F&I and Showroom October 2011

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Contents

2 F&I and Showroom October 2011

October 2011 Volume 14, Issue 10

2011 F&I Pacesetters

14 Setting the PaceMeet the seven fi nalists for F&I Dealer of the Year, the winner of which will be profi led in the magazine’s November issue.

F&Idol Contest

20 Lights, Camera, Action!These fi ve individuals were named category winners for having the best on-camera F&I presentations in fi ve categories.

Technology

28 Mobile Goes MainstreamThe pace of mobile technology adoption is quickening, and companies are lining up to help dealers transition to a mobile marketplace.

Auto Finance

32 Below-Prime Goes Prime TimeIn the second quarter, fi nance sources continued their drive down into the high-risk credit tiers.

Finance and Insurance

36 Reorganizing the DeskThe desk can be critical to a dealership’s success, but overstepping its boundaries can leave a store vulnerable.


40 Maximizing PPM ReturnWith the right product mix, prepaid maintenance plans can add serious revenue to your store’s bottom line.

4 Letters

6 Editorial

8 Developments

12 Industry Trends

42 Sales Driver

44 On the Point

46 Legal

48 Bottomliners

51 Ad Index

52 Mad Marv

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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Letters

Making HeadwayTO THE EDITOR: I moved over to F&I

about a year and a half ago after sell-

ing cars for seven years. The last time

I received F&I training was back in

1999. Times have defi nitely changed

and I want to make sure I’m present-

ing my products the right way.

Grace A. ZambonWells River (Va.) Chevrolet

TO THE EDITOR: I must say that I truly

enjoy the articles in F&I and Show-room magazine each month! It’s par-

ticularly valuable to read articles by

Mad Marv. He gives the reader real

hands-on advice.

Cathy AronFounder/CEO

Profi t Drivers Ltd.

TO THE EDITOR: Good column last

month (“What’s My ‘Buy Rate’?”).

The consumer fails to consider that

the “great rate” they are getting from

their bank is often at or above those

available through the dealership’s fi -

nance sources, and that their friendly

banker is margining those funds at or

above the typical dealership markup.

They’re in it for a profi t, too, not just

because they’re nice guys.

Randal HatteyFinance Manager

Reynolds FordOklahoma City, Okla.

TO THE EDITOR: Thanks for stepping up

to defend the industry in your column

last month. Considering how well

you answered Newsweek’s questions,

I think they’ll either run the article

with little or no mention of you and

your answers, or scrap it altogether

since they couldn’t fi nd the dirt they

were looking for.

Klay KelsoThe Plateau Group

Dandridge, Tenn.

Thanks, everyone. I appreciate the comments. As for your question, Grace, you really do need to get out to the magazine’s annual conference in Las Vegas. Next year the confer-

ence will be held Sept. 10–12 at the Paris Las Vegas Hotel. In the mean-time, check out the “Events” page on our Website for a list of upcoming training events. You’ll fi nd a variety of training events offered by many of the experts writing in the magazine. — Gregory Arroyo

Spot OnTO MAD MARV: Your “Be the Buyer”

column last month was right on tar-

get. I would add that, since back-end

products can be canceled, lienhold-

ers can go after the provider for the

unearned portion of the products if

the customer defaults on the loan.

Finance companies tend to focus too

much on that single repo rather than

the other nine customers that do pay.

Keep up the good work, Marv.

Jim SerraniPresident

JBS Dealer Services LLCFort Mill, S.C.

TO MAD MARV: Great column last

month, Marv! It’s been awhile since

I’ve read something so profound. The

only wrinkle I’d offer is that instead

of calling a buyer’s supervisor when

they refuse to budge, ask the buyer to

take the deal to his or her supervisor.

That will give the buyer another op-

portunity to review the deal. Plus, he

or she won’t feel like you’re trying to

go over his or her head.

The truth is, it may take a second

look to get a deal right. I recently had

a deal where a fi rst-time buyer was

putting money down and fi nancing

a 2011 Toyota 4Runner at 62 percent

loan to value. I had to turn the deal

down because I was unable to get

the payment in line and the customer

couldn’t put any more money down.

After talking to the F&I director, I

realized I had the option to request

a tier bump and term extension from

my supervisor, which would drop the

payment signifi cantly. Needless to

say, we got the deal done.

