F&I and Showroom July 2011
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ALPHERA FINANCIAL IS A CAPTIVE IN DISGUISE
LEASING MAKES SENSE AGAIN
SERVICE TOURSBOOST VSC AND
PPM SALES
INTERNETEXPLORERARTHUR McCRACKEN LEADS A HYBRID ONLINE SALES TEAM AT HONDA OF TENAFLY (N.J.)
JULY 2011 $10.00
LEGAL: CFPB’S IDENTITY CRISIS | MAD MARV: PAY PLANS REDUX | SALES: LIFE OUTSIDE THE LOT
A BOBIT PUBLICATION FI-MAGAZINE.COM
5 REASONS1Q 2011
WAS ONE FOR THE BOOKS
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JM Family is a diversified automotive company ranked on the FORTUNE® 100 Best Companies to Work For® list, its thirteenth consecutive year.
A division of
(800) 553-7146 www.jmagroup.com
© 2011 Jim Moran and Associates, Inc.
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We Deliver Cash flow Profit Wealth
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4 F&I and Showroom July 2011
July 2011 Volume 14, Issue 7
Dealer Profi le
16 The Hybrid DealerEliminating the business development center could be the death knell for any dealership in today’s Internet age, but not for Honda of Tenafl y. In fact, it’s had the opposite effect.
Auto Finance
20 First Quarter Delivers Optimistic OutlookDelinquencies and dollar volume of at-risk loans continued to fall in the fi rst quarter, and auto fi nance sources responded, with shares of loans to credit-challenged buyers increasing by 11.1 percent.
Executive Q&A
28 Under the RadarAlphera Financial Services is feeling a little freer these days. In fact, according to the company’s top exec, becoming a captive is a real possibility for the fi ve-year-old company.
Finance and Insurance
30 A New Lease on Profi tsF&I trainer breaks down a process for making leasing a win-win for the fi nance offi ce and the dealership.
Finance and Insurance
34 Take a WalkA tour of the service and parts department can be all it takes to move the needle on service contract and prepaid maintenance sales.
6 Letters
8 Editorial
10 Developments
36 Sales Driver
37 Mad Marv
38 Legal
40 Bottomliners
45 Ad Index
48 Industry Trends
Departments
Features
F&I and Showroom (ISSN 2154-1728) (USPS 018-706) (CDN IPM# 40013413) is published monthly, by Bobit Business Media, 3520 Challenger Street, Torrance, California 90503-1640. Periodicals Postage Paid at Torrance, California 90503-9998 and additional mailing offi ces. POSTMASTER: Send address changes to F&I and Showroom, P.O. Box 1068 Skokie, IL 60076-8068. Please allow six to eight weeks for address changes to take effect. Subscription Prices: United States $20 per year; Canada $35 per year; Foreign: $35 per year. Single copy price: $10; Fact Book: $30. Please allow six to eight weeks to receive your fi rst issue. Bobit Business Media reserves the right to refuse nonqualifi ed subscriptions. Please address editorial and advertising correspondence to the executive offi ces at 3520 Challenger Street, Torrance, California 90503-1640. The contents of this publication June not be reproduced either in whole or in part without the consent of Bobit Business Media. All statements made, although based on information believed to be reliable and accurate, cannot be guaranteed and no fault or liability can be accepted for error or omission.
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Contents Endorsed as the offi cial publication
of the Association of Finance & Insurance Professionals
COVER PHOTO BY DAVID TENG
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Questions to Break ObjectionsTO RICK MCCORMICK: I really enjoyed
your explanation of how the simple
things are the most important to mas-
ter in the F&I department (“Being
Brilliant at the Basics,” June 2009).
In the article, you mentioned 30 ef-
fective questions every F&I manager
should ask of their customers. Can
you give some examples of the types
of questions we should be asking?
Yas AliFinancial Services Manager
Richmond Hill MitsubishiRichmond Hill, Ontario, Canada
Yas, the goal when asking questions is to gather information that will create you-told-me-earlier opportunities. To do that, you need to fi gure out what objections you think you’ll face while working with a customer. Then fi gure out what information you’ll need to overcome that objection and develop questions you can ask your custom-ers that will extract that information. Remember to use open-ended ques-tions like: “What brought you into buy a car today?” and “Who will be driving the car?” or “How many miles a year do you drive?” Every answer they give creates a you-told-me-ear-lier opportunity.
Developing a list of questions also will ensure that you have good op-portunities to help a customer make good buying decisions. Remember that good F&I managers determine what to “say” next while great F&I managers determine what to “ask” next. I also recommend reading “Se-crets of Question Based Selling” by Tom Freese. It’s not about car sales in particular, but it’s a great resource for using questions to sell effectively. Keep asking those questions! — Rick McCormick
Getting Compliance TrainingTO JIM RADOGNA: I read your May ar-
ticle (“5 Steps to Compliance”) and,
in Step Four, you mention that some
F&I training programs “cost less
per employee than a box of business
cards.” Can you please point me in
the right direction?
Karen SpadyShaffer Ford Sales Inc.
Oakland, Md.
Karen, here are some thoughts you might want to keep in mind when reviewing training programs. Let me start by saying that I have become a big fan of online training because of the costs and logistics involved in in-person training. E-learning also is typically more affordable than train-ing seminars since there are no travel expenses involved. Online training also tends to be far more convenient, as staff can train according to their own schedules and at their own pace. That means they won’t have to juggle handling customers with training, and you can train new hires without having to wait for the next scheduled seminar.
Most online training providers also allow senior management to monitor results with built-in progress tracking. A good online training program also provides a level of protection to the dealership, as most programs will re-quire staff members to pass a certifi -cation test and sign a “code of ethics” to ensure ongoing compliance. Best of luck! — Jim Radogna
Keep ‘em ComingTO MAD MARV: Hi Marv, I just wanted
to say that I read your column every
month and I enjoy them very much.
Your April article on the hybrid
manager was one of my favorites. I
experienced that combined sales/F&I
manager concept at my previous em-
ployer’s store. Needless to say, it was
a disaster. I won’t go into detail about
that failed experiment, but I did
want to thank you for your articles.
They’re excellent and I have learned
a lot from them. Keep them coming.
Paul HaysFinance Director
Golden Circle Ford Jackson, Tenn.
Letters
6 F&I and Showroom July 2011
Vice President Group Publisher, Auto Group
Sherb Brown
Publisher, Dealer GroupNational Sales Manager
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david.gesualdo@bobit.com
Executive EditorGregory Arroyo
310-533-2592gregory.arroyo@bobit.com
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8 F&I and Showroom July 2011
A nother show, another group
of lenders talking about
how close they were to be-
ing swallowed up by the credit cri-
sis three years ago. The more I hear
these stories, the more I know auto
fi nance is back. But that’s not what
I want to talk about this month. I
want to tell you where I fear we may
be headed.
Before I do, let me run through a
few insights I picked up at the Na-
tional Auto Finance Association’s
15th annual conference. First, lenders
have fi nally realized that F&I manag-
ers are fairweather fans. If they’re not
buying, you’ll fi nd someone who is.
I also got the sense that fi nance
sources are no longer looking to
grow by moving outside of their
comfort zones. Instead, they’re look-
ing to pick up market share by adding
more dealers with the types of cus-
tomers they like. That’s good news
if you have a solid lender spread, but
I’m not sure the “I’ll-send-you-four-
good-deals-if-you-buy-this-one” tac-
tic is going to work anymore.
The capital markets also are doing
well, which means there’s money to
lend. What’s driving the auto seg-
ment of that market, said Standard
& Poor’s Amy Martin, is prime and
subprime auto. Unfortunately, there
was no mention of nearprime and
nonprime, and I know that’s a prob-
lem out there.
Now for the scary part. Several
conference presenters speculated
where this margin-compressed, Inter-
net-driven market is headed. Are we
at the beginning stages of a recovery
or in a race to the bottom? Accord-
ing to one speaker, the pain we’ve felt
the last three years isn’t over, and you
might not recognize what we’re left
with when it is.
The speaker was Dale Pollak,
founder of vAuto. The company,
which he recently sold to AutoTrader,
designed a used-vehicle management
system that allows dealers to man-
age their inventory like an invest-
ment portfolio. The philosophy upon
which this system was built is one that
Pollak believes will eventually be the
reality of the new-vehicle market.
He opened his remarks by saying
that he’s feeling a little vindicated
these days. He had been telling any-
one who would listen that the indus-
try was in for a major transformation.
When times were good, the industry
grew too fat and lazy to explore ex-
actly how technology could change
the way dealers do business.
“For my message, a wonderful
thing happened,” he said. “We saw
the collapse of the market in 2008.”
If you’re reading this, then you
probably belong to a dealership that
spent the last three years cutting vari-
able, fi xed and semi-fi xed costs to
weather that economic storm. But it’s
not enough, is it? Costs are rising, new
costs are emerging and the Internet
continues to cut into your margins.
That’s a byproduct of what Pollak
calls an effi cient market. Such mar-
kets are characterized by pricing at
the margins and more effi cient op-
erators. Those who don’t get in line
with this movement will be lost,
Pollak said, but those who do will en-
joy higher margins in the future.
See, the vAuto software bucks the
idea that the used market still consists
of two segments: wholesale and re-
tail. Pollak believes there is only one
market, and that market is driven by
what happens at retail. That’s why he
believes a reliance on historical data,
instinct, pricing guides, auction val-
ues and appraisals no longer works.
Instead, he thinks everything should
start with an average retail price. Once
you know that, you can subtract your
profi t objective, reconditioning, trans-
portation and auction fees to come up
with a more dialed-in acquisition cost.
It’s this kind of granular look at pric-
ing that will continue to cut into mar-
gins and drive down profi ts, he said.
In Pollak’s vision of the future,
dealers will no longer be able to op-
erate big, “Main Street” storefronts.
Instead, we will see acre-and-a-half
lots located off the beaten path. In-
house service departments will be
replaced by offsite facilities shared
by multiple dealerships. The family-
owned, single-point store, he added,
will go the way of the family farm.
See, Pollak believes that the al-
batross hanging around the dealer’s
neck is the soil on which his or her
dealership sits. Margins simply don’t
support it, and no amount of profi t
made in service or F&I will help.
Then there’s the Internet shopper,
who is making it so those prime loca-
tions are no longer required. Problem
is, dealers simply can’t extract them-
selves from their property, leaving
them exposed to interest rates.
I hope you’re angry after reading
that. I don’t totally subscribe to what
Pollak says, but I’m hoping that his
message makes you think. We need
to change, folks. Will we be like Am-
azon.com in the future? I don’t know
about that, but change is needed.
Rime of the Ancient Dealer
Letter From the Editor
Still rattled from the NAF Association’s latest conference, the editor shares one speaker’s unsettling vision of the dealership of the future. By Gregory Arroyo
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In the wake of the US Fidelis
debacle, the Missouri General
Assembly has sent a new bill to Gov. Jay Nixon’s offi ce that aims to
toughen the state’s regulation
of direct-to-consumer sales.
US Fidelis, which left thou-
sands of customers in the lurch
when it fi led for a high-profi le
bankruptcy last year, was
based in St. Louis, a city and state that
remains home to many of these direct-
to-consumer sellers of vehicle service
contracts.
House bill 132, sponsored by Sen.
Scott Rupp (R-Wentzville), passed the
state’s legislature on May 16 and could
be signed into law by Gov. Nixon by
the end of summer. It aims to curb the
recent surge of telemarketing compa-
nies using deceptive sales techniques
to sell service contracts to customers.
