EXPLORING ISSUES THAT ARE SHAPING THE BUSINESS OFFICE
As the margin on new-vehicle sales continues to decline, many dealers are shifting their focus to other profit-generating areas of their operations — like the business office.
Over the past year we’ve seen automakers and even large dealership groups roll out branded F&I products in stores and online, and new technologies to increase transparency and improve efficiencies. There’s also been a greater focus on educating customers in the business office.
All of those developments help indicate where F&I is heading into 2016 and beyond. But what’s making the biggest impacts on the industry?
I spoke with F&I experts, Chris Cawston, President & General Manager at Sym-Tech Dealer Services and Sean O’Brien, COO of CTL Corp., a division of Industrial Alliance Insurance and Financial Services Inc. (iA Financial Group) to learn about some of the top trends happening in the F&I space.
All of these trends, whether economic, technological or political, will implicate customers and have an effect on your business.
PROCESS, NOT PRODUCT
Forget antiquated sales processes. They now sit in the customer’s hands. Customers are looking for transparency at every stage of the buying process, including in the F&I office.
Process, not products, is where Cawston sees innovation happening in the F&I space. It’s arguably more important than ever before that F&I managers adopt a customer-centric approach.
Cawston likes to go by the 300 per cent rule: offer 100 per cent of products to 100 per cent of the customers 100 per cent of the time. To do that, dealers are putting procedures in place that are scalable and repeatable to deliver the best customer service, backed by training and advancements in software.
Part of that involves streamlining processes without keeping customers tied up in the business office for hours. In February, Autotrader in the U.S. reported the average F&I transaction time hovered around the 60 minute mark. Anything longer than that, and customer satisfaction drops significantly.
Dealers are also looking to their lender partners to help speed up the contract funding and cut down on unnecessary paperwork.
In the U.S., lenders are exploring new data that go beyond the typical bureau data to help them make quick and more informed decisions about customers. That includes customer attributes such as address histories and insurance information.
While those kinds of data sets are not currently available in Canada, O’Brien said it’s only a matter of time.
Another trend O’Brien is watching closely is how dealers acquire customers through various lead sources, and how that might impact the business office.
Process, not products, is where Cawston sees innovation happening in the F&I space
HEALTHY LENDERS
Lenders in Canada continue to have deep pockets, particularly on the non-prime side. Consumers are also getting better at understanding what financing their vehicles will look like.
Despite high household debts in Canada, financial institutions have stretched out loan terms to as long as 96 months in a bid to boost sales. It’s unlikely they will stretch out longer than that.
There’s still a concern about the impact of negative equity, which many executives find troubling, and that’s why O’Brien encourages dealers to offer leasing as an alternative to keep monthly payments low. It also helps the cycle move quicker, added O’Brien.
While delinquency rates are improving in Canada, they are slightly higher in western Canada due to the economic turmoil going on in the region. O’Brien said he is watching that region closely.
It will also be interesting to see what happens when short-term interest rates eventually creep up, and how that would impact financing. On the other side of the spectrum, the Bank of Canada is pondering negative interest rates that could help stimulate the Canadian economy, though it’s unlikely to happen.
NEW REGULATIONS
Regulations for dealers in the U.S. are getting tighter and are only continuing to tighten to restrict unfair and discriminatory lending practices. The Consumer Financial Protection Bureau (CFPB) in the U.S. is keeping a close watch on dealers and their compensation models.
Some of that chatter has moved north of the border, but for now it just remains chatter. Cawston said he wouldn’t be surprised to see an increased regulatory environment in Canada moving
forward, though.
The way Canadian dealers can help prepare for regulatory changes is to take certification or compliance courses that review best practices.
While dealers are required to document their activities in the business office, Cawston believes it’s more important today than ever that they stay on top of it. Software can help with processes and controls that help ensure dealers meet disclosure requirements and prevent any inadvertent slips.
These trends may or may not have a lasting impact on the F&I office, but together, they show where the industry is headed. They can’t be ignored.