Danny ReyesBank Representative

Subprime auto fi nance company


Vice President Group Publisher, AutoGroup

Sherb Brown

Publisher, Dealer GroupNational Sales Manager

David Gesualdo727-947-4027

[email protected]

Executive EditorGregory Arroyo

[email protected]

Managing Editor / Art DirectorTariq Kamal

[email protected]

Assistant EditorJennifer Washington

[email protected]

Great Lakes Sales ManagerRobert Brown Jr.

[email protected]

Sales & Marketing CoordinatorTracey Tremblay

E-Media and Print Production Manager

Brian Peach310-533-2548

[email protected]

Web ManagerSam Kim

[email protected]

Audience Marketing ManagerTony Napoleone

Chairman Edward J. Bobit

President & CEOTy F. Bobit

Chief Financial Offi cerRichard E. Johnson

Business and Editorial Offi ceBobit Business Media3520 Challenger St.Torrance, CA 90503

Phone: 310-533-2400Fax: 310-533-2503

Change Service RequestedReturn Address:

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Subscription Inquiries888-239-2455

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Printed in U.S.A.

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The idea behind the menu seems simple enough. Use it and you can sell more products. Well, evidently, how you use it has come into question. The editor weighs in. By Gregory Arroyo

A battle is brewing over F&I

menus, and lines are being

drawn in the sand. No longer

is the debate over whether it should

be used; it’s about how it should be

used. But be warned: You’d better

surround yourself by like-minded

people before offering your opin-

ion.

Menu providers won’t even get

into this debate. Instead, they’ll talk

about how their menu will blend

with whatever method you sub-

scribe to. Even trainers are careful

when offering their opinion. I guess

I’m amazed at how the tool that was

supposed to make us better at what

we do has become such a fl ashpoint

for our industry.

The current debate centers around

what form the menu should take.

If you’re from the George Angus

school, you view the menu as more

of a disclosure form: The less you

make it look like a sales tool, the

more successful you’ll be.

Then there are those who believe

the menu should take the “good-bet-

ter-best” approach. They think that

three- or four-column menus are the

best way to get through more prod-

ucts in a shorter amount of time.

That makes sense to me, but so does

Angus’ theory.

Then there is what seems to be a

new wrinkle on an old method of

selling. Some refer to it as a hybrid

approach to selling, and two of this

year’s F&I Pacesetters seem to be

employing it.

In this scenario, products are dis-

closed early and often. The hope

is that the customer will mentally

commit to purchasing before the

menu is even shown. And when it

does appear, products are displayed

in one customized package. Now, I

want to make it clear that I’m not

referring to payment packing, where

the customer is unaware of what

they’re buying or for how much. I’m

merely referring to how the menu is

formatted.

I also want to make it clear that

there is no trickery involved. The

method merely calls for the produc-

er to list each product in one column

before he or she says to the custom-

er, “Do you remember when I told

you about how GAP protects you?”

or “Remember when I explained the

benefi ts of our tire-and-wheel pro-

tection?” That’s when the F&I man-

ager moves to a step-sell approach

— that old method of selling that

seems to be making a comeback.

I know we were led to believe that

the menu would eliminate the step-

sell approach, but evidently it hasn’t.

Some insiders, including an execu-

tive for a major F&I provider, now

prefer the aformentioned hybrid ap-

proach over all others. But doesn’t

that relegate the menu to nothing

more than a disclosure tool?

When I judged our F&Idol con-

test, I noticed that not one contes-

tant brought out the menu. Now, I

understand that we asked partici-

pants to record themselves selling

and overcoming objections for one

product, but the menu was nowhere

to be seen.

What I did see were those mats

F&I managers use to disclose the

factory warranty coverage. F&I

managers would start by disclosing

what’s covered and for how long be-

fore jumping into their service-con-

tract pitch. I know, we got what we

asked for. But for all of those stats

we published about how the menu

can drive up sales, it was still sur-

prising to me that it never appeared

in any of those videos.

I guess I’m wondering if we

should even refer to the menu as a

selling tool. I mean, several of this

year’s F&I Pacesetters seemed more

focused on the menu as a compli-

ance and accountability tool. Heck,

even the Pacesetter who described

his F&I selling process as “menu-

less” uses the menu to ensure proper

disclosure and compliance.