“This was the No. 1 [issue] gen-
erating complaints to the Attorney
General’s offi ce and the Better Busi-
ness Bureau in our area,” Rupp said
of companies who engaged in tactics
similar to those used by US Fidelis.
Charged with false and deceptive
business practices last year, the com-
pany was reported to have been using
manufacturers’ names and logos with-
out permission for marketing purpos-
es, as well as failing to pay claims for
customers in all 50 states. In addition,
company founders Darain and Cory
Atkinson were indicted in June on
multiple felony charges.
“From maybe a 12- to 15-
mile radius from where US
Fidelis was located, there were
probably a dozen companies
that were offshoots of that,”
Rupp said. “A lot of US Fidelis’
upper management saw how
profi table the organization could be,
so you saw a lot of them leave and
start their own companies.”
Some of the main provisions in the
bill include a licensure requirement
for VSC telemarketers, delivery of
contract terms and conditions prior to
a sale, expansion of the defi nition of
a service contract to include additive
warranties, and a clarifi cation on a
consumer’s cancellation rights.
“We’re hopeful that this bill will
make people think twice before con-
tinuing with the practices that have
occurred out there over the last cou-
ple of years,” said Stephen McDan-
iel, assistant executive director of the
Service Contract Industry Council
(SCIC). The organization, working
in conjunction with the Missouri
Department of Insurance, supports
the bill and participated in Attorney
General Chris Koster’s Auto Service
Contract Task Force, which drafted
the legislation.
FTC Finds Auto Dealers Compliant With Consumer Protection RuleAUTO RETAILERS CAME OUT ON TOP
in a compliance review conducted by the Federal Trade Commission (FTC), the agency announced in May.
Last November, the FTC began investigating nearly 50 auto dealers in 45 states and two large online op-erations to determine the industry’s compliance with its “Holder in Due Course” rule. The agency closed its investigation after fi nding broad compliance among the dealers it
reviewed. The rule in question
preserves consumers’ rights to raise claims and defenses against
purchasers of consumer credit contracts. If a dealer
were to engage in fraud or made misrepresentations in the course of selling a car on credit, a consumer could raise the dealer’s conduct as a defense to a lender’s demand for payments.
The rule requires dealers to include in their credit contracts a notice that lenders who buy the contracts are subject to the claims and defenses consumers may assert against dealers.
During the investigation, dealers were asked to provide copies of consumer credit contracts executed after Oct. 1, 2009. The FTC’s staff-ers then reviewed the contracts to determine the industry’s level of compliance with the rule.
The FTC took the opportunity to remind dealers that their obliga-tions under the rule will expand in the near future due to the Dodd-Frank Act. The rule currently does not require dealers to include the notice in credit contracts exceeding $25,000 in the amount fi nanced, but that will change on July 21 when the Dodd-Frank Act goes into effect. At that point, the bar will be raised to $50,000.
Missouri Service Contract Bill Passes Legislature
Developments
10 F&I and Showroom July 2011
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MISSOURI STATE CAPITOL PHOTO BY KTRIMBLE
Jefferson City, Mo.
revi
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Developments
12 F&I and Showroom July 2011
W ith executives
and employees
on hand at the
former Detroit-area home
of Chrysler Financial, TD
Auto Finance announced
on June 10 that it’s open
for business.
The new company was
formed after the April ac-
quisition of Chrysler Fi-
nancial by Toronto-based
TD Bank Group, which
added its existing portfolio
business to the former cap-
tive’s portfolio.
“It’s great to be here in
Chrysler Financial’s home-
town of Farmington Hills to
announce our exciting new
TD Auto Finance brand,
which represents both the
fi nancial stability and re-
nowned customer service
of TD and the deep expe-
rience and partnerships of
the former Chrysler Finan-
cial,” said Thomas F. Gil-
man, the company’s presi-
dent and CEO.
Sources close to the
company said TD Auto
Finance has signed 6,200
U.S. dealers since Decem-
ber. Half of those are new
relationships for the for-
mer captive and about 22
percent are Chrysler deal-
ers. The focus of the initial
lending program will be on
prime buyers, with no spe-
cifi c timeline for adding
subprime, nonprime, leas-
ing or fl oorplan fi nancing
programs.
“TD Auto Finance is
off to a strong start, with
thousands of new dealers
signed up in Canada and
the United States since
December and many more
poised to come aboard,”
Gilman said. “Dealer and
customer feedback for our
products and programs has
already been overwhelm-
ingly positive.”
TD Auto Finance Open for Business
TD Auto Finance execu-tives Tracy Hackman and Tom Gilman unveiled the new lending unit’s logo to a crowd of auto dealers, civic offi cials and staff.
THE FEDERAL RESERVE
Board (FRB) announced June 20 that auto deal-ers are temporarily not required to comply with certain data collection requirements in the Dodd-Frank Act. Initially, Dodd-Frank amended the Equal Credit Op-portunity Act (ECOA) to require creditors to collect and report information from credit applications made by women- or minority-owned businesses.
The proposed rule falls under the ECOA, also known as Reg. B, and will allow dealers to remain exempt until the fi nal regulations are issued.
Although the Con-sumer Financial Protec-tion Bureau (CFPB) will have the authority to implement this provi-sion of the ECOA, the FRB will maintain the same authority for cer-tain dealers.
Creditors are not obligated to comply with the requirements until the CFPB issues detailed rules to imple-ment the law, so the FRB issued a proposed rule to clarify that its approach also applies to dealers that are subject to the board’s jurisdiction. Comments from the public on the proposed rule are open until July 29.
FRB Temporarily Exempts Dealers From Certain Dodd-Frank Requirements
A new Kelley Blue
Book Market In-
telligence survey
indicates that new- and
used-car shoppers have
drastically changed their
minds about gas prices in
the near term.
Fifty percent of the 467
vehicle shoppers surveyed
in May said they think gas
prices will either stay the
same or fall. Additionally,
the number of respondents
who said gas prices have
changed their mind about
vehicles they are con-
sidering decreased from
35 percent in April to 30
percent in May. Consum-
ers also are feeling better
about their current eco-
nomic situation, according
to the study.
Concern about qualify-
ing for an auto loan de-
creased from 27 percent
in January to 17 percent
in May. The study also
showed a 10 percent de-
crease in the number of
respondents who said they
are delaying a vehicle pur-
chase.
If prices remain around
$3.27 per gallon, car shop-
pers likely will not make
major changes in vehicle
consideration criteria, ac-
cording to the study. How-
ever, at the $4 per gallon
price point, 66 percent of
consumers said their vehi-
cle consideration would be
impacted. At $5 per gallon,
90 percent of respondents
said their vehicle consider-
ation would be affected.
Kbb.com Study: Consumers Not Panicking Over Gas Prices
FI0711develop.indd 12FI0711develop.indd 12 7/1/11 1:48:57 PM7/1/11 1:48:57 PM
Our loyalty to dealers hasnever wavered.And it never will.
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Call your Chase Regional Manager directly:
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Even in the toughest of times, we’ve been the leader our
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succeed, with expert advice and the right combination of
financial products. We’ve proudly served the automotive
industry nationally for more than 60 consecutive years—
we are a leader you can rely on.
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FI0711develop.indd 13FI0711develop.indd 13 7/1/11 1:48:58 PM7/1/11 1:48:58 PM
HYUNDAI HAS LAUNCHED
an in-store accessory sales program that will be facilitated by MOBIS Parts America and powered by the Insignia Group’s Web-based accessory sales tools. Through Insignia,
Hyundai dealers will be trained on accessory sales and order manage-ment and have access to performance report-ing and tracking tools, as well as a customer interactive 360-degree vehicle confi gurator.
Ally Financial announced that William Muir, president and head of global automotive
services operations, has post-poned his previously announced retirement and will remain with the company indefi nitely. The company also announced several shifts to its executive management team to help with the company’s transformation, including its initial public offerings.
The company named Jeffrey Brown, Ally Financial’s former corporate treasurer, to the newly created
position of senior executive vice president of fi nance and corporate planning. Brown now reports to Michael Carpenter, Ally’s CEO.
Additionally, James Mackey was named Ally’s chief fi nancial offi cer. He will report to Jeffrey Brown and
lead Ally’s fi nancial planning and analysis, accounting, investor relations and business planning initiatives.
Ally also shifted structured funding executive Christopher Halmy over to the position of corporate treasurer. He also will report to
Brown and will be responsible for global treasury activities.
Sergio Marchionne, chief executive of both Chrysler Group LLC and Fiat SpA, has tapped Reid Bigland to head
the OEM’s sales strategy, dealer relations and operations, order facilities, incentives and fi eld operations in both the United States and Canada. He also will serve as president and CEO of the Dodge brand, and will continue to hold his title as president and CEO of Chrysler Canada.
Flagship Buying Below-Prime PortfoliosFLAGSHIP ACCEPTANCE
rolled out a national program to purchase existing nonprime and subprime auto loan port-folios from auto dealers and fi nance companies. The Chadds Ford, Pa.-based fi nance company’s program will target nonprime and subprime portfolios worth $5 million to $250 million and above. Additionally, accounts with suffi cient pay histories will not require minimum FICO or equivalent scores, accord-ing to the company.
Nonprime Source Opens in California, TexasCARFINANCE CAPITAL LLC,
a new nonprime auto
program nationwide for the remainder of 2011.
GM Finance to Offer Floorplan Financing This YearGENERAL MOTORS CO.
said it plans to launch a fl oorplan fi nancing pilot program through its cap-tive lender, GM Financial, before the year is out. The program is part of GM’s efforts to re-create a full-service captive fi nance company. Dan Berce, the fi nance unit’s president and CEO, said GM aims to provide 10 to 20 percent of the fl oorplan loans to its dealers “within a year or two.” Most of that fi nancing is now pro-vided by the government-controlled Ally Financial Inc., which handled about 82 percent of GM dealer fl oorplan loans in 2010’s fourth quarter.
fi nance source founded by former Triad Financial executives and head-quartered in Irvine, Calif., has begun to sign dealers in California and Texas. Led by Jim Landy, Triad’s founder and CEO from 1989 to 2005, the
company launched on the West Coast in May and entered the Texas market in June. Company offi cials said the new fi nance source, which is focused on a FICO score range of 550 to 670, will continue to roll out its
Developments
14 F&I and Showroom July 2011
Moves and Hires
FI0711ally_uwc.indd 1 6/14/11 8:45:10 AM
Hyundai, Partners Launch Accessory Sales Programs
FI0711develop.indd 14FI0711develop.indd 14 7/1/11 1:48:58 PM7/1/11 1:48:58 PM
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FI0711ally_uwc.indd 1 6/14/11 8:45:10 AMFI0711develop.indd 15FI0711develop.indd 15 7/1/11 1:49:00 PM7/1/11 1:49:00 PM
The easy part is to sell you
the car,” Donald Dwan,
general sales manager of
Honda of Tenafl y, tells
the camera. “The big job
is, after we do that, how do we take
care of you?” Asking that simple
question has helped to create the cus-
tomer-fi rst culture at the 79-year-old
New Jersey dealership. Maintaining
that image in today’s Internet age,
however, has proven to be far more
complicated.
The two-minute video Dwan ap-
pears in is part of a new ad campaign
the dealership rolled out in late June
to announce that the operation was
removing the “D&C” from “D&C
Honda of Tenafl y.” That change will
help to distinguish the dealership
from one of its biggest competitors,
a nearby Honda store operated by
DCH Auto Group.
That low-tech change, however,
is nothing compared to the many
changes Tenafl y’s third-generation
owners, Norman Dorf and brother
Jeffrey, have made to compete in the
digital realm.
