Tag: F&I

Categories
F&I

Are You Prepared for a Buyers’ Market?

Contributing Author: Brien JoyceA few years ago, you may have been one of the few lenders in your area aggressively offering subprime loans. While the automotive market was struggling, you had the advantage of being one of the only subprime options available to those consumers who were in the market to buy. With limited supply, you had better opportunity to increase your profit margins with minimal effort.

Now, the tables have turned. The subprime market expanded exponentially in 2013. According to Automotive News, executives at General Motors stated that in December, subprime accounted for 7.5 percent of their sales volume.

As more big banks and captives enter the ever-expanding subprime market, you no longer have the same market advantage with Dealers. In essence, we’ve left the seller’s market and entered a buyer’s market. With so many available options, consumers have a better opportunity to shop for the best rate and terms. Naturally, smaller subprime lenders will have a harder time competing on rate alone with larger institutions.

Whether direct or indirect, it’s time to move past rate-only marketing strategies and compete on the value of your loan or your institution. Dealerships and consumers alike are more likely to work with lenders that make their lives easier. For dealerships, this means a quick turn-around on loan approvals, availability during dealership hours (not just bank hours), and providing a loan that consumers will find valuable.

It is actually possible to succeed at captivating both consumer and dealer audiences at the same time. Loans offering complimentary, short term or limited F&I products that reflect a dealer’s consumer base position them to effectively increase profit and customer retention. Consumers will be more confident with doing business with the dealership and in their financial future. In addition these loans may benefit you by helping to mitigate potential loss.

For example, if a customer experiences a mechanical breakdown within the first six months after purchasing a vehicle, they could potentially struggle with the financial burden of paying for both extensive repairs and their monthly auto loan payment. With a six-month complimentary vehicle limited vehicle service contract, that burden could be significantly reduced, allowing them to repair their vehicle without putting a significant strain on their finances and affecting their ability to make their payment on their car loan.

The complimentary product also makes it an easier conversation for the dealership up to give their customers the option to upgrade to potentially the entire length of the loan. This protects you, the customer, and significantly increases dealership profitability.

To determine your value to your dealership partners, conduct an internal audit of your loan closing procedures with these questions in mind:

  • How quickly do we respond when the dealership submits an application?
  • Are we always available when an F&I manager needs us?
  • Are we courteous and professional when working with a dealership?
  • Do we provide solutions to help our dealership partners succeed?
  • Do our loans give the dealership additional credibility with their customer base?

In this highly competitive market, your value proposition is your differentiator. By focusing on enhancing the value of your loans through good customer service and targeted F&I products, you can significantly increase efficiencies for both for 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 importance of your 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.

Find out how EFG can help you break through the competition. Contact us today.

Categories
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.

Categories
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!