So, where do you stand? Person-

ally, I think the best menu is the one

that works for your operation. Now,

I’m no trainer. I’m just a guy who

watched about 35 videos for our

F&Idol contest and can tell you who

I would buy from. I’ll tell you who

that is next month, when we profi le

the 2011 F&Idol winner.

Lines Drawn

Letter From the Editor

Menu providers won’t even get into this debate. Even trainers are careful when offering their opinion. I guess I’m amazed at how the tool that was supposed to make us better

at what we do has become such a fl ashpoint for our industry.

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Developments

On Sept. 26, California Gov.

Jerry Brown signed legisla-

tion that will allow Califor-

nia to raise doc fees by at least $25.

The bill also will install new car-

buying reforms.

Introduced by Assemblyman Bob

Blumenfi eld (D-Sherman Oaks), AB

1215 will require that dealers regis-

ter vehicles electronically, as well as

post a red sticker on used cars that

are fl agged by the National Motor

Vehicle Title Information System

(NMVTIS) as “junk,” “salvage” or

“fl ood.” The new rules take effect in

July 2012.

“By signing this law, the gover-

nor can protect consumers and save

the state nearly the same sum as the

budget cuts causing 70 state parks to

close next year,” said Blumenfi eld,

who estimated that the state will save

$9 million in costs related to the De-

partment of Motor Vehicles.

The doc fees dealers charge for pro-

cessing retail and lease agreements

will rise from $55 and $45, respec-

tively, to $80. The bill also reduces

the time consumers may legally drive

without permanent license plates

from six months to 90 days.

“On the bill of sale, dealers also are

going to be allowed to charge the cost

that they pay their fi rst line vendor for

the electronic processing service,”

said Tom Plunkett, vice president of

sales at Automated Vehicle Registra-

tion Service (AVRS). “They’re going

to make money complying with this

new bill.”

The industry’s dealer count in-

creased by 0.4 percent this

year, the fi rst time in 10 years,

according to Urban Science’s 2011

Automotive Franchise Activity Re-

port (FAR). The report also revealed

an increase in throughput and sales,

indicating that dealers are in stronger

fi nancial positions than they were at

the close of 2010.

As of July 1, there were 17,725

dealerships, an increase of 66 from

the end of 2010. That’s in spite of the

number of franchises — the brands

that a dealer carries — decreasing

by 729 to 29,360. The drop can be

attributed to the wind-down of the

Mercury brand. It also represents a

stabilization of the industry, accord-

ing to Urban Science analysts.

Social Media Challenging Labor LawsTHE NATIONAL LABOR RELATIONS

Board (NLRB)’s split decision on 14 cases involving the dismissal of em-ployees over posts made on social media sites showed just how much technology is challenging current labor laws.

The NLRB, which enforces the National Labor Relations Act (NLRA), was split evenly on wheth-er current labor laws protected the employees named in the cases, one of which involved a highline auto dealership. The results of those investigations were detailed in an Aug. 18 report.

In four cases involving employ-ees’ use of Facebook, the division found that employees were en-gaged in protected activity because they were discussing terms and conditions of employment with fel-low employees. In fi ve other cases, the division found that the activity was not protected.

In the case involving the highline dealership, the dealer dismissed a salesman after he posted pho-tographs and critical commentary about a sales event held at the store on his Facebook page. The salesman and his coworkers had expressed concerns during a pre-event meeting about the refresh-ments management wanted to serve customers. They felt the inexpensive food and beverages would refl ect badly on the store and would impact sales.

The NLRB’s Division of Advice determined that the employee’s actions were meant to express the sentiment of the group and that the Facebook activity was a direct result of the earlier meeting.

“He was vocalizing the senti-ments of his coworkers and con-tinuing the course of concerted activity that began when the sales-people raised their concerns at the staff meeting,” the report read.

Calif. Governor Signs Car-Buying Reform Bill

Dealer Count Up for First Time in a Decade

8 F&I and Showroom October 2011 PHOTO COURTESY CA.GOV

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Developments

General Motors LLC announced that former vice chairman Robert

“Bob” Lutz will provide counsel to the com-

pany’s senior leadership team. He will be available to executives on a part-time consultancy basis, according to GM. Lutz brings more than 40 years of experience in the industry, including two stints at GM. He also has served as a senior executive at Ford, Chrysler and BMW, and was CEO of Exide Batteries.

