Tag: Finance & Insurance

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Business Growth F&I

Vehicle Dependability is on the Decline! Do You Know How to Leverage this Trend?

Contributing Author: Brien JoyceWith the pent-up demand and looser credit standards, customers have been flocking to dealership lots over the past year and a half. While that trend is expected to continue, dealerships have also seen a much more demanding consumer walk onto their lots. Since the recession, consumers have a tighter hold on their wallet and expect more value for their dollar.

Now, compound their hesitation with the widespread recalls and reports of vehicle failures hitting the news. Not only are customers more concerned with the level of service and value they receive from the dealership, but also with the dependability of available new model inventory.

According to the 2014 U.S. Vehicle Dependability Study from J.D. Power and Associates, for the first time in 15 years, owners of three-year-old vehicles reported more problems than did owners of three-year-old vehicles in the previous year. They attributed this drop in dependability to an increase in engine and transmission problems, particularly on 4 cylinder vehicles.

With vehicle dependability called into question, along with many high profile news stories around the OEMs and recalls, you can bet consumers are going to be even more circumspect when it comes to purchasing their next vehicle. Your dealership partners need a strategy to incentivize potential customers to purchase from them. Keeping in mind that retail sales volume has a significant impact on your loan volumes, think about this statistic from the J.D. Power Automotive Internet Roundtable – today’s car shoppers visit only 1.1 dealerships before making a purchasing decision, which is down from visiting three dealerships just five years ago.

Now think about how many of your dealerships partners are the ones with which consumers choose to do business. Going forward, the best way to keep your share of loan volume is to ensure that your dealership partners successfully sell to this new single-visit customer. But how?

The Answer: Keep it Simple —

  • Be available during dealership hours and not just 9 to 5, Monday through Friday.
  • Provide fast, consistent loan decisions.
  • Be willing to advance on consumer protection products that add value to the loan and take away customer concern.
  • Consider offering complimentary limited warranties that help extinguish customer hesitation.

With vehicle dependability called into question, the ability for your dealership partners to sell vehicle service contracts will be at the forefront of their minds in the coming months. Consumer protection products will not only mitigate customer concern, but also reduce the likelihood of defaults. This is especially important in the subprime space where a vehicle breakdown could cause a consumer to choose between making their monthly payment and repairing their car.

Of course, not all customers have the credit history to afford a loan that takes into account the vehicle cost and the traditional F&I products sold within the dealership. That’s where structuring complimentary limited offerings within your loan can take the lead. This way, the customer still gets coverage on some of the most important parts of their vehicle, your loan is better protected from default, and the dealership has the opportunity to upsell to different coverage levels to increase their profit.

Whether you can structure your loan advance to take the cost of selling F&I products into account, or provide complimentary limited offerings, your loan will stand out and keep you top of mind. Combine this with quality customer service and F&I managers will prefer to sell your loans.

With over 35 years of innovating nimble consumer protection products for dealerships across the U.S., EFG Companies knows how to structure your loan to stand out from the crowd. Contact us today to find out how.

Categories
Business Growth F&I

Looking for a Product Administrator? How are Their Reserves?

Cliff Eller, Executive Vice President, Product CommercializationWith the first quarter behind you, it’s time to evaluate your progress and plan for the rest of the year. As you seek to continually improve your auto lending processes, and determine new avenues of profit, you are probably conducting due diligence in determining whether providing consumer protection products with your loans would benefit your institution. In this process, it’s important to ensure that any product administrator with which you may choose to do business will enhance your credibility with dealerships and consumers. The best way to determine this is to start by looking at their reserves and whether their products are structured to handle any volume of claims no matter the market conditions.

In your review, keep the following questions in mind:

  • Is the product provider backed by an A.M. Best “A” Rated, underwriter?
  • How long have they been with their current underwriter?
  • Do they adequately price their products to manage the reserve to pay claims?
  • How is their customer service in their claims department?

When partnering with a product administrator, you want to be sure that their reserves are adequate in order to ensure that your customer’s claims are handled for the duration of the contract. One of the easiest ways to determine whether a product administrator will benefit your business is to look at their relationship with their underwriter.

First, find out their carrier’s A.M. Best Rating. This rating signifies the company’s financial strength and ability to meet its ongoing insurance contractual obligations. Simply put, if their underwriter is a reputable company that follows through on its obligations, it’s highly probable that your product administrator will as well.

However, that credit rating alone cannot convey the strength of the relationship between the product administrator and the underwriter. If the administrator has a relatively new underwriter, it’s a good idea to look into their history with others. Why did they make the change?

Looking at how long the company has been with their current underwriter or whether they flip from one to another can tell you about the company’s viability in the market. If they can’t maintain a long-term relationship, they may be inadequately reserved, putting the underwriter at greater risk. Looking at the company’s history of underwriters will display a pattern. If they’ve only worked with strong underwriters, their products are probably handled properly. If they can only attract weak underwriters, the chances exist that they could be mishandling the structure and pricing of their products.

