Change & Challenges Highlight a Great Start

to 2012

GREG GOEBEL, CEOAUTO DEALER MONTHLY

Welcome!Thanks to sponsors and staffSubprime Sponsors

Food For Thought…• Experian defines Prime credit at 680+

– Average credit score for a used car buyer is 659 meaning more than half are subprime

Food For Thought…• Experian defines Prime credit at 680+

– Average credit score for a used car buyer is 659 meaning more than half are subprime

• Subprime loans accounted for 44% of auto loans in Q2, up 41% from 2011.

Food For Thought…• Experian defines Prime credit at 680+

– Average credit score for a used car buyer is 659 meaning more than half are subprime

• Subprime loans accounted for 44% of auto loans in Q2, up 41% from 2011.

• According to Equifax, in Q1, new vehicle buyers with credit scores <680:– Hyundai/Kia, 31%– Chrysler, 29%– GM, 23%– Ford, 20%

Food For Thought…1Q2012 Percentage of 2012 Model Sales Subprime:

• Mitsubishi Galant, 43%• Suzuki SX4, 41%• Dodge Avenger, 39%• Kia Forte, 37%• Dodge Caliber, 36%• Nissan Sentra, 26%• Chrysler 200, 24%• Dodge Journey, 21%• Nissan Versa, 21%• Chevrolet Sonic, 20%

Don’t Call them “Bogues!”

• Well written F&I scribe’s favorite term.– “…sick of being nice to them. Pay your

d*mn bills and lose that smart-@ss entitlement attitude. You did it to yourself…”

Don’t Call them “Bogues!”

• Well written F&I scribe’s favorite term.– “…sick of being nice to them. Pay your d*mn

bills and lose that smart-@ss entitlement attitude. You did it to yourself…”

• Unemployment hit 10% • Underemployment may be worse• More subprime pre-owned buyers than

prime• Is your business really too good for them?• …call them valued customers!

Why Can’t We All Just Get Along?

• Conflicts rule the dealerships!– New vs. Used– Used vs. Service Department– Internet vs. Bricks & Mortar– “Me” vs. “We”– Dealer’s plans vs. Company Agent’ s plans

• Is there any wonder why we feel like firemen/women more than managers?

• Prime vs. Subprime

Prime vs. Subprime• 80% of all stores are at odds• Comp plans are the often the root of the

conflict• Two scenarios

– F&I hangs a deal that costs them money to contract

– F&I Manager vs SF Manager: Someone has to lose for the other one to win

• Fix it and everybody wins: More sales, more F&I products, more gross profit

2012 SF Benchmarksby Greg Goebel Training & Consulting

Overview of the results:1) Huge shift to new vehicles in SF2) Surprise drop in deal gross profits3) Poor deal structure is generally the

culprit4) Down payments have increased5) Dealers spending more for

marketing6) Per deal F&I gross profit up

significantly

Average SF Retail Price

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000 $17,395

$14,547

$11,699

2012 Franchise Benchmark 2012 Combined Benchmark2012 Independent Benchmark

Average Net Cash Down (PRU)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600 $1,563

$1,364

$1,164

2012 Franchise Benchmark 2012 Combined Benchmark2012 Independent Benchmark

Average Trade Down (PRU)

$0

$100

$200

$300

$400

$500

$600

$700

$800

$501 $503 $505

2012 Franchise Benchmark 2012 Combined Benchmark2012 Independent Benchmark

SF Units as a Percent of Total Retail Volume

20%

30%

40%

50%

60%

70%

80%

90%

100%

35.0%

63.8%

92.5%

2012 Franchise Benchmark 2012 Combined Benchmark 2012 Independent Benchmark

Average SF Units Sold per person in SF dept.

2012 Franchise Benchmark – 9

2012 Combined Benchmark – 9

2012 Independent Benchmark – 8

Special Finance Manager(s) Average Comp.