William W. Helman IVhas joined Ford Motor Co.’s board of directors, effective immediately. Helman is a partner

with Greylock Partners, where his practice is focused on enterprise software, consumer Internet, healthcare and biotechnology. Helman will serve on the Ford Board of Directors’ Finance Committee, Sustainability Commit-tee and the Nominating and Governance Committee.

Service Repair Solutions Inc. (SRS) has promoted Rich Holland to the position of president

of its subsidiary, MPi. As chief strategy offi cer at SRS, Holland focused on SRS’s forward-looking strategic plan and the company’s product management team. As president of MPi, Holland will be responsible for day-to-day opera-tions and the development and execution of MPi’s future strategic business plans.

Webb to Kick Off Agent Summit 2012LEADING TRAINER PAUL

Webb will deliver the opening keynote address at the second annual Agent Summit, show or-ganizers announced in September. The event, scheduled for March 12-14, 2012, at Caesars Pal-ace, is designed specifi cal-ly by and for automotive general agents.

F&I Admin Releases Dealer Portal for SCS AutoF&I ADMINISTRATION

Solutions LLC has added a new dealer portal, DAP 8.3, to its SCS Auto plat-form. Branded as an F&I product provider’s site, DAP is designed to allow dealers, credit unions and other producers to get F&I product quotes, complete electronic remittance, view reports and more, according to F&I Admin.

MaximTrak Completes Reynolds IntegrationMAXIMTRAK TECHNOLOGIES

has completed the Reyn-olds Certifi ed Interface program and can now integrate its software tools with Reynolds and Reynolds’ ERA dealer management system. The certifi cation allows MaximTrak’s solutions to pull data from an ERA DMS using standard data interfaces provided by the RCI Program.

Delinquencies Fall for Seventh Straight QuarterHELPED BY IMPROVING

sales, the national 60-day delinquency rate for auto loans fell for the seventh consecutive quarter, dropping to 0.44 percent at the end of the second quarter, TransUnion reported. The credit bureau did note a moderate slowdown in the delinquency rate’s im-provement since the third quarter of last year.

Incentives Battle Coming, Says Kbb.comKELLEY BLUE BOOK

is anticipating an incen-tives battle between Japanese and domestic brands later this year. As Japanese production facilities return to full ca-pacity, Kbb.com expects to see strong incentive support from these man-ufacturers as they try to recapture market share lost after the March 11 earthquake.

U.S. Economic Growth Will Continue to LagTD ECONOMICS BELIEVES

the U.S. economy will continue to grow, but the affi liate of TD Bank says the economy may not be able to sustain addi-tional shocks. Temporary shocks, such as rising gas prices, have dissipated, but the impact on con-sumer confi dence is likely to be felt over the next several quarters.


CHASE AUTO FINANCE

will continue to operate as Subaru Mo-tor Finance for another fi ve years, renew-ing its captive fi nance deal with Subaru of America for lease, retail and fl oorplan fi -nancing. Chase also an-

nounced that it would extend the consumer

fi nancing program it rolled out for Chrysler dealers to FIAT, provid-

ing its dealers with prime and

nearprime customers with low interest rates and other incentives.

Chase Announces Finance Agreements With Subaru, Fiat

Moves and Hires

fi nanitfdF

inwit

SHOWROOM PHOTO COURTESY CHACON AUTOS


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Industry Trends

An NABD survey fi nds that resistance to payment assurance technology has largely faded, but disclosure and discretion remain areas of concern.

W hen the fi rst code-based

payment assurance (a.k.a.

“starter interrupt”) devic-

es were introduced in the early 1990s,

auto dealers suddenly enjoyed the

same power as the phone and cable

companies: If their customers didn’t

pay, the service could be shut off.

That idea was too radical for some.

Consumers and state legislators

raised a stink, claiming the devices

could shut vehicles down in traffi c

or violate “right-to-cure” provisions

in state collection guidelines. Those

claims were put to rest, but not with-

out a stern directive from industry

advocates to dealers and fi nance

companies: Disclose the use of the

devices, and be consistent in pulling

the trigger.

Earlier this year, the National Alli-

ance of Buy Here, Pay Here Dealers

(NABD) initiated a survey of more

than 100 new- and used-car dealers

who collectively utilize approximate-

ly 150,000 units. The results showed

that the use of code-based and GPS-

enabled tracking devices, as well

as units that employ both

technologies, is on the rise.

