Category: F&I

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Business Growth F&I Government Regulations

What’s Your Value Proposition for 2014?

Contributing Author: Steve KleesWhen you walk into a dealership, what value do you bring to the F&I office besides another loan for which their customers may qualify? In 2014, F&I managers across the country are concerned with three hot buttons:

  • Compliance
  • The Consumer Financial Protection Bureau (CFPB)
  • Maximizing profitability

As entities like the CFPB increase the pressure on compliance practices, F&I managers have a difficult job on their hands to balance compliance with profitability. The best way to separate your loan from the competition is to help them with this balance. How do you do this?

Understand your role in compliance culpability. As seen recently, the CFPB is targeting both financial institutions and dealerships for discriminatory practices. In December, they ordered Ally Financial to repay $80 million to consumers, whom the CFPB alleges were discriminated against. If you haven’t already, it’s time to evaluate your processes in approving auto loans to ensure your own compliance.

Provide clear standards for loan approvals. This not only helps with compliance, but helps F&I managers ensure that they submit well-qualified customers for your loans. You know your qualifications, but how well do F&I managers? Look at how often you deny auto loans. If that number is high, it could be because your standards are unclear to the F&I officer.

Provide more options to F&I managers. Traditionally, when you approve a loan, the F&I manager marks up your interest rate to help increase their profit margin. This very practice is what is under intense scrutiny by the CFPB. So, consider stepping outside tradition and provide options to maximize profit by structuring your loan with complimentary consumer protection products. By offering products such as vehicle return or a vehicle service contract, you set the stage for the F&I manager to upsell those products and get a greater share of the return. Offering complimentary products with upsell opportunities neatly nullifies compliance issues and increases profit for both you and your dealership partners.

With over 36 years in innovating and implementing proven go-to-market strategies in the dealership space, EFG Companies understands the balance between ensuring complete compliance and increasing profit. That balance lies in the value proposition. Which is why EFG structures its products and services to not only provide value to you, but also dealerships and the end-consumer. Our unmatched client-engagement model goes well beyond simple product innovation to mitigating liability through superior claims processes, and continuous training and follow-up.

Learn how EFG can take your value proposition to the next level in 2014.

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Business Growth F&I

Preparing for 2014

Eric Fruithandler, Senior Sales Executive, Specialty Channel2013 is almost over and 2014 is upon us!

How did you fare in meeting your 2013 business goals?

How about preparing for 2014 initiatives?

Throughout the year we saw competition heat up as larger lenders got back into the subprime market, forcing underwriting standards to loosen across the industry. As larger banks and credit unions began offering more pre-crash terms and pricing on subprime auto loans, smaller institutions that focus on subprime lending have struggled to retain organic growth and keep their customer portfolio filled with well-qualified customers.

To regain market-share and outperform organic growth in 2014, subprime lenders need a two-pronged strategy to compete with increased competition for loans.

Insulation

The first step is to insulate your business from big lender competition. How do you do this? By focusing on your strengths! Those big lenders are still very wary of the subprime market; if there’s the slightest chance of significant volatility, they will jump ship. However, because you’ve weathered the storm through the Great Recession, you know how to manage more volatility in the market.

Part of the reason subprime auto lenders survived was because of their focus on customer service. By fortifying relationships with dealers and customers, and being flexible in tailoring their loans to meet consumer needs, those subprime lenders found a way to flourish in one of the toughest economic downturns in U.S. history. That strong focus on customer service will set you apart as competition increases. Throughout 2014, continue to ask:

  • How can we increase efficiency and courtesy in responding to applications?
  • How can we provide more value to both our dealership partners and the end consumer?
  • How can we increase transparency within our parameters to ensure our dealership partners know which customers qualify for our loans?

Attraction

The second step in the strategy is to make your auto loans more attractive for greater organic growth. This goes hand-in-glove with insulation as you cannot make your loans more attractive without good customer service. Concentrate on providing tangible value to dealerships by helping dealership personnel present more qualified customers by ensuring they understand your standards, and by responding quickly and efficiently to all applications.

Differentiate yourself beyond terms and pricing with consumer protection products, such as a vehicle return program, a vehicle service contract, or a limited powertrain protection plan. Products like these boost your bottom line, your dealership’s margins and protect the pocket-book of the loan applicant.

By focusing on customer service, flexibility and value, it is possible to tailor your portfolio to perform better in 2014. With over 36 years serving as an industry innovator of consumer and vehicle protection programs, EFG Companies is committed to the continuous development of innovative products and services paired with go-to-market strategies and execution support across a multitude of channels.

Find out how we can help increase your loan volume and performance while providing additional upsell opportunities to accelerate revenue growth. Contact EFG today!

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F&I

Funding Riskier Loans? Reduce the Risk with Your F&I Products

Contributing Author: Brien JoyceSubprime auto lending started booming again in late 2009, early 2010. And 2013 has been no different. According to Standard and Poor’s, the average loan-to-value ratio on vehicle sales to consumers with spotty credit has risen to 114.5 percent this year, from about 112 percent in 2010. As evidenced, you’ve probably seen a sharp increase in competition this year. Well, it’s only going to get more competitive, pressuring your margins and risk.

How do you plan to reduce the risk of these loans without affecting the discipline of your underwriting practices?

Have you ever considered that the finance products tied into your loans could also reduce risk?

With programs like vehicle return from EFG Companies, it is now possible to not only make your loans more attractive to dealerships and car buyers, but may also reduce loss on defaults or delinquencies.

Vehicle return programs maintain a proactive risk-management strategy that may decrease repossessions and collections costs while enhancing loan volumes and increasing finance control.

For example, the basic level of a vehicle return program offered by EFG covers a consumer’s negative equity up to $7,500 as long as the consumer meets the criteria for the claim and returns their vehicle to the dealership. Covered circumstances include loss of income due to involuntary unemployment, physical disability, loss of driver’s license, international employment transfer, self-employed personal bankruptcy and accidental death.

How does this help you?

Let’s look at the benefits of a single vehicle service contract before looking at the broader picture. Imagine if you will, an F&I manager closing a loan with 6 months complimentary vehicle return on a car with the MSRP at $20,000:

  • The consumer did not put a down payment on the car, so they are driving off the lot with a $20,000 loan.
  • The consumer makes four monthly payments of $500 and subsequently loses their income via one of the covered circumstances. At this point, the loan balance is 18,000.
  • The customer returns the car to the dealership, which buys the car back at its current market value, $13,500.
  • Then vehicle return benefit kicks in, paying the lender the remaining balance on the loan, $4,500. The loan never defaults, the consumer’s credit remains intact, and the lender reduces any potential recovery expense.

What if the loan did not have vehicle return? You know the recovery and liquidation costs.

This scenario does not even include upgrade options such as payment relief, which further secures the loan.

Fortify your loans and protect your margins by strategically choosing F&I products to pair with your loans. Strong finance products not only generate more loan applications and approval, but also may help protect you by reducing risk.

Find out more on how you can potentially reduce the impact of loss while increasing profits at the same time. Contact EFG today!