Two years ago, the dealership de-
cided to eliminate its business devel-
opment center. Veteran salespeople
now handle Internet leads and work
the phones. “We were spending a for-
tune on manning a decent-sized In-
ternet department and we were going
through people all the time,” Norman
Dorf says. “That meant we had the
least experienced people taking calls.
Something just didn’t feel right.”
The Costs of TechnologyThe D&C name has existed in New
Jersey’s Bergen County — one of
the highest per-capita income coun-
ties in the United States — since
1932. That’s when the family opened
a Chevrolet dealership at its County
Road location. In 1971, it became the
state’s fi rst Honda store.
The store, which sells, on average,
200 to 250 vehicles per month, was
on track for one of its best years when
the credit markets froze after Leh-
man Brothers fi led for bankruptcy in
September 2008. Things could have
been worse for the dealership if not
for the support of the affl uent com-
munity it serves.
The following year wasn’t much
better, but not any worse. “Like ev-
eryone else, we made some adjust-
ments with staffi ng and getting our
expense structure right when the
downturn happened,” Dorf says.
Online sales have allowed Dorf’s
family-owned operation, tucked away
in one corner of town, to compete
with the area’s “800-pound gorilla,”
the 27-store DCH Auto Group. The
group’s biggest Honda store is locat-
ed a mere eight miles away, but that
didn’t stop Honda of Tenafl y from re-
cording fi ve record sales months last
year. Still, that doesn’t mean Dorf is
a big fan of the Internet.
“The one thing I don’t like about
the Internet is that it nickel and dimes
you,” he says. “I mean, we’re spend-
ing a fortune between all the differ-
ent technology companies. And now
I need to pay someone to handle my
Facebook page?”
Those rising costs were the pri-
mary reason Jeffrey Dorf decided
to listen in on a few calls between
customers and BDC operators. He
was not impressed. “That’s when we
said, ‘Forget it,’” he recalls. “There
had to be another way, so we just got
rid of it.”
Rotate and ResetArthur McCracken is Honda of
Tenafl y’s Internet sales manager. He
oversaw the creation of the dealer-
ship’s BDC three years ago and he
was initially reluctant to disband it.
He knew that getting the sales team
to handle extra duties would be tough
to accomplish.
16 F&I and Showroom July 2011
Dealer Profile
Hybrid Dealer
The
Eliminating the business development center could be the death knell for any dealership in today’s
Internet age, but not for Honda of Tenafl y. In fact, it’s had the opposite effect. By Gregory Arroyo
PHOTOS BY DAVID TENG
FI0711profile.indd 16FI0711profile.indd 16 7/1/11 11:42:20 AM7/1/11 11:42:20 AM
“It was a necessary move, overall,
because what we were doing defi nite-
ly wasn’t working — especially fi -
nancially,” he says. “But I wasn’t sure
the people downstairs could do it.”
The people downstairs are the
dealership’s 11-person sales team;
two of whom have been with the store
for more than 20 years. McCracken’s
statement isn’t a knock on their tal-
ents as salespeople; in fact, he knew
their experience was the one thing
he had going for him. But to make
things work, he knew they’d have to
pick up some new skills.
McCracken is quick to admit that
his BDC was fragmented before it
was dissolved. Turnover was high,
and training new people was always
a problem. There also was a deep di-
vide between the operators and the
sales staff. Salespeople felt the way
leads were handed out was unfair
and that BDC staffers were poaching
some of their longtime customers.
Customers didn’t like it either. In
many cases, the person they made
a connection with over the phone
wasn’t the person that greeted them
when they arrived at the dealership.
The Dorf brothers’ bold decision,
executed in mid-2009, solved many
of those issues. McCracken oper-
ated as a one-man department for
the fi rst 30 days after the change, and
he quickly identifi ed the more tech-
savvy salespeople to help him handle
leads. That continued until the sum-
mer, when the rest of the sales team
began to realize they would have to
pick up some new skills to get a piece
of the action.
“Not every salesperson was han-
dling leads early on,” McCracken
says. “But I think we started to turn
the corner by the summer. Some of
those little battles going on when we
had the BDC started to cease, and ev-
erybody kind of got it.”
By the time it was eliminated,
McCracken’s former department ac-
counted for 18 percent of the dealer-
ship’s production. Today, the sales
team is hovering between 22 and 24
percent. The goal, says McCracken,
is to be at 25 percent. The sales staff-
ers also are converting 10 percent of
the leads they get, and McCracken
has his sights on 15 percent.
Call in the StrategistMcCracken didn’t go it alone. He
had sales strategist and trainer
Cory Mosley, the magazine’s “Sales
Driver” columnist, with him ev-
ery step of the way. Mosley had
worked with the dealership when it
established its BDC and was instru-
mental in formulating the strategy
for the dealership’s new direction.
What McCracken liked about Mosley
was the way he meshed his philoso-
phies with the dealership’s culture.
“When I was going to take over the
BDC, I went to every seminar, every
trainer I could, but the concepts all
seemed the same,” McCracken says.
“No one was able to say, ‘Let me
learn what you guys are, what makes
you different, and then let me put
together a strategy that matches and
allows you to accomplish what you
want to do the way you want to.’ And
that’s what Cory did.”
Mosley started by training the
salespeople to handle leads. That
meant reprogramming them to un-
derstand that the sale isn’t over if
the customer doesn’t buy within 72
hours, or even after 30 days. He also
had to familiarize the staff with sites
like TrueCar.com. His theory is that
dealerships can retain control of a
deal without being confrontational if
they know what information custom-
ers are arming themselves with.
“You need to know exactly what the
consumer is seeing if you want to pro-
tect gross profi t and regain control,”
says Mosley. “People think ‘control’
is a bad word, but it’s about leading.”
July 2011 F&I and Showroom 17
The hybrid sales department thatArthur McCracken, Internet manager, Norman Dorf, owner, and sales strategist Cory Mosley constructed more than a year ago is already converting 10 percent of the dealership’s leads. The goal now is to get to 15 percent.
FI0711profile.indd 17FI0711profile.indd 17 7/1/11 11:42:21 AM7/1/11 11:42:21 AM
One term Mosley added to the deal-
ership’s lexicon was “price consulta-
tions,” which means the dealership
will use all its resources to help the
customer make the best car-buying
decision. It’s a simple twist that cus-
tomers seem to appreciate.
“A lot of times, it’s the language
you use and how it’s delivered,” says
McCracken. “Some guys use it and
some don’t. For guys that don’t have
the gift of gab, it makes a difference
in how the customer perceives what’s
going on.”
Mosley also trained the sales team
to mine the dealership’s database and
rethink their direct-mail campaigns.
He taught them that mailers don’t
have to be about selling. In fact, he
says, sending a survey can be even
more benefi cial. They allow custom-
ers to rate their experiences and help
dealers identify holes in the process.
Filling the GapsThe work McCracken put forth to cre-
ate Honda of Tenafl y’s BDC wasn’t
all in vain. When the salespeople
came online, having advanced sys-
tems in place allowed management to
identify several procedural gaps that
additional technology could fi ll.
The fi rst new solution was installed
by Sunnyvale, Calif.-based Response-
Logix Inc., which Mosley recommend-
ed. The company’s lead-management
experts equipped the dealership with
software that automates responses to
price-quote requests. In fact, custom-
ers can receive multiple price quotes
within 10 minutes, the baseline Mos-
ley set for the store.
Mosley also wanted to optimize the
dealership’s merchandising strategy,
which meant working closely with
the store’s Website provider, San Di-
ego-based Autofusion Corp. “It was
about putting as many mousetraps in
place as we could,” Mosley says. “I
just wanted the Website to give cus-
tomers every reason to buy from the
dealership.”
Site visitors are quickly engaged
by a chat feature provided by Activ-
Engage Inc. Todd Smith, CEO of the
Orlando, Fla.-based company, once
managed Dorf’s Chevrolet store, so
he knew exactly what the challenges
were and how his company could
help. The software gives customers
information about dealership spe-
cials and store hours, and can even
connect them to a fi nance manager.
“Here’s a dealer not located on
a main highway, doesn’t have a 40-
acre facility, yet is highly competi-
tive,” Smith says. “And that’s because
they’re good at connecting with their
local audience and because they know
that success goes beyond the sale.”
Weaving everything together was
DealerSocket’s CRM offering. Mc-
Cracken was on the phone with the
company at least once or twice a day
during those fi rst few months to get
the system to mesh with the dealer-
ship’s process and the sales team’s
skill set.
“Ultimately, the CRM is what con-
nects all these dots and maintains
a history of all those dots,” he says.
“And they wove it all together, which
was critical to getting salespeople on-
board with everything.”
The dealership’s hybrid sales de-
partment is still a work in progress,
and Jeffrey Dorf says he and his
brother are always on the lookout for
more effective solutions. He is quick
to point out that the decision he and
his brother made may not work for ev-
eryone or in every market. However,
he believes that the connection be-
tween reaching more customers and
selling more cars is a universal truth.
“Everyone in the dealership has to
be ready to handle e-mails, texts or
whatever medium our customers are
using,” he says, “and that goes for
service and sales.”
Things are smoothing out for Mc-
Cracken and his hybrid team. In fact,
he’s already moving on to several
new projects, such as a new series of
walkaround videos the dealership is
creating for its online marketing ef-
forts. After that, he’ll begin integrat-
ing the hybrid Internet processes he
created for the sales department into
the service area.
“When the BDC didn’t quite work
out, that could have been my demise
right there,” McCracken says. “But
the owners stuck with me and I ap-
preciate that.”
Mosley also is amazed at what
Honda of Tenafl y was able to accom-
plish. “Nine times out of 10, elimi-
nating the BDC is a bad idea,” he
says. “But these guys did it and those
efforts have now translated into 50
cars a month consistently.
“To me, dealers need to realize
that you don’t have to have the pre-
mier highway location or an unlim-
ited, mega-group-supported advertis-
ing budget to be successful. You can
change the rules and still win.”
18 F&I and Showroom July 2011
Dealer Profile
At 79, Sanford Dorf (center), fl anked by sons Jeffrey and Norman, still comes to the dealer-ship everyday. The family leaned heavily on Arthur McCracken and Cory Mosley to map out a plan to eliminate the dealership’s BDC.
“Everyone in the dealership has to be ready to handle e-mails, texts or whatever medium our customers are
using, and that goes for service and sales.”
— Jeffrey Dorf
FI0711profile.indd 18FI0711profile.indd 18 7/1/11 11:42:24 AM7/1/11 11:42:24 AM
THANK YOU
1,000,000 contracts sold. The best administration team, agents and dealers in the business. Find out how we do it at www.aulcorp.com or call 800.826.3207.
Service Contracts. It’s What We Do.®
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FI0711profile.indd 19FI0711profile.indd 19 7/1/11 11:42:24 AM7/1/11 11:42:24 AM
Delinquencies and dollar volume of at-risk loans continued to fall in the fi rst quarter, and auto fi nance sources responded, with shares of loans to credit-challenged buyers
increasing by 11.1 percent. Experian Automotive’s director of automotive credit provides a snapshot of other auto fi nance trends from the quarter. By Melinda Zabritski
20 F&I and Showroom July 2011
As the auto fi nance landscape continued to
stabilize in the fi rst quarter of 2011, lend-
ing sources continued to show a higher tol-
erance for risk. So what looked like a light
at the end of tunnel in previous quarters
now appears to be an expanding bright spot for the auto
fi nance marketplace.
The clear winners for the quarter were drops in 30- and
60-day delinquencies, a growing share of new-vehicle
loans for credit-challenged customers, lower dollar vol-
umes of at-risk loans and a drop in the average loan age.