NABD founder Kenneth Shilson

used the results to craft a recently

published white paper on the state

of the segment.

“The survey provided new insights

in respect to the use of payment assur-

ance and GPS tracking devices, and

was overwhelmingly positive toward

their use and their overall operational

impact,” Shilson says. “Although the

ways in which these devices are used

still varies between users, the con-

sensus was that payment devices are

a very benefi cial tool in effectively

managing a portfolio in today’s chal-

lenging environment.”

The fact that dealers’ approach to

the use of the devices “still varies” is

a concern. Nearly 10 percent of re-

spondents reported that they do not

disclose the presence of the device

to every customer. As Shilson points

out in the white paper, there’s no

good reason not to: Dis-

closure protects the

dealer and has a “psy-

chological impact” on the customer.

Thirty-eight percent of respondents

said they prefer to use their discretion

when deciding whether to disable the

starter or initiate GPS tracking, a

practice which could hurt a fi nancer

if they were to face a discrimina-

tion suit. Delinquency, Shilson says,

should be the determining factor.

To download the NABD white

paper, visit the “Important Industry

Information” section at www.bhph

info.com.

Closing the Payment Assurance Gap

46%

44%

32%

36%

36%

13%

36%

22%

51%

7%

9%

32%

55%

12%

Which type(s) of payment assurance device do you use? Do you disclose the presence of each device to every customer?

Do you use enforce yourpolicy uniformly or useyour own discretion?Disabler product with

payment reminder

GPS tracking device

Combined disabler andGPS (with reminder)

Combined disabler andGPS (no reminder)

What benefits have you experienced as a result?

Customers call us

All of the above

We are able to paycloser attention to

repayment patterns

Allows us moreflexibility in creditgranting decisions

Customer is forcedto have regular

interaction with us

How have the devices affected your repossession efforts?

All of the above

Some of the above

Enforces theory of“They can run, but

they can’t hide.”

Provides a psychologicaldeterrent

Facilitates reporetrieval, therefore

mitigating losses

Yes90%

No10%

Uniformly62%

Usediscretion

38%

PHOTO ©ISTOCKPHOTO.COM / CRISTIMATEIV12 F&I and Showroom October 2011

FI1011trends.indd 12 10/3/11 3:14:15 PM

http://www.bhph

FI1011trends.indd 13 10/3/11 3:14:17 PM

Meet the seven fi nalists for F&I Dealer of the Year,

the winner of which will be profi led in the magazine’s

November issue. By Gregory Arroyo

For these seven operations,

noncompliance is not an op-

tion. What sets them apart

from the rest is the ability

of their F&I departments to

succeed under the strictest of guide-

lines, as they have successfully found

the fi ne balance between being cus-

tomer-centric and aggressive. One of

them will appear on the cover of next

month’s issue as the 2011 F&I Dealer

of the Year. The following profi les

offer a peak into these operations and

the people who lead them.

Dick Hannah DealershipsBackground Check: Founded in

1949, Vancouver, Wash.-based Dick

Hannah Dealerships is a 13-rooftop,

19-brand operation. The dealer group

is currently operated by Richard

Hannah, president, and vice presi-

dents Jason and Jennifer Hannah.

The Numbers: The dealer group’s

profi t per vehicle retailed sits just

north of $1,000 after increasing by

$350 since March 2007. In the same

span, the dealer group’s charge-back

rate fell from 20 percent to 9 percent.

Secret Weapon: The

group’s F&I director,

Ralph Larson, a former

general agent. Since join-

ing Dick Hannah in

March 2007, he has put the group

through sales training and helped re-

organize its F&I department.

Larson also standardized the pro-

cesses by which his department oper-

ates. He implemented a new selling

approach that sells and discloses all

of the F&I products throughout the

buying process. The menu is used to

confi rm that the customer is commit-

ted to the product. Building value, he

says, is key.

“We try to get the customers famil-

iar with the features and benefi ts of

the F&I products and their associated

costs upfront, even before the formal

F&I process even begins,” he says.

“No one likes to be sold anything, but

people like to buy stuff.”

Compliance Check: Located in a

state famous for its active attorneys

general, Dick Hannah has a zero-tol-

erance policy when it comes to non-

compliance. The group records all

F&I interactions via Innovative Af-

termarket System’s SmartEye video

and audio recording system.