Another area to evaluate is their reserve structure. While inexpensive products are attractive initially, that low cost could negatively affect the funds put in reserve to pay claims. Find out how much income from each product sold goes towards paying claims. Ask how many claims are paid each year, and take a look at their Better Business Bureau rating. If the BBB is inundated with consumer complaints about unpaid claims, that could point to a potential claims issue that adversely affects your customer.

One way to determine whether the reserves are handled appropriately is to find out how the underwriter’s actuaries assist in the process of pricing the products. The actuary’s primary role in this process is to protect their company from the negative impact of having too little money to pay claims. So, they would be the most stringent about making sure the reserves are appropriately priced to accommodate the associated claims exposure.  If they sign off on product pricing and structure, that’s a good indication that the reserves are set up correctly.

Lastly, look at their customer service in their claims department. How fast are incoming calls answered? How quickly do they process a request? How often are calls abandoned? These statistics paint a picture of the customer experience. If customers spend most of their time waiting for their call to be picked up, or their request to be processed, you can bet that they will associate that bad experience with both your loan and the dealership who sold it. This obviously negatively affects the customer experience. Even though their claim is adjudicated by a third party expert, which is a positive, your dealership partners and your brand are essentially the face of that product administrator.

With over 36 years of innovating consumer protection products, EFG Companies knows how to structure F&I products that increase your profit and keep enough in reserve to handle whatever the market throws our way. That’s why we’ve maintained one relationship with an AM Best A rated insurer as our underwriter since our inception. Find out how our consumer protection solutions and go to market strategies will give you the edge you need to succeed in today’s market.

Categories
Business Growth F&I

Are You Relevant in the Market?

CalloutThe news is in! According to the latest “State of the Automotive Finance Market Report” from Experian Automotive, vehicle loan delinquencies are down, nonprime, subprime and deep subprime lending volume is up, and we’ve reached a record level of open loan balances.

Everyone is looking to reap the benefits of a healthy market. However, while consumers are relying more heavily on financing and continuing to make their monthly auto loan payments a priority, they are still highly value conscious. With a healthy market, you might think this doesn’t matter as much. Even with increased competition, there are plenty of consumers getting back in the car market. With a solid number of closed loans each month, there’s nothing to worry about, right?

Eric Fruithandler, Senior Sales Executive, Specialty ChannelBut, what if you could do more? What if you could blow that increased competition out of the water? The good news is you can by focusing on what the American consumer wants – value. The value-driven consumer from the recession didn’t go away once they had more money in their pockets. Instead, much like the consumers after the Great Depression, they kept their new outlook and their money. Now, when consumers walk into a dealership, they aren’t just looking for a new car, they are looking for a new experience that puts their needs first.

Now consider your loans and where they fit into this picture.

  • Do your loans reflect the value proposition of your dealership partners?
  • Do F&I managers understand the benefits your loan poses for their customers?
  • Is the loan funding process simple and efficient?
  • After loan closing, do customer relationships foster repeat business and referrals?

The indirect loans that sell the best aren’t necessarily the ones with the lowest rate anymore. Instead, they are the loans that make an F&I manager’s job easier by setting them up with a value proposition. This value proposition starts with their experience securing the loan and ends with the loan’s benefits. Think about the customer experience after loan closing, could that experience be turned into a value proposition?

Put yourself in the shoes of the consumer. What’s important to you when shopping for a loan?

  • Ease of making payments
  • The ability to view quickly your loan balance
  • When calling with a concern, the ability to speak with a real person
  • Mobile banking

While each of these things might seem standard, you would be surprised how many consumers don’t even know how to make their first payment and end up starting their auto loan experience off on a bad foot. With this information in hand, the F&I manager can more easily demonstrate their commitment to the customer as they present a loan with the confidence that the customer will be taken care of.

Beyond what you already do, there is also significant opportunity to relate your loan to dealership needs and customer concerns. F&I managers can tell you, it is not easy trying to sell consumer protection products by themselves. Too many customers walk in with pre-conceived notions about the legitimacy of the products sold in the F&I office. One of the easiest ways to you can help them overcome this setback is with complimentary F&I products, which put the F&I manager in a positive position with their customers, enabling them to increase product penetration with upgrades.

While these products allow consumers to avoid unexpected expenses that may inhibit their ability to make a car payment, they also provide you with increased income potential per loan funded. By offering complimentary consumer protection products, you have the opportunity to increase the relevancy of your loan to dealerships and consumers, thereby increasing the number of your loans and your bottom line.

At EFG, we know how to pair the right mix of products with your loans to achieve maximum success. But beyond product development and administration, we also act as an extension of our client’s business to ensure their relevancy in the market.

Contact us today to find out your loan volume can exceed expectations.