The quarter also represented the best time in 30 months
for consumers to secure an auto loan, and all signs point to
a market that will continue to improve and expand.
Drop in Delinquencies Lowers At-Risk Loan VolumesVehicle owners did a signifi cantly better job making pay-
ments on time in the fi rst quarter, helping the automotive
fi nance market stabilize more than it had during the year-
ago period.
Thirty-day delinquencies are at their lowest point since
the fourth quarter of 2008, giving lenders a little more lee-
way in their credit decisions. Having dropped 7.95 percent,
30-day delinquencies contracted to 2.52 percent in the fi rst
2.50%2.25%
Bank
2.98%2.67%
Captive
1Q 2010 1Q 2011
1.47%1.42%
Credit union
5.35%4.83%
Finance/other
30-Day Delinquency Rate
5.5%
4.5%
3.5%
2.5%
2.0%
1.5%
1.0%
0
0.73%0.60%
Bank
0.65%0.50%
Captive
1Q 2010 1Q 2011
0.40%0.35%
Credit union
1.75%1.58%
Finance/other
60-Day Delinquency Rate
2.0%
1.5%
1.0%
0.5%
0
Auto Finance
■ The average credit score for used-vehicle customers was 663, down two points from 665 in the year-ago quarter.
■ The average loan amount for a new vehicle was up $8, increasing from $25,396 in the year-ago quarter to $25,404.
■ The average loan amount for a used vehicle jumped $397, increasing from $16,636 in the fi rst quarter of this year.
■ The average loan term increased by a full month, jumping to 63 months for new vehicles and 58 months for used.
1Q 2011: By the Numbers
First Quarter Delivers Optimistic Outlook
PHOTO ©ISTOCKPHOTO.COM / STURMWARNUNG
FI0711experian.indd 20FI0711experian.indd 20 6/30/11 4:35:58 PM6/30/11 4:35:58 PM
FI0711experian.indd 21FI0711experian.indd 21 6/30/11 4:36:01 PM6/30/11 4:36:01 PM
FI0511friendly.indd 1 4/27/11 11:37:15 AM
22 F&I and Showroom July 2011
quarter from 2.74 percent a year ago. Sixty-day delinquen-
cies dropped by 13.45 percent in the same period, with the
captive fi nance segment enjoying the largest decline.
In addition, those drops in delinquencies lowered the to-
tal dollar volume of at-risk automotive loans from nearly
$20 billion in the fi rst quarter of 2010 to $16 billion in the
fi rst quarter of this year.
Lenders Ease Loan CriteriaIn a stabilizing automotive credit market, lenders were in a
better position to loosen lending criteria and provide more
consumers with opportunities to qualify for loans.
The share of loans to credit-challenged new-vehicle
shoppers increased 11.1 percent from the year-ago period.
The share of loans made to the nonprime segment in-
creased from 9.71 percent in the year-ago quarter to 10.57
percent. The share of loans made to subprime customers
jumped from 5.67 percent to 6.16 percent, while the share
of loans made to deep subprime customers rose from 1.38
percent to 2 percent.
The improving ease of obtaining a new-vehicle loan also
was refl ected in average credit scores. For new-vehicle
fi nancing, the average credit score fell to 766, 10 points
lower than in the fi rst quarter of 2010. Coincidentally, 766
also was the average score in the fourth quarter of 2008,
after which the market began to contract in earnest.
Loan Ages Decline as Consumers Return to MarketDespite all the buzz about the sluggish economy caus-
ing consumers to hold on to their vehicles longer, loan
data suggests that this may not be the case. Taking into
consideration variances with different lenders and risk
tiers, the average age of vehicle loans in the fi rst quarter
was 27.89 months, down from 28.14 months in the year-
ago period.
Among lenders, loan age for banks and captive lenders
dropped, while the average loan age for credit unions and
fi nance companies increased. Finance companies showed
the largest spike, moving from 28.64 months in the fi rst
quarter of 2010 to 30.82 months in the fi rst quarter.
Loan age for all risk tiers except for subprime, which
jumped by 1.22 months, experienced a drop from the fi rst
quarter of 2010 to the fi rst quarter of this year. Loan age
fell 1.82 months for superprime customers, 0.69 months
for prime customers and 0.76 months for nonprime cus-
tomers. Loan age for the deep subprime segment plum-
meted by 6.25 months.
This data points to customers with solid credit returning
to market faster than in 2010, which bodes well for new-
vehicle retailers and for lenders with portfolios geared to-
ward higher-end credit customers.
Auto Finance
1Q 2010
100%
80%
60%
40%
20%
0
New-Vehicle Financing by Risk Segmentation
1.4%5.7%9.7%
13.2%
69.9%
1Q 2011
2.0%6.2%
–4.7%
+11.1%10.6%
13.7%
65.6%
44.8%
Deepsubprime
8.5%
Subprime
7.8%
Nonprime
3.1%
Prime–6.2%
Superprime
Year-Over-Year Change in Risk Distribution
50%
40%
30%
20%
10%
0
-10%
28.1 27.629.4
27.7 26.526.828.6
30.8
Bank Captive
1Q 2010 1Q 2011
Credit union Finance/other
Average Loan Age by Lender Type
35
25
15
5
0
32.5
26.230.231.4
27.7 27.0 26.625.9 27.225.4
Deepsubprime
Subprime Nonprime Prime Superprime
Average Loan Age by Risk Segmentation
35
25
15
5
0
1Q 2010 1Q 2011
This data points to customers with solid credit returning to market
faster than in 2010, which bodes well for new-vehicle retailers and for lenders
with portfolios geared toward higher-end credit customers.
▲
FI0711experian.indd 22FI0711experian.indd 22 7/5/11 1:18:44 PM7/5/11 1:18:44 PM
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26 F&I and Showroom July 2011
Financing and Monthly Payments Remain FlatThere was little change in loan characteristics, with
monthly payment, loan length and amount fi nanced stay-
ing relatively stable. The average loan amount for a new
vehicle increased by a mere $8 to $25,404 in the fi rst quar-
ter, while the average used-vehicle loan increased by $397
to $16,636 in the fi rst quarter of this year.
Average monthly payments showed little movement as
the average new-vehicle payment fell from $462 to $460,
while the average used-vehicle payment rose from $341
to $343. Loan terms followed suit, jumping just one month
for both new and used vehicles. Terms for new vehicles
jumped from 62 months to 63 months, while used in-
creased from 57 months to 58 months.
Continued Expansion Rests on the EconomyThe combination of improved consumer payments and
lower dollar volumes at risk has given lenders breathing
room to loosen their overall lending criteria. It’s also made
it easier for automakers to get customers into new vehicles.
Brighter days are ahead for lenders and automotive
retailers should these trends continue. However, if sus-
tained economic turmoil causes consumer delinquencies
to sneak back up, the lending industry could contract
once again.
Melinda Zabritski serves as director of automotive credit for Experian Automotive. E-mail her at melinda.zabritski@bobit.com.
Auto Finance
Top 20 Lenders by Market ShareTHE TOP 20 LENDERS CLAIMED 51.18 PERCENT OF the loan market share in 2010 — a 12.9 percent gain over 2010, according to Experian Automotive. The fi rst 11 lenders in the group held a majority of that share, while share was spread relatively evenly among the remaining nine companies.
1 Ally Financial Inc. 9.44%
2 Wells Fargo Dealer Services 6.07%
3 Toyota Financial Services 5.23%
4 Chase Automotive Finance 4.27%
5 Honda Financial Services 3.8%
6 Ford Motor Credit 3.44%
7 Capital One Auto Finance 2.8%
8 Bank of America 1.91%
9 Nissan Motor Acceptance Corp. 1.8%
10 Fifth Third Bank 1.57%
11 Santander Consumer USA 1.56%
12 AmeriCredit Corp. 1.28%
13 BMW Financial Services 1.23%
14 Hyundai Motor Finance 1.18%
15 US Bank 1.08%
16 Credit Acceptance 1.02%
17 The Huntington National Bank 0.92%
18 SunTrust Bank 0.91%
19 USAA 0.84%
20 BB&T 0.83%
Average Amount Financed
$30K
$25K
$20K
$15K
$10K
$5K
0
$16,239 $16,636
Used
$25,396$25,404
New
1Q 2010 1Q 2011
Average Monthly Payment
$500
$450
$400
$350
$300
$250
$341 $343
Used
$462 $460
New
1Q 2010 1Q 2011
PHOTO ©ISTOCKPHOTO.COM / MONKEYBUSINESSIMAGES
Ally 9.44%
Wells Fargo 6.07%
Toyota 5.23%
Chase 4.27%
Santander 1.56%
Nissan Infiniti 1.8%
Bank of America 1.91%
Fifth Third Bank 1.57%
Capital One 2.8%
Ford 3.44%
Honda 3.8%All others58.11%
FI0711experian.indd 26FI0711experian.indd 26 6/30/11 4:36:42 PM6/30/11 4:36:42 PM
When traditional loan financing doesn’t cover the F&I products your customer wants, your deal isn’t at a loss. Save-A-Deal provides alternative funding solutions for F&I products not covered by vehicle financing to ensure customers can afford the aftermarket programs they need. Realize F&I profits and save your deal today with quick, 72 hour funding with no dealer cancellations.
Get your customer the financing they need. Call 877-404-6823 or visit www.saveadeal.com for more information.
THIS DOESN’T HAVETO BE YOUR CUSTOMER
FI0711charter.indd 1 6/27/11 11:05:20 AMFI0711experian.indd 27FI0711experian.indd 27 6/30/11 4:36:47 PM6/30/11 4:36:47 PM
UnderF
ounded in 2006, Alphera
Financial Services has oper-
ated under the radar, quietly
expanding its portfolio and
growing its dealer count in
the shadow of BMW Financial Ser-
vices. The shroud is now coming off,
at least according to Fred Isele. In fact,
Alphera’s president reveals
that his management team is
eyeing several opportunities
to become a captive fi nance
company.
F&I: Talk about the down-turn and how it impacted your operations.
Isele: Like everyone, we were affect-
ed by the credit crunch and the lack of
liquidity, however, we did not exit the
marketplace. We bumped our credit
profi le up to a 700 FICO for about
three or four months during the credit
crunch and then dropped it down to
670. Now we’re buying 650 and up.
F&I: Things were better last year, I take it.Isele: It was a great year for us in
terms of profi tability and volume.
This year we’re ahead of our volume
target, profi tability is exceeding our
plan, and credit losses are below fore-
cast. So we’re going to hit our volume
projections this year, but if it comes
down to volume or profi tability, we’ll
choose profi tability.
F&I: You guys have kind of operated under the radar, haven’t you?
Isele: When we fi rst came to market,
we were only allowed to sell the Al-
phera name. The fact that we were a
division of BMW was totally hush-
hush. What we found pretty quickly
was that saying we’re a division of
BMW actually helped us when we
were in front of dealers.
We also operated with some restric-
tions in those fi rst six months of our
founding. We were only allowed to
sign dealers who had a BMW store
within their corporate entity, which
hindered us. We only had
340 BMW stores here in the
United States. But once we
got our foot in the door, the
shackles were lifted and we
were able to sign any new-car
franchised dealer.
F&I: So what’s your dealer count at today?Isele: We have about 875 dealers here
in the continental United States and
we cover all brands. And to make a
separation, we’re parallel to BMW Fi-
nancial Services, which covers BMW
Group products, including new and
used, motorcycles, Mini and Rolls-
Royce. We basically fi nance every-
thing else, from Kia’s to Maseratis.
F&I: Are you looking to sign more dealers?Isele: Not necessarily. However, we
are looking to add to our headcount in
2012. As that happens, we could see
our dealer count climb to 1,000. The
key for us is we want to be exclusive,
which is a key selling point for us.