Larson also instituted fi xed profi t

models for F&I products. The group

also invested in Compli’s compliance

and HR software to automate its em-

ployee training program. The deal-

ership also employs MenuVantage’s

selling system to verify disclosures

and ensure that its pricing model is

followed by all producers. The dealer

group also is an Association of Fi-

nance and Insurance Professionals

(AFIP) Industry Partner.

Industry Involvement: Dealer prin-

cipal served as past president of the

Washington State Automobile Deal-

ers Association, and currently sits on

the board of the Oregon Automobile

Dealers Association.

Giving Back: Among its many com-

munity outreach activities, Dick Han-

nah plants a tree for every vehicle sold

in support of the Arbor Day Founda-

tion. The dealer group also partners

with organizations such as the Boys

and Girls Clubs of Southwest Wash-

ington, Southwest Washington Medi-

cal Center and the United Way.

Fremont MotorsBackground Check: This Lander,

Wyo.-based dealer group was found-

ed in 1938 by Clyde Guschewsky.

Today, the 13-store operation repre-

sents the largest dealer group in the

state under the leadership of Charles

Guschewsky.

The Numbers: F&I gross so far this

year is 151 percent ahead of 2010. To-

tal retail is up 132 percent.



Chris CochranHaddad Dealerships

Setting

FI1011pacers.indd 14 10/3/11 6:29:37 PM

Secret Weapon: Understanding the

importance of relationships. Twice a

year, the dealer group invites all of its

lender reps and buyers to meet with

management and its F&I team. The

event serves as both a relationship

builder and a chance for reps to pro-

vide feedback.

“The relationship we have with

buyers played a huge role in our abil-

ity to navigate the downturn,” says

Robert Laird, director of fi nance for

Fremont Motors.

F&I producers are taught a no-

pressure approach to F&I sales.

Three years ago, the group installed

MenuVantage’s F&I selling system.

Laird likes the system because it al-

lows him to monitor his team.

“When we present product, we

want to make sure we’re making it

clear to customers how our products

will benefi t them. And we present

them as options, show them how they

work and then leave it the customer

to decide,” he says.

Laird adds that sales managers are

paid the same amount on F&I income

as F&I managers, which he says has

created a real team atmosphere be-

tween the two departments. It also

has led to better F&I performance.

Compliance Check: For Fremont,

there’s just no option when it comes

to compliance. “All our stores are in

small markets, which means we need

to be able to sell to a couple of gener-

ations of customers,” Laird says. “We

don’t survive if we don’t have repeat

customers.”

The dealership also is active in the

Wyoming Automobile Dealer Asso-

ciation, from which it sources most

of its compliance policies and pro-

cedures. It also sources information

from the AFIP. Laird also conducts

quarterly audits of customer fi les.

Industry Involvement and Trophy Room: The operation’s president

and CEO, Charles Guschewsky,

sits on the board of directors for the

Wyoming Automobile Dealers As-

sociation. The group’s Ford store

earned Blue Oval certifi cation, and

its Toyota store is a four-time win-

ner of the Toyota President’s Award.

Its Chrysler/Dodge dealership also

was awarded Chrysler’s Five Star

distinction.

Giving Back: The dealership pro-

vides $400,000 in annual support to

local causes throughout Wyoming

and Nebraska.

Haddad DealershipsBackground Check: Haddad Deal-

erships, which operates a Subaru,

Toyota and Hyundai store, has served

the Pittsfi eld, Bennington and North

Adams areas of Massachusetts for

more than 80 years.

The Numbers: Managed by Chris

Cochran, fi nance director, Haddad’s

seven-person F&I team is already 10

to 12 percent ahead of last year in

terms of profi t per retail unit. Accep-

tance rates are up 20 percent.

Secret Weapon: A pay plan that re-

wards for overall acceptance rates, not

for product-specifi c penetrations. The

group currently employs the menu

systems offered by DealerTrack and

Team One Research and Training.

Cochran says his team’s approach

to F&I product sales is what has

made the biggest difference. “With-

out getting into specifi cs, instead of

us selling, our method lends itself to

customers having to choose which

option works for them,” he says.

Compliance Check: Compliance

has really come into focus for Hadd-

ad in recent years, as the group re-

ally put a high price on customer

satisfaction. That’s why