical parts and a tremendously expensive battery that can stop the vehicle in its tracks. Because ICEs are totally different technology from EVs, offering the same coverage on both really doesn’t make sense. Because of this, EFG Companies recently released a new Motorist Assistance Plan for Electric Vehicles (MAP® Electric Vehicle Protection) to exclusively cover the unique technology of EVs.