F&I: What customer or vehicle profi le are you looking to fi nance?
Isele: We’ve redefi ned ourselves. We
really bought down into subprime
when we fi rst came to market, but
we found, as others did, that it takes
a signifi cant amount of energy to col-
lect that business. As a result we de-
cided to move toward a more luxury
experience.
Right now we’re about 70 per-
cent used and our mileage ceiling is
90,000 miles at inception. The rea-
son our used percentage is so high is
we’re not going to compete against
the new-car rates offered by cap-
tive fi nance companies. We’re not
out there to be the cheapest game in
town, but we won’t shy away from a
deal that makes sense.
F&I: You took top honors in J.D. Power and Associates’ annual dealer satisfaction study for prime credit. Will you repeat that feat this year?
Isele: The results are coming out July
28, so put that on your calendar. What
the JD Power award did was provide
legitimacy to our program and busi-
ness model in the marketplace. But it’s
been a double-edged sword in that it
put a lot of pressure on us to maintain
that image, and a lot of competition
stood up and took notice.
F&I: What were the keys to earning that accolade?Isele: It’s a combination of things.
We have 14 dedicated Alphera sales
and marketing managers nation-
wide and each covers between 60
and 65 dealers on average. What
separates us from the competition is
the bond our reps have with dealer
personnel.
We also provide what I think are
key tools and services. For instance,
we offer a self-service funding tool
called AlpheraPath, which is a
Web-based system that gives deal-
ers the ability to fund themselves
within 24 hours of keying in some
information. It automatically edits
28 F&I and Showroom July 2011
Executive Q&A
the
Isele
Radar
FI0711qa_alphera.indd 28FI0711qa_alphera.indd 28 6/30/11 4:29:20 PM6/30/11 4:29:20 PM
Alphera Financial Services is feeling a little freer these days. In fact, according to the company’s top exec, becoming a captive is a real possibility for the fi ve-year-old company. By Gregory Arroyo
and performs an audit on the deal,
eliminating contracts in transit.
F&I: Do you offer F&I products?Isele: Not at this time, but we’re work-
ing on it. We just wanted to get our
feet on the ground fi rst with our basic
products. Offering F&I products is a
logical next step, but we want to do it
smartly and we want to make sure it’s
Alphera branded.
F&I: What about fl oorplan fi nancing?Isele: We are a full-spectrum com-
mercial lender, so we have fl oorplan,
real estate, mortgages and term notes.
Our fi nance portfolio is modest now
but growing. Now, we also provide
fl oorplanning to independent dealers,
which is a new twist for us. We fi rst
like to build a relationship on the retail
side. Once we have earned the trust
and confi dence of the dealer, verifi ed
their fi nancials and growth plans, we’ll
move forward with fl oorplan fi nancing.
F&I: So, what’s the ultimate goal?Isele: Well, we really would like to
become a captive fi nance company
for an automaker. We’ve entertained
companies I can’t share the names of
right now, but I believe we have the
expertise and the bandwidth to be-
come either a private label fi nancing
organization or a captive for an OEM
— not a domestic make, but a low-
volume import brand.
Quite frankly, there are some
strange bedfellows out there between
OEMs and banks that are not provid-
ing the level of service that is expect-
ed. I think the J.D. Power award put us
back on the radar, and manufacturers
want the service we can provide to
their customers.
July 2011 F&I and Showroom 29
FI0711qa_alphera.indd 29FI0711qa_alphera.indd 29 6/30/11 4:29:22 PM6/30/11 4:29:22 PM
A New Lease on
ProfitsA
s the economy and
the auto fi nance land-
scape continues to im-
prove, manufacturers
are once again turning
to leasing to reach their annual sales
goals. Whether that’s a good thing for
F&I production or not will depend on
the F&I manager’s ability to educate
their customers about the issues they
could face from the time they leave
the dealership to the time they drop
off the key at lease end.
Leasing can be advantageous for
both the customer and the dealer. It
allows for shorter trade cycles, builds
loyalty and, most importantly, keeps
payments low. And with credit criteria
and income requirements loosening,
leasing is becoming a serious option
for today’s car buyer. To maximize
profi tability and make the return of
leasing a positive for your dealership,
the F&I offi ce must develop inten-
tional and effective strategies.
Different Payment Type, Same Approach The misconception is that lease cus-
tomers aren’t interested in protect-
ing their vehicles. After all, it’s not
their vehicle; they are just “renting”
it for a short period of time. Unfor-
tunately, nothing could be further
from the truth.
When a lessee loses a key or dents
a rim, they have to pay for it at lease
end, if not sooner. That’s why you
have to approach lease customers with
the same needs-discovery process
used for retail buyers, because they
need the same level of protection.
The key is to implement an inten-
tional process that will uncover how
the customer will use the vehicle and
what he or she intends to do once they
turn in their key. Questions about
what they like about leasing also
are great ways to uncover a possible
need. We’ll get into that a little later,
but the message here is that good
By all accounts, leasing is back, but that doesn’t
mean your F&I profi ts have to suffer. F&I trainer
breaks down a process for making leasing a win-win
for the fi nance offi ce and the dealership.
By Rick McCormick
30 F&I and Showroom July 2011
Finance and Insurance
PHOTO ©ISTOCKPHOTO.COM / SKYAK
FI0711leasing.indd 30FI0711leasing.indd 30 6/30/11 4:33:17 PM6/30/11 4:33:17 PM
FI0411wisefi.indd 1 3/25/11 8:30:54 AM
July 2011 F&I and Showroom 31
FI0711leasing.indd 31FI0711leasing.indd 31 6/30/11 4:33:18 PM6/30/11 4:33:18 PM
32 F&I and Showroom July 2011
Finance and Insurance
F&I managers are always thinking
of what to say next. Great F&I man-
agers, however, are thinking of what
to ask next! And the more needs dis-
covery questions you ask, the more
you’ll fi nd out why your customer
needs your product.
Your questions will extract the
need for your products, but custom-
ers won’t buy if they haven’t discov-
ered that need for themselves. That’s
why your intentional needs-discov-
ery process must center on how your
products will protect them from the
hidden costs of leasing. And remem-
ber, nothing hurts customer satisfac-
tion more than fi nding out they’re on
the hook for an unexpected cost at
lease end.
What’s In Your ContractThe manufacturer’s wear-and-use
guidelines provide a perfect start-
ing point for building a tailored
product presentation. Just check the
back of the lease contract for the list
of costs the customer could incur.
This list will typically include six
to eight categories of wear-and-tear
items, such as lost or damaged keys,
interior stains, rips, burns or exces-
sive wear.
Having the contract handy also
works when the customer raises an
objection. Simply turn it over and
highlight the excess wear-and-tear
disclosures and point out the items
the manufacturer will be looking at
when the vehicle is returned. Some
manufacturers even offer a “Lease
Return Guide.” Just be sure the prod-
ucts you offer cover all the possible
issues your customers could face
throughout the life of the lease.
Filling in the GapsSimply asking, “What do you like
about leasing?” can help you uncover
exactly what the customer does and
doesn’t know about the responsibili-
ties that come with a leased vehicle.
For instance, they may not be aware
that if they have to replace a fl at tire
or damaged wheel, they must replace
it with the exact same tire or wheel
the vehicle came with. If they don’t,
they could be in for a big surprise.
Now, let’s take a look at how the
same approach can work for selling
windshield protection:
F&I manager: I certainly understand
your declining the coverage, espe-
cially since you are leasing this ve-
hicle. However, that may not be the
best option for you given what you
told me earlier. You plan to turn this
vehicle in at the end of the lease, cor-
IT MAY SEEM LIKE A BOOM, BUT the recent pickup in leasing is more of a correction. The indus-try is building leasing back up to its traditional market share after it all but vanished through the credit crisis. According to CNW Research, leasing represented 24.6 percent of all transactions in May. Jonathan Banks, who man-ages NADA Used Car Guide’s edi-torial and data services, believes
leasing will stay within the 20 to 25 percent range going forward, which would be a healthy per-centage for the industry.
Products ideal for a lease include excess wear-and-tear coverage, interior and exterior protection, tire-and-wheel pro-tection, key replacement, dent-and-ding protection, prepaid maintenance and windshield protection.
Lease Share of New-Vehicle Sales
2010 2011
24.1%22.6%
23.7%24.5% 23.7%24.5% 24.2%23.1%
March April May June2011: June 1–15 only
SOURCE: CNW RESEARCH
FI0711leasing.indd 32FI0711leasing.indd 32 6/30/11 4:33:19 PM6/30/11 4:33:19 PM
rect? And you said you will be using
this for business, and a majority of
your driving will be on the interstate,
correct? Well, that’s why it’s critical
you have windshield protection. With
your driving habits, the likelihood of
a rock placing a minor star wheel in
your windshield is high and you can’t
take the chance of it expanding. And
the last thing you want is to replace a
windshield on a vehicle you’re going to
give to someone else to enjoy, right?
Remember that products that aren’t
dependent on the customer suffering
a mechanical breakdown increase the
odds of the customer returning to the
dealership to have a claim handled.
That’s why products geared toward
leasing are viewed as great loyalty
builders. In fact, I recently visited a
Toyota dealership’s service depart-
ment. A tire-and-wheel claim had
come in on a Toyota Avalon with less
than 10,000 miles on the odometer.
The total claim paid was $701.23.
That customer was excited that the
coverage had saved them money in
the fi rst 12 months. Not only did the
customer come back to the dealer for
the repair, but you can bet he or she
will be more than happy to buy from
that store again.
The Road to ConsistencyProducing a consistent profi t on lease
transactions is defi nitely challenging.
Aside from breaking through those
misconceptions about leasing’s im-
pact on F&I production, some manu-
facturers now provide some cover-
age at lease end — and many even
include GAP at no charge. Luckily,
there’s been an infl ux of new ancil-
lary products that address the perils
of leasing that some of the more tra-
ditional products don’t.
Also in the favor of auto dealer-
ships is the fact that F&I managers
are the most adaptive and talented
closers in the store. They have adjust-
ed to a changing customer and tighter
lending guidelines. They have over-
come a steady stream of car-buying
articles that warn customers against
buying anything on the F&I menu.
The challenge now is to adapt to the
return of leasing. That option has not
historically lent itself to F&I produc-
tion. But, with the right approach and
a slew of new ancillary products, you
can make leasing a profi table venture
for your dealership.
Rick McCormick is the director of training and income development for Automotive Financial Services, a provider of F&I products and training for dealerships nationwide. E-mail him at rick.mccormick@bobit.com.
July 2011 F&I and Showroom 33
Products that aren’t dependent on the customer
suffering a mechanical breakdown increase the
odds of the customer returning to the dealership
to have a claim handled.
Many manufacturers are now includ-ing GAP in a lease at no charge, but a slew of new ancillary products are allowing dealers to stay in the game.
PHOTO BY GREGORY ARROYO
FI0711leasing.indd 33FI0711leasing.indd 33 6/30/11 4:33:20 PM6/30/11 4:33:20 PM
34 F&I and Showroom July 2011
Finance and Insurance
If you’ve been in the business any
amount of time, you’ve already
heard a number of tips, tactics
and techniques for presenting
vehicle service contracts. It’s
a popular topic among trainers. But
every book, CD, seminar or article
like this one tends to point to a spe-
cifi c factor that, when captured, can
have a profound effect on your ability
to gain a customer’s commitment to
purchase a VSC. That factor is con-
sumer awareness.