$0

$2,500

$5,000

$7,500

$10,000

$12,500

$15,000

$17,500

$20,000

$15,008 $14,811 $14,614

2012 Franchise Benchmark 2012 Combined Benchmark 2012 Independent Benchmark

2012 SF BenchmarksAdvertising/Marketing Spend

2012 Franchise

Benchmark

2012 Combined Benchmark

2012 Independent Benchmark

2011 Franchise

Benchmark

2011 Combined Benchmark

2011 Independent Benchmark

Cost Per Lead $57 $52 $52 $81 $48 $32

Cost Per Sale $447 $377 $320 $418 $340 $266

Advertising Expense as %

of Total SF Gross Profit

15.1%

14.4% 14.0% 12.7

%12.9

% 11.5%

2012 SF BenchmarksAd Spend by Media

$16,281

$3,150

$1,309

$625 $466 $275 $115 $37

RadioTelevisionDigitalPrint Media (paper/traders)Internet Leads PurchasedReferrals/BirddogsOtherDirect Mail

TOTAL = $22,258

2012 SF BenchmarksLead Count & Percent of Total Leads

Internet Lead

Web Site

Loan by Phone

Phone Ups

Walk-ins

Be-backs

Repeat/Referral

0 20 40 60 80 100 120 14078

129

4

130

66

11

6

18.4%

30.4%

0.9%

30.7%

15.6%

2.6%

1.4%

TOTAL = 424

2012 SF BenchmarksSales and Conversion %

by Lead Source

Internet Lead

Web Site

Loan by Phone

Phone Ups

Walk-ins

Be-backs

Repeat/Referral

0 2 4 6 8 10 12 14 167

15

1

15

15

5

1

9.0%

11.6%

25.0%

11.5%

22.7%

45.5%

16.7%

59 Units = 13.9% conversion rate

2012 SF Benchmarks:Sales Volume

New SF Units Sold Used SF Units Sold Total SF Units Sold0

10

20

30

40

50

60

70

24

45

69

12

47

59

0

49 49

2012 Franchise Benchmark 2012 Combined Benchmark2012 Independent Benchmark

2012 SF Benchmarks:Deal Gross Profits

Average Vehicle Gross Profit

Average F&I Gross Profit

Average Total Deal Gross Profit

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$1,881

$1,085

$2,966

$1,734

$893

$2,627

$1,587

$701

$2,288

2012 Franchise Benchmark 2012 Combined Benchmark2012 Independent Benchmark

2012 SF Benchmarks:The Basics – Year over Year

2012 Franchise

Benchmark

2011 Franchise

Benchmark

2012 Combined Benchmark

2011 Combined

Benchmark

2012 Independent Benchmark

2011 Independent Benchmark

New SF Units Sold 24 16 12 12 0 0

Used SF Units Sold 45 64 47 59 49 45

Total SF Units Sold 69 80 59 71 49 45  Average Vehicle Gross Profit

$1,881 2,262 $1,734 $2,146 $1,587 1,797

Average F&I Gross Profit $1,085 891 $893 $799 $701 523Average Total Deal Gross Profit

$2,966 3,153 $2,627 $2,945 $2,288 2,320

Industry is Ever Changing

• Capital is flowing

Industry is Ever Changing

• Capital is flowing“Wall Street analysts say inventors are

lining up to pump funds into the auto lenders…”

Survey of finance company executives indicate their concern is that industry is quickly forgetting its lessons of four years ago and going people will soon hit the wall.

Industry is Ever Changing

• Capital is flowing• Auto loan collections never better

Industry is Ever Changing

• Capital is flowing• Auto loan collections never better• SAAR is soaring

Industry is Ever Changing

• Capital is flowing• Auto loan collections never better• SAAR is soaring

– Europe be damned, the U.S. market is back

– Now at 14.5 M new vehicles– 2013 forecasts for 15+ M new vehicles– Used vehicle market rebounding also

Industry is Ever Changing

• Capital is flowing• Auto loan collections never better• SAAR is soaring• Consumer Financial Protection Bureau is

here!– 1100 employees by 2013– 10% of entire Federal Reserve budget– Effects everyone directly or indirectly– Communicates directly with FTC– MUST show “heads-on-sticks” to prove value

Industry is Ever Changing

• Capital is flowing• Auto loan collections never better• SAAR is soaring• Consumer Financial Protection Bureau is

here!• Huge shift towards new vehicles in

SF

Industry is Ever Changing

• Capital is flowing• Auto loan collections never better• SAAR is soaring• Consumer Financial Protection Bureau is

here!• Huge shift towards new vehicles in SF• This adds up to more sales and profit

opportunities – but with added risk.

