Steve Roennau
Vice President
Compliance
EFG Companies
One of the most discussed topics over the last few years within the auto retail industry has been how to shorten the sales cycle within dealerships. Dealers have invested time and money into training initiatives, enhancing their technology capabilities, and in creating an online showroom. Even with all these initiatives, they are still struggling to achieve their goal.
According to a recent survey by eLEND Solutions, 85 percent of dealers say they want a sales process that lasts less than two hours. But, 42 percent report it usually takes three to five hours to sell a car. Now, why is this important to lenders?
One hypothesis is that those dealers who achieve significant reduction in the time it takes to sell a car will see more foot traffic, referrals and repeat customers, meaning more opportunity to increase indirect loan volume. In addition, by acting as a partner with dealers in this endeavor, it further fortifies the lender-dealer engagement, potentially resulting in increased loan volume and longer-term relationships with successful dealers.
It’s always important to remember that dealership success equates to lender success. So why shouldn’t you be invested in your success?
With dealers struggling to meet consumer demands for a shorter sales process, ask yourself, “What can I do to help my dealer partners achieve their goal?”
There is, in fact, some low-hanging fruit that you can easily take advantage of to help in this endeavor, starting with technology. If there ever was a time to jump on the technology bandwagon, it is now. If you haven’t yet, it’s past time to streamline your operations by optimizing your digital capabilities to provide swift loan approvals. With the plethora of options in the subprime space, dealers most often chose the first lender that provides approvals. If they have to wait for an approval, they typically lose the customer. Therefore, even if you have better terms, if your decision-making process takes too long, you can lose a deal.
It’s important to remember that your technology must integrate seamlessly with dealership technology for it to truly be effective. So, before engaging with a developer, discuss with your dealers their technology options so you can find a solution that works with every dealer.
Now, this brings up another important point in the lender-dealer relationship – communication. You’d be surprised by how much good communication can help increase efficiencies. When you revise your decision-making criteria based on your subprime categories, do you just send dealerships a letter? Or, do you follow that up with a phone call or visit to walk them through the changes? Take a look at what you are booking from your dealers – there could be a breakdown in the communication between your institution and your dealer partners. Remember, F&I managers have short memories and dealerships tend to experience high turnover, so they need to be reminded regularly, even if you have no changes to your lending criteria.
Taking the time to discuss your lending requirements with F&I managers speeds up their processes, and reduces wasted time on both their, and your, part in submitting and reviewing applications. It also reduces the number of denials, and has the potential to increase the number of applications they send that can be approved. In this effort, it’s also important that your staff is scheduled to be available during dealership hours to resolve any inconsistencies in application submissions.
Lastly, it is possible to shorten the F&I process and increase your loan volume by becoming the lender of choice through providing complimentary F&I products on your loans. Dealers love selling loans with complimentary products because it makes it easier for them to sell upgrades to increase their gross profit. In addition, by becoming the lender of choice, you not only increase your loan volume, but you have more opportunity to fine tune your processes with the dealer to speed up funding.
Beyond the profit and loan volume gains, providing complimentary F&I products, such as a vehicle service contract (VSC) or WALKAWAY® vehicle return protection, you also have the potential to reduce the risk of default and provide you full control over product compliance. Remember, the top three reasons consumers default on their loans are:
- Vehicle breakdown (covered by a VSC)
- Disability or loss of driver’s license due to medical impairment (covered by WALKAWAY)
- Involuntary job loss (covered by WALKAWAY)
Providing complimentary F&I products like a VSC or WALKAWAY protects your loan from default and delinquency risk by either ensuring the customer can make their loan payment in the event of a vehicle breakdown, or by returning the vehicle to the dealership if they lose their job, become disabled or lose driver’s license due to unforeseen medical circumstances.
With almost 40 years of experience in retail automotive, EFG Companies knows how to position your institution as a strategic partner within the dealership space. Put our in-depth knowledge of dealership operations to work to make you a preferred lender for all your dealer clients and beyond. Contact us today!