Simply put, your customer is not
going to buy anything until they are
aware they need it. There are many
ways to articulate that need: There’s
the “99.9% perfect” rebuttal, or the
“One day in the shop,” or the “Why
do you think the manufacturer gave
you a 3-year/36,000 warranty?” re-
sponses. They’re great word-tracks,
but, when it comes to VSCs, the
single most effective way to create
awareness among your customers is
to show them.
There are two opportunities for of-
fering a customer a VSC: at the time of
purchase and every time the customer
returns to the dealership for service
— that is, if they didn’t elect to pur-
chase the VSC in the F&I offi ce.
Creating awareness is critical to
gaining a purchase commitment,
but it can be diffi cult to broach the
subject. That’s especially true for
a new-vehicle purchase. The odds,
however, tend to tilt in your favor as
the customer gets closer to the end of
the factory warranty. So, how do we
create better odds in the F&I offi ce at
the time of purchase?
To visually create a need for a VSC
in the F&I offi ce, you need to send
your customer on a service walk-
through. Ideally, it should be per-
formed by the sales consultant after
the F&I manager is introduced and
while he or she is getting the paper-
work ready.
Guided TourThe service walk can be one of the
most infl uential steps on the road
to the sale. Many salespeople don’t
like this step, but the reality is a ser-
vice tour adds value to the sales pre-
sentation by providing a few more
reasons for doing business with your
dealership.
A quick tour of your service and
parts department creates awareness
in two key ways:
■ Service: Seeing cars on lifts
will remind customers that their own
machine may one day break down or
need repairs. However, it’s impor-
tant that your salespeople point out
just how much the dealership has
invested in diagnostic tools and to
train, retrain and certify mechanics.
It’s also important for the sales con-
sultant to point out that the store’s
mechanics have invested upwards of
$15,000 in specialty tools to service
vehicles.
■ Parts: Taking the customer on
a tour of the parts department —
where the dealership stocks more
than $250,000 in parts and sup-
plies each month — also lets the
customer know that your dealer-
WTake a
The best way to sell a VSC is to create awareness of
the need for service and to demonstrate your ability
to handle it. F&I trainer explains how a quick tour of your service and parts department can do just
that. By Gerry Gould
The service walk can be one of the most infl uential steps
on the road to the sale. Many salespeople don’t like this step, but the reality is a
service tour adds value to the sales presentation.
PHOTO ©ISTOCKPHOTO.COM / LEEZSNOW
FI0711service.indd 34FI0711service.indd 34 6/30/11 4:23:11 PM6/30/11 4:23:11 PM
ship is armed for more than just
oil changes and tire rotations.
Back in the BoxThe service department is great at
creating awareness, but it’s up to the
F&I manager to take advantage of
the awareness created during the ser-
vice tour when making his or her F&I
presentation. Doing so will take more
than word-tracks, because the key to
keeping that awareness alive is to
recreate the feeling the customer felt
while walking the service and parts
department.
First things fi rst: If your sales con-
sultant has not taken the customer on
the tour, call him or her into your of-
fi ce to do so.
F&I manager: Did your sales con-
sultant show you our award-winning
service department?
Customer: No.
F&I Manager: While I’m getting
the paperwork ready, I’ll have your
sales consultant introduce you to one
of our service managers and set you
up for your fi rst oil change.
Scheduling that fi rst oil change
gets the customer thinking about how
they’ll maintain and service their ve-
hicle. It’ll also remind the customer
of the thousands of dollars the deal-
ership invested to keep the parts de-
partment well-stocked and the ser-
vice department well-equipped.
With sales and fi nance working
together to create awareness, you’re
getting closer to gaining a commit-
ment from the customer to purchase
a service contract or prepaid mainte-
nance plan. Now let’s review a couple
of word-tracks to hammer the mes-
sage home:
1Prepaid Maintenance: Schedul-
ing the customer’s fi rst oil change
is the perfect lead-in for presenting a
prepaid maintenance program. Here’s
how it works:
F&I manager: Now that you’re set
up for your fi rst oil change, you have
an opportunity to take advantage of
our prepaid maintenance program.
May I share the benefi ts with you?
Customer: Sure.
2Vehicle Service Contract: Here’s
a way to go when your customer
says, “I won’t need that.”
F&I Manager: I understand. I don’t
expect you to enroll in the vehicle
service contract if you don’t see any
value in it. To see if it would be ben-
efi cial to you, do you mind if I share
something with you?
Customer: Sure, go ahead.
F&I manager: When you took a
tour of our service and parts depart-
ment, did you happen to see those
large toolboxes the mechanics had
nearby, the diagnostic equipment and
vehicles being repaired on the lifts?
Customer: Yep.
F&I manager: Each one of our certi-
fi ed technicians keeps nearly $15,000
worth of tools in their toolboxes, and
our parts department stocks an av-
erage of $250,000 a month in parts
inventory. We made that investment
to ensure our dealership would be
capable of doing more than just oil
and fi lters. Vehicles today are more
dependable than ever before, but the
fact remains that they still can suffer
costly breakdowns. Have you thought
about it in that way, or do you have
other concerns with the program?
There are many ways to sell VSCs,
but if you want to increase your sales
chances, consider the service walk as
the essential ingredient to creating
customer awareness.
Gerry Gould is the director of train-ing at Clearwater, Fla.-based United Development Systems. He can be reached at gerry.gould@bobit.com.
July 2011 F&I and Showroom 35
Walk
Salespeople should lead customers on a guided tour of the service and parts department while the F&I manager prepares their paperwork.
FI0711service.indd 35FI0711service.indd 35 6/30/11 4:23:15 PM6/30/11 4:23:15 PM
36 F&I and Showroom July 2011
Does life in the car business really mean working ‘bell to bell’? Is good talent really that diffi cult to fi nd? Sales columnist offers Part One of his take on how to fi x one of the industry’s biggest problems. By Cory Mosley
During a recent interview for
The Norm Jones Show, a talk
radio show in Detroit, I was
asked what I thought was the biggest
challenge facing the car business.
Without hesitation, I said the inabil-
ity to acquire, properly develop and
retain fresh talent would prove to be
an epidemic for the car business.
I have a dealer client whom I’ve
worked with for six years, and I
began to notice some blasts from
the past during my last eight visits.
There was the recycled sales man-
ager, the twice-fi red salespeople and
a fresh-from-rehab fi nance manager
on his third tour at the dealership.
When I asked why this was happen-
ing, the client said, “It’s hard to fi nd
people.”
That answer, along with “This is
the car business,” are two of the all-
too-familiar responses I often hear.
So many things go unexamined,
unaddressed and not dealt with in
the name of our industry’s culture.
So, how do we change this? What’s
needed to attract and retain talent in
the car business? Well, let’s take a
look at two possible solutions.
Problem 1: The Work ScheduleThe typical dealership schedule has
been enforced, accepted and treated
as gospel for decades. The problem
is that’s exactly what’s kept a lot of
talented people with great potential
from getting into the business. It also
has contributed to years of missed
soccer games, vacations, family out-
ings and countless other pursuits.
Is the bell-to-bell lifestyle the only
way to successfully run a car dealer-
ship? Is the end-of-the-month frenzy
to roll more vehicles and get deals
done the only option for maximiz-
ing sales?
One of the fi rst stores I worked for
when I started my career offered 9
a.m. to 3 p.m. and 3 p.m. to 9 p.m.
schedules. The dealership also al-
lowed employees to take two Satur-
days off per month, something that
is unheard of in the car business. But
why is that? Why is taking a hard look
at dealership hours and work sched-
ules so “outside the box,” especially
since the people people making the
schedule don’t actually work it?
Holiday store hours are always an
interesting conversation as well. I
mean, how many cars can a dealer-
ship really sell over a holiday? When
I ask dealers that, which I often do,
the answer is usually two or three. If
that’s the case at your store, wouldn’t
you foster more goodwill among your
employees by giving them the day off
instead? Hey, it’s just a thought.
Problem No. 2: Managers vs. LeadersThere are probably people out there
more qualifi ed than I to address
leadership. However, my experience
working for and with managers who
never led and don’t know how to lead
provides me with a nice perspective
on what a leader should be.
I will save full commentary on
this topic for a future article, but
allow me to offer a few nuggets of
advice: First, as leadership guru
John Maxwell points out, good lead-
ers are self-improving. They realize
that their team must fi rst improve
themselves before improvement in
performance can be realized. Yet,
so many managers obtain their title
and simply put the shifter into park.
Leaders have subordinates by de-
fault, but what they really do is man-
ifest followers. Managers simply
have subordinates.
Let’s review a few typical charac-
ter differences between leaders and
managers:
■ An approach of calculated
change vs. stability.
■ Vision vs. objectives.
■ Personal charisma vs. formal au-
thority.
■ Energy of passion, rather than
control.
So, which traits describe you?
Want to take it a step further? Put
those traits on a piece of paper and
ask your staff to circle options that
best match you and let them anony-
mously provide you the results.
See, leaders create a culture of
achievement that shapes outcomes.
They are not focused on being right
and simply producing results.
Next month, I will use this space
to explore the topics of training and
development. I will also address the
two biggest breakthrough topics
most relevant to the future. So, stay
tuned.
Cory Mosley is principal of Mosley Au-
tomotive Training, a company focused
on new-school techniques, products
and services. He also is the creator of
the “Control Your Sales Destiny” semi-
nar series. E-mail him at cory.mosley@
bobit.com.
Challenging the Status Quo
Sales Driver
FI0711salesdriver.indd 36FI0711salesdriver.indd 36 6/30/11 3:23:05 PM6/30/11 3:23:05 PM
I know I’ve been hitting pay plans
pretty hard lately, but we’re not
through with the topic just yet.
This month, I’d like to focus on the
negotiation aspect because I believe
that’s where most pay plan-related
problems can be avoided.
In the heat of negotiations, we
sometimes lose sight of our ultimate
goal. Dealers want to create a work-
able program that fairly compensates
the employee while the company
retains a handsome profi t. F&I man-
agers want a reasonable incentive to
keep those profi ts rolling in. There’s
no telling how many pay plans have
been formulated over the years, but
I’ll bet no two are exactly alike. It all
depends on the store.
As for me, I’m an ordinary F&I
manager who gets paid the old-fash-
ioned way: one deal at a time. I be-
lieve that pay plans that promise high
incomes and fat guarantees work
fi ne for the fi rst few months of a new
hire, but after that they tend to fos-
ter apathy. The exception to that is a
small store selling less than 30 units a
month, because one bad month could
really be painful for an F&I pro.
I’m not going to sit here and tell
dealers how they should pay their
F&I managers, nor will I try to teach
my fellow F&I managers how to un-
dermine their dealers when discuss-
ing pay. There are plenty of so-called
experts out there who will do that job
for a hefty fee. My goal is to sketch
out some common scenarios and
raise some points to consider.
1Making the Change: There was
nothing your last F&I manager
— or you as their boss — could do
to pick up his or her production.
Now, you and the new employee you
hired have to fi gure out a pay plan,
but neither can say whether the cur-
rent program will fi x the situation or
turn out to be the cause of it.
That’s the time to take a step back,
because it’s easy to give away too much
in your attempt to fi ll a vacancy. If the
pay plan is too generous and the new
guy or gal hits the ground running,
you’re bound to have second thoughts
every time you have to write a huge
check when the producer hits the up-
per limits of the plan. Hey, I get it. It’s
just too diffi cult to justify the pay.
The answer to most situations can
be found at the desk of the comptrol-
ler. He or she can determine what
the maximum payout would be with
any given pay program. Whether it’s
a percentage of departmental gross
or a total dollar amount, be certain
to make the adjustments that you
can live with so you don’t face this
situation again. You may even want
to consider incentives and perks that
will motivate your manager to give
you the extra effort. Doing so will
keep employees in the game.