NCM Associates Benchmarks®

NCM Associates, Overland Park, KS• Originators of the Automotive 20

Group program in 1947• Have been producing industry

Benchmarks® for over 60 years.• Benchmarks® are based on 75th

percentile of profitable dealers• Serve as a measuring stick for

you results

NCM Associates Benchmarks® Monthly F&I

Gross Profit DistributionDomestic

Benchmark (no chrgbks)

Import (Reg) Benchmark

(no chrgbks)

Import (Hi-Line) Benchmark (no chrgbcks)

Independent Benchmark (no chrgbcks)

Finance Income $62,176 54,397 $59,642 $23,168

VSC Income $52,157 51,343 $23,131 $25,248

GAP Income* $14,757 15,110 $3,956 $5,891Other Aftermarket Income $14,432 17,474 $22,179 $6,235Prepaid Main. Income $12,949 9,078 $9,189 $0

CLAH Income* $6,803 6,279 $4,801 $203

Total $156,471 147,402 $122,899 $60,745

NCM Associates Benchmarks® Monthly F&I

Gross Profit DistributionDomestic Franchise

Import (Reg) Franchise

Import (Hi-Line) Franchise

Independent Retail

Total F&I Income $156,471 147,402 $122,899 $60,745

Finance Income 40% 37% 49% 38%

VSC Income 33% 35% 19% 42%

GAP Income* 9% 10% 3% 10%Other Aftermarket Income 9% 12% 18% 10%

Prepd Maint. Inc. 8% 6% 7% 0%

CLAH Income* 4% 4% 4% 0%

100% 100% 100% 100%

NCM Associates Benchmarks® Sales

Penetration and Gross ProfitsIndependent Retail Dealer Domestic Franchise -

Combination

Penetration Pct.*

Gross Profit Per Contract

Sold

Percent of Gross

RetainedPenetration

Pct.*

Gross Profit Per Contract

Sold

Percent of Gross

RetainedFinance Income 69% $492 97% 71% $692 93%VSC Income 43% $858 96% 41% $926 75%GAP Income* 40% $310 94% 39% $389 89%Other Aftermarket Income 21% $92 100% NA $108 100%Prepd Maint. Inc. 0% $0 91% 18% $387 95%CLAH Income* 0% $0 88% 19% $108 71%Overall 95% 90%

* Indicates penetration percentage of financed contracts

NCM Associates Benchmarks® Sales

Penetration and Gross ProfitsImport (Reg) Franchise Import (Hi-Line) Franchise

Penetration Pct.*

Gross Profit Per Contract

Sold

Percent of Gross

RetainedPenetration

Pct.*

Gross Profit Per Contract

Sold

Percent of Gross

RetainedFinance Income 74% $630 97% 64% $832 94%VSC Income 45% $1,077 96% 27% $843 94%GAP Income* 43% $408 94% 13% $450 93%Other Aftermarket Income NA $112 100% NA $178 100%Prepd Maint. Inc. 16% $298 91% 24% $387 100%CLAH Income* 17% $435 88% 17% $178 81%Overall 96% 95%

* Indicates penetration percentage of financed contracts

NCM Associates Benchmarks® Prime F&I: Net Per Retail Unit

Total Retail Units

Total Monthly Gross Profit (no

chargebacks)

NET F&I PRU*

Domestic Franchise - Combined 125

$156,471 $987

Import (Regular) Franchise - Combined 137

$147,402 $894

Import (Hi-Line) Franchise - Combined 101

$122,899 $908

Independent Retail 68 $57,876 $847* Net after all chargebacks and F&I compensation paid.

Reverse Math

• Net F&I per car:$987

• Average Chargeback/car: $135• Subtotal

$1122• Commissions @ 22% $

217• F&I Gross Profit at sale $1339

per car

In Summary• Balance of 2012 and 2013 should be

strong• Sales of Finance & Insurance

products stronger than ever.• Credit market still trending down

– Huge increases in new car SF volume– Well over half of used vehicle loans are

SF• Put a plan in place to reduce conflict

and everyone at conference is a winner.

Before You Leave…

• Finance Survey – Please complete it

• Going to break – Finance Companies

So How Do You Get There?

Enjoy the sessions today and tomorrow, learn and profit!