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.


Why Should They Choose Your Loan?

Steve Roennau Vice President Compliance EFG Companies
Contributing Author:
Steve Roennau
Vice President
EFG Companies

The Challenge: Differentiation!

According to the latest State of the Automotive Finance Market Report, nonprime, subprime and deep-subprime new vehicle loans increased to 27.5 percent market share in Q2. This is a 25.4 percent year-over-year increase. In addition, nonprime, subprime and deep-subprime used vehicle loans experienced a 54.5 percent year-over-year increase in Q2 market share.

But with the good, comes the bad. As loan volume increases, lenders are presented with two challenges: increased competition and higher delinquency rates. With an influx of financial institutions putting together sub-prime financing packages and June auto loan delinquencies increasing by 5.5 percent, it’s important to ask how you are tackling these challenges presented by an expanding market.

Consider this:

Loans that offer complimentary consumer protection products can help you address the challenges of increased competition and delinquency control, while also providing additional streams of revenue.

Said another way:

The dealerships you work with have a variety of other subprime lenders from which to choose. What do you have to incentivize F&I managers to present your loan offering to their customers? Why should the customer choose your loan offering? You can’t always offer the lowest rate, so what makes you different?

Financing options offering complimentary F&I products with upgrade opportunities provide significant benefits to all parties involved.

  • Benefits to F&I Managers: Starting the F&I process with a loan paired with complimentary consumer protection products puts the F&I Manager in a positive position with their customers, enabling them to sell consumer protection products as upgrades, thus improving profit potential.
  • Benefits to Consumers: Consumer protection products allow consumers to avoid unexpected expenses that may inhibit their ability to make their car payment.
  • Benefits to Lenders: Upgrade options provide increased potential for profit opportunity for lenders, and by protecting the customer, mitigates loss exposure.

With over 35 years of consumer protection product insights, EFG Companies works side-by-side with subprime lenders like you to administer the right mix of F&I products providing the greatest return to you and your dealership partners.

Don’t You want to know how?

Banner Economy

Faced with Economic Lemons? Lemonade Sure Tastes Good.

Contributing Author: Steve KleesAs President Obama and Congress nail out budget sequestration for 2013, businesses across the country are scrambling to determine how this will affect their productivity.

Political Pundits are anticipating the sequester will cost the economy upward of one million jobs in 2013 and 2014. While this might make you cringe when thinking about possible affects to the sub-prime auto loan market, it’s important to remember that coming out of a recession, there is pent-up demand.

According to recent stress tests conducted by Fitch Ratings, the U.S. auto market can withstand a hypothetical recession and material declines in used vehicle recovery rates. However, rather than just trying to withstand economic hardships, your competitors are looking for ways to turn those stresses in their favor.

How do you stand-out from the crowd among F&I managers beyond low interest rates?

Consider the following scenario.

An F&I manager has a customer who qualifies for financing through your institution and a competitor. While the competitor’s rate is slightly higher, they also offer complimentary consumer protection products that make their loan more stick (not to mention the opportunity to make money through upsell). Which rate do you think the F&I manager will sell?

Structuring your loans with F&I products that reflect current economic conditions and consumer needs not only make it easier for finance managers to sell, but also:

  • attract and retain dealership partners;
  • increase year-over-year auto loan volume and financial control;
  • expand per month income;
  • reduce default rates; and,
  • decrease repossessions and collection costs.

With over 35 years in administering consumer protection products and working hand-in-hand with dealers across the U.S., EFG Companies knows how to structure your loans to be more attractive in the F&I office with F&I products custom-tailored to match your dealership-partner’s demographics.

Find out how EFG can turn economic stress into increased revenue streams today.