2Striking a Balance: On the other
side of the table, the F&I man-
ager must realize that few dealers
come to the bargaining table with
a blank check. Some F&I manag-
ers are only looking for the bigger,
better deal, but the career employee
looks at adding to the dealer’s bot-
tom line. Whether by training or by
nature, they see their position in the
store as a support role, and they’re
continually searching for ways to
enhance the dealer’s philosophy.
3Need vs. Want: Just as the deal-
er must give careful consider-
ation to the design of the pay plan,
it is equally important for the F&I
manager to consider that you have to
strike a reasonable agreement that
will keep everybody in business.
Oftentimes, F&I managers come to
the table with the sharpest of nego-
tiating skills. It’s as if they’re facing
a customer.
That’s why careful thought must
be given to what you want from the
dealer. As the store begins to grow
and volume is added, be prepared for
the dealer to hire an additional staff-
er to maximize productivity. I know
the idea of having to share a piece
of the action with a newbie is disap-
pointing, but you have to remember
that, as the business grows, so will
the opportunities. This is where
winners rise to the occasion and do
what’s best for the organization.
At the end of the day, pay plans
— however complicated — should
be a win-win for the dealer and
the F&I manager. Both ends of the
pay spectrum should be discussed
and analyzed thoroughly. If the F&I
manager hits the outer limits of the
program, write that check with pride
and remember that you get to keep
a pretty good amount yourself. Be
certain that the manager doesn’t
starve on short months either. At-
tach a congratulatory note as well.
It will amaze you how much more
production you will see from your
manager.
Marv Eleazer is the fi nance manager at
Langdale Ford in Valdosta, Ga. E-mail
him at marv.eleazer@bobit.com.
It Takes Two
Mad Marv
July 2011 F&I and Showroom 37
The magazine’s F&I columnist revisits pay plans and offers some food for thought before, during and after negotiations. By Marv Eleazer
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FI0711mosley.indd 1 6/22/11 12:31:16 PM
38 F&I and Showroom July 2011
Legal
A s we approach the one-year
anniversary of the federal
law that established the Con-
sumer Financial Protection Bureau,
it’s probably worth recapping the
CFPB-related events of the last sev-
eral months in order to get some idea
of how our federal dollars are being
spent protecting consumers’ fi nan-
cial interests.
Although it is not scheduled to for-
mally assume any regulatory author-
ity until July 21, 2011, the CFPB has
launched its Website, www.consumer
fi nance.gov. There you’ll fi nd a video
that explains the causes of the fi nan-
cial crisis and how the agency will be
a “cop on the beat” to protect con-
sumers. The site also provides links
to the CFPB’s blog and social media
accounts.
As of this writing, the CFPB is still
without a director. President Obama
hasn’t named anyone yet, and rumors
are fl ying about a possible recess ap-
pointment of the agency’s interim di-
rector, professor Elizabeth Warren. A
nomination in July would leave very
little time for a Senate confi rmation
of the selection before the bureau of-
fi cially assumes its duties. Despite
the lack of a director, the CFPB, its
interim director and her team lead-
ers are moving fast to get the agency
ready for its July 21 deadline. Some
think it’s too fast. And some think
there’s too much power in the hands
of the director.
There are Republican proposals
to place the CFPB in Congressional
hands by moving the bureau to the
Treasury Department and elimi-
nating its status as an independent
entity under the Federal Reserve
Board. They also want to restruc-
ture the bureau’s leadership as fi ve
commissioners serving staggered
terms, with no more than three seats
per political party. This isn’t a radi-
cal approach — it’s how the Federal
Trade Commission and the Securi-
ties and Exchange Commission are
set up.
Other measures to reduce the bu-
reau’s power and independence also
have been introduced. Whether the
current Republican efforts on the hill
will go anywhere is anybody’s guess.
Until such time as Warren is re-
placed, if at all, she will serve as the
credit czar and remain the “go-to”
person for the CFPB. On March 16,
she testifi ed before the House Sub-
committee on Financial Institutions
and Consumer Credit. She discount-
ed a rules-based approach to fi nan-
cial services oversight, claiming that
too many rules bog down the indus-
try and put smaller competitors in
the fi nancial products marketplace at
a competitive disadvantage.
“A simple, straightforward, and
consistent presentation of a credit
agreement is the best way to level the
playing fi eld between consumers and
lenders — and among different types
of lenders,” she said, in part.
Does this mean we might see an
auto fi nancing contract that can fi t
on a postcard? Probably not. But it
may lead to abbreviated retail install-
ment contracts for car dealers. War-
ren spoke of revising or eliminating
outdated regulations and disclosures
that burden lenders and obscure real
credit terms.
So far, the bureau’s staff consists
of several hundred folks, most of
them lawyers. And whoever is doing
the hiring is doing a pretty fair job so
far. With the auto sales, fi nance and
lease industries wary that the bureau
would be staffed by consumer advo-
cate-type zealots with little experi-
ence, the appointments of Leonard
Chanin as rule-writer in chief, and
of Peggy Twohig as chief-in-charge
of non-depository institutions (sales
fi nance companies and dealers)
caused folks to dial back the panic
meter a couple of notches. Both are
regulatory veterans, Chanin with the
FRB and Twohig with the FTC.
We’ve also learned that Rick
Hackett has been tapped to oversee
the installment credit business (that
includes dealer fi nancing), and that’s
good news. He is a veteran, highly
regarded consumer credit lawyer
who has done credit compliance
work for many institutions and, in
doing so, has developed a good sense
of the businesses he has assisted.
You can tell we think a lot of Rick,
but make no mistake. He, like Cha-
nin and Twohig, will be dedicated
to the bureau’s mission and won’t be
any sort of pushover.
So, those are some of the highlights
from the CFPB’s fi rst months. The
events of the next few months will
likely prove pivotal, so stay tuned!
Thomas B. Hudson Esq. is a partner in
the law fi rm of Hudson Cook LLP and
the author of several books, available
at CounselorLibrary.com. ©2011 Coun-
selorLibrary.com, all rights reserved.
Based on an article from Spot Delivery.
Single print publication rights only,
to F&I and Showroom magazine. HC#
4814-5772-9033 (7/11).
Ready to StrikeThe leadership may still be up for grabs at the CFPB, but the newly formed consumer watchdog agency will hit the ground running on July 21. By Tom Hudson
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40 F&I and Showroom July 2011
Bottomliners
IAS HAS ANNOUNCED
the launch of Smart-Pad, a tablet-based program that utilizes video and multimedia presentations to introduce cus-tomers to products and services available in the service drive and F&I offi ce. Sales personnel can also use the tool to survey custom-ers or to learn more about the
customer. Results can then be sent to mul-tiple departments via text or e-mail. The software is available
immediately and will run on pop-ular tablets such as the Apple iPad, most Google Android tablets, and the Blackberry Playbook, accord-ing to IAS. For more information, visit www.iasdirect.com.
IAS Releases Tablet-Based Software for F&I
Wolters Kluwer Opens Indirect Lending DirectoryWOLTERS KLUWER FINANCIAL
Services has launched the Indirect Lending Directory, a listing of more than 600 lenders that accept and use the company’s retail install-ment contracts. The directory includes national and regional lenders, including local banks and credit unions. To access the direc-tory, visit www.wolterskluwerfs.com/ildirectory.
Reynolds Launches dealerPAD iPad AppREYNOLDS AND REYNOLDS HAS
launched dealerPad, an iPad mobile app designed to provide immediate access to customer and dealership information. The app is a mobile version of the technology provid-er’s Contact Management solution for the ERA dealership manage-ment system. For more informa-tion, visit www.reyrey.com.
eBay Motors Launches iPhone AppTHE EBAY MOTORS
iPhone app, a tool designed to allow buyers to bid on or buy cars, parts and accessories, is now available for download. The app’s “My Garage” feature allows users to scan any vehicle identifi cation number (VIN) to automatically add car details or shop the eBay Motors inventory to fi nd vehicle-specifi c parts and accessories.
KBB Offers Free 30-Day Trial of Quick Values PortalKELLEY BLUE BOOK IS OFFERING A
free, no-obligation, 30-day trial for Quick Values, the publisher’s newest valuation product, until July 23. Quick Values was designed to deliver new- and used-car val-ues, trade-in values, as well as wholesale lending and auction values, all updated weekly. For more information, visit www.quickvalues.com.
Product Feature
uce cus
cttts
immediately
FI0711bottom.indd 40FI0711bottom.indd 40 6/30/11 3:21:43 PM6/30/11 3:21:43 PM
September 26-28, 2011 Las Vegas Hilton www.IndustrySummit.com
The F&I Conference and Expo, Special Finance Conference and
Vehicle Service Contract Administrators Conference Have United for
We’ve combined three of the auto fi nance industry’s most powerful conferences!
Join hundreds of F&I professionals at this unparalleled annual gathering to get the information, training and new contacts
you’ll need to succeed in the year ahead!
“Without question, the most valuable event for F&I managers and directors, general managers — and
some very smart dealer principals I know — has become the F&I Conference in Las Vegas. The staff and sponsors
have produced, without question, the best single information venue in the industry.”
— George Angus, Team One Research and Training
Agenda, Keynotes, and Executive Leadership Program information inside!
FIC06-44summit_6pp.indd 1 6/30/11 9:39:48 AMFI0711bottom.indd 41FI0711bottom.indd 41 6/30/11 3:21:46 PM6/30/11 3:21:46 PM
September 26-28, 2011 Las Vegas Hilton www.IndustrySummit.com
Monday, September 26, 2011 8:00AM – 4:00PM
Control Your Sales DestinyLeading sales trainer Cory Mosley’s new seminar series was designed to maximize
front-line profi ts by leveraging new-school training principles. Additional charge applies
10:00AM – 4:00PM
AFIP Certifi cation Program This two-part course was designed to provide the regulatory and legal knowledge
F&I professionals need to excel and a strong foundation for industry-specifi c ethical practices. Additional charge applies
12:30PM – 4:30PM
Buy Here, Pay Here for Franchised Dealers
Peritus Portfolio Services’ Rod Heasley and special guest Kenneth Shilson, founder of the NABD, tackle the subject of adding a BHPH operation to a new-car dealership.Additional charge applies
Monday, September 26, 2011 5:10PM – 6:00PM
No Shortcuts: Building a Sustainable Auto Franchise
Capital One Auto Finance’s Kevin Borgmann will share his analysis of industry
trends and his vision for a successful franchise in the new economy.
Tuesday, September 27, 20119:10AM – 10:10PM
After the Storm: Rebuilding the Automotive Industry
John Gray of Experian Automotive will discuss how some dealers and lenders were able to
prevail through the downturn and make the most of the recovery.
Tuesday, September 27, 20112:00PM – 3:00PM
The Future of Dealer-Assisted Financing
NADA’s 2011 chairman, Stephen Wade, will outline the association’s efforts on behalf of
dealers and provide an up-to-date report on the state of the industry.
Executive Leadership Program
Keynote Speakers
Register now at IndustrySummit.com or cFIC06-44summit_6pp.indd 2-3 6/30/11 9:34:16 AMFI0711bottom.indd 42FI0711bottom.indd 42 6/30/11 3:21:46 PM6/30/11 3:21:46 PM
Monday, September 264:30PM – 5:30PM General Session: State of the Special Finance Industry6:00PM – 7:30PMNetworking Reception
Tuesday, September 278:00AM – 9:00AMExhibit Hall Open (Breakfast served)9:00AM – 9:45AMEducation Session: The Search for Inventory9:00AM – 9:45AMFinance Company/Vendor Presentations10:00AM – 11:15AMEducation Session: Marketing Best Practices: Dealer Panel10:15AM – 11:00AMFinance Company/Vendor Presentations11:30AM – 12:15PMEducation Session: Maximizing Deal Structure
11:30AM – 12:15PMFinance Company/Vendor Presentations12:30PM – 2:00PMExhibit Hall Open (Lunch Served)1:45PM – 2:30PMFinance Company/Vendor Presentations2:00PM – 3:30PM Education Session: Legal Jeopardy2:45PM – 3:30PMFinance Company/Vendor Presentations3:45PM – 4:15PMEducation Session: Finding Exceptional Performers3:45PM – 4:15PMFinance Company/Vendor Presentations4:45PM – 5:30PMEducation Session: Sales Processes That Produce4:45PM – 5:30PMFinance Company/Vendor Presentations5:30PM – 7:30PMNetworking Reception in Exhibit Hall
Wednesday, September 288:00AM – 9:00AMExhibit Hall Open (Breakfast served)9:00AM – 11:00AMEducation Session: Call Center Best Practices: Dealer Panel9:00AM – 12:15PMFinance Company/Vendor Presentations11:30AM – 12:30PMEducation Session: Standout Finance Companies12:30PM – 2:00PMExhibit Hall Open (Lunch served)2:00PM – 2:45PMEducation Session: Avoiding Funding Follies4:00PM – 5:30PMReception in Exhibit Hall
Times and topics are subject to change. Stay tuned to IndustrySummit.com!
Monday, September 26, 2011 8:00AM – 5:00PMRegistration Open5:10PM – 6:00PMEvening Keynote: Kevin Borgmann, Capital One Auto Finance6:00PM – 7:30PMWelcome Reception
Tuesday, September 27, 2011 7:00AM – 8:00PMRegistration Open 8:00AM – 9:00AMExhibit Hall Open (Breakfast served)9:00AM – 9:10AM Welcome to Industry Summit 9:10AM – 10:10AM Opening Keynote Address: John Gray, Experian Automotive10:15AM – 11:15AM Panel Session: The Idea Exchange: Trainers’ Best Practices for Sales and F&I11:30AM – 12:30PM Workshop: 10 Habits of Highly Successful F&I Managers11:30AM- 12:30PMWorkshop: A Dealer’s Guide to Digital Compliance
12:30PM – 2:00PM Exhibit Hall Open (Lunch served) 2:00PM – 3:00PM Afternoon Keynote Address: Stephen Wade, NADA 3:05PM – 4:05PM Panel Session: Executive Panel3:05PM – 4:05PMWorkshop: Out With the Old: New-School Training Ideas4:30PM – 5:30PM Workshop: Best Practices for F&I Managers and General Agents4:30PM – 5:30PMPanel Session: Captive Lenders Roundtable5:30PM – 7:30PM Networking Reception in Exhibit Hall
Wednesday, September 28, 2011 7:30AM – 5:30PM Registration Open 8:00AM – 9:00AM Exhibit Hall Open (Breakfast served)9:00AM – 10:10AMPanel Session: F&I Managers Roundtable 10:15AM – 11:15AM Workshop: Creating Interest When the Customer Says ‘No’
10:15AM – 11:15AMWorkshop: How Did We Do? Update on the Frank-Dodd Act11:30AM – 12:30PM Workshop: Game Changers: 3 Can’t-Miss Closes11:30AM – 12:30PMWorkshop: Marketing in the Digital Age12:30PM – 2:00PM Exhibit Hall Open (Lunch served) 2:00PM – 3:00PM Workshop: Lights, Camera, Action! Training With Video Technology2:00PM – 3:00PMWorkshop: Profi ts and Pitfalls: Joining the Social Media Revolution3:05PM – 4:00PM Workshop: How to Create a Virtual F&I Offi ce3:05PM – 4:00PMWorkshop: Fixing the Desk at Your Dealership4:00PM – 5:30PM Reception in Exhibit Hall
Times and topics are subject to change. Stay tuned to IndustrySummit.com!
F&I Conference and Expo Agenda
Special Finance Conference Agenda
r call 800-576-8788 today! Turn the page for registration and hotel
information!
FIC06-44summit_6pp.indd 2-3 6/30/11 9:34:16 AMFI0711bottom.indd 43FI0711bottom.indd 43 6/30/11 3:21:48 PM6/30/11 3:21:48 PM
2011 Registration Pricing
Official Conference Hotel
September 26-28, 2011 Las Vegas Hilton www.IndustrySummit.com
Type Early Bird Rate(on or before Aug. 26)
Regular Rate (after Aug. 26 and onsite)
Full Conference Pass — Dealer Includes access to all F&I educational sessions,
exhibit hall, meals and receptions $695 $795
Full Conference Pass — Agent Includes access to all F&I educational sessions,
exhibit hall, meals and receptions$695 $795
Full Conference Pass — Finance Company Includes access to all F&I educational sessions,
exhibit hall, meals and receptions$695 $795
Industry Pass — Manufacturer/Supplier Includes access to all F&I educational sessions,
exhibit hall, meals and receptions $745 $845
Spouse Pass Includes access to all meals and receptions $250 $350
Groups of fi ve or more from the same company are eligible for a discount! Call 800-576-8788 for details.
Executive Leadership Program (Open to Full Conference Pass holders only)
Buy Here, Pay Here for Franchised Dealers $49
AFIP Certifi cation / Basic or Senior $460
Control Your Sales Destiny (lunch included) $299
Las Vegas Hilton3000 Paradise Road, Las Vegas, NV 89109Call 800-732-7117 by September 2, 2011 to register at the special conference rate of $125/night!
Hotel Block Raffl eDon’t forget to book in the Industry Summit room block to be eligible for the Hotel Block Raffl e Drawings which will be announced during the conference! Only Industry Summit attendees registered and staying in the offi cial conference block at the Las Vegas Hilton are eligible to win.
The Industry Summit Mobile App is Coming to a SmartPhone Near You. Details Coming Soon!
Use your smartphone’s code reader to scan this box. You’ll be led
directly to the Industry Summit site and all the latest updates!
Visit IndustrySummit.com or call 800-576-8788 today!
FIC06-44.11
FIC06-44summit_6pp.indd 4 6/30/11 9:39:50 AMFI0711bottom.indd 44FI0711bottom.indd 44 6/30/11 3:21:49 PM6/30/11 3:21:49 PM
July 2011 F&I and Showroom 45
Ad IndexCompany Phone Web Page
Association of Finance & Insurance Professionals (AFIP) 817-428-2434 afi p.com 31
Ally Auto 877-357-8477 (option 6) allyblueprinta.com 15
American Financial & Automotive Services 800-967-3633 afasinc.com C4
AUL Corp. 800-826-3207 aulcorp.com 19
CARLAW Auto Dealer Suite 877-464-8326 counselorlibrary.com 45
Charter Warranty 877-404-6823 saveadeal.com 27
Chase • chase.com 13
Chem Etch Manufacturing Inc. 877-564-2565 chemetchmfg.com 46
CNA National 800-345-0191, ext. 720 cnanational.com C2
Continental Warranty Inc. 215-512-5596 continentalwarrantyltd.com 46
CUDL 877-744-2835, ext. 2334 CUDL.com 40
Dealerlink 800-890-8850 DealerLink.us 29
Friendly Finance Corp. 800-872-2877 friendlyfi nancecorp.com 23
Industry Summit 800-576-8788 industrysummit.com 41-44
Innovative Aftermarket Systems (IAS) 800-346-6469, ext. 8989 smartdealerproducts.com 5, 47
JM&A Group 800-553-7146 jmagroup.com 2-3
Mosley Automotive Training • mosleyautomotive.com 39
NAC (National Auto Care Corp.) 800-548-1875 nacsolution.com 9
National Automotive Experts 800-810-8859 nationalautomotiveexperts.com 11
Protective 800-794-5491 protectiveassetprotection.com 7
Reahard & Associates Inc. 866-REAHARD go-reahard.com 1
Resource Automotive 312-560-9182 thewarrantygroup.com/automotive 24-25
Ristken Software Services 800-368-9680 ristken.com C3
TD Auto Finance 800-200-1513 tdafdealer.com 21
United Car Care 800-571-6412 unitedcarcare.com 33, 46
Wise F&I 800-849-1080 WiseFandI.com 31
we are.
FI0411hudco.indd 1 3/28/11 2:30:36 PM
FI0711index.indd 45FI0711index.indd 45 7/1/11 11:41:40 AM7/1/11 11:41:40 AM
46 F&I and Showroom July 2011
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To advertise in the next issue of F&I and Showroom, contact David Gesualdo at 727.947.4027 or david.gesualdo@bobit.com.
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FI0711index.indd 47FI0711index.indd 47 7/1/11 11:41:44 AM7/1/11 11:41:44 AM
48 F&I and Showroom July 2011
A new study reveals fi ve reasons why some car buyers still dread the dealership experience, as well as fi ve areas dealers can focus on to improve customer satisfaction.
Be it negative or positive, feed-
back can be a very good thing.
Customer reviews help
dealers fi gure out what their
clients want; they also help
dealers avoid the pitfalls of
using techniques that might
drive shoppers away.
Auto research and
shopping Website Car
Gurus.com recently
conducted a study to
determine the top com-
plaints customers have
about car dealerships, as
well as the main reasons they
left the store happy.
The study examined 1,000
dealership reviews posted by Car-
Gurus users in a six-month span.
For each dealer review submitted,
consumers rated their experience
on a scale of one to fi ve stars and
were asked to provide written com-
ments. Of the reviews analyzed, 34
percent had one- or two-star ratings.
Ten percent of reviews had three
stars and 56 percent were awarded
four or fi ve stars.
Poor communication and deceptive
business practices such as bait-and-
switch routines were the top com-
plaints among the negative reviews
examined for the study. Friendly
service and quick responses to online
leads were cited most often in posi-
tive consumer reviews.
Other complaints against dealers
included customers who felt their
time was wasted or received poor
customer service. Accurate answers,
clean showrooms and
good prices rounded out
the top fi ve compliments.
Overall, results sug-
gested that a car dealer’s
candor and responsiveness
carry signifi cant weight
with an Internet shopper
and can make or break a
sale — sometimes even be-
fore the consumer meets the
dealer in person. As the in-
formation age progresses and more
car buyers take time to research pric-
ing, vehicle availability and sales tac-
tics online, they will continue to put a
premium on a dealership experience
that rewards those efforts.
5 Reasons Customers Love or Hate Their Dealers
Industry Trends
Top 5 Reasons Consumers Love Car Dealers
1 Friendly, professional service
2 Fast response
3 Accurate answers
4 Clean dealerships, clean car interiors
5 Good prices
Top 5 Consumer Complaints About Car Dealers
1 No response
2 Bait and switch
3 Communications disconnect
4 Unsatisfactory customer service
5 Time wasted
PHOTO ©ISTOCKPHOTO.COM / ELENATHEWISE
According to a study published earlier this year by R.L. Polk and AutoTrader, 71 percent of vehicle shoppers start their shopping process online — more than double the rate of any other information source.
FI0711trends.indd 48FI0711trends.indd 48 6/30/11 4:33:44 PM6/30/11 4:33:44 PM
Solved.
Technology exists to solve problems.But to solve a problem, you must first understand it.
FI0711trends.indd 993FI0711trends.indd 993 6/30/11 4:33:45 PM6/30/11 4:33:45 PM
FI0711cover.indd 994FI0711cover.indd 994 7/1/11 11:45:44 AM7/1/11 11:45:44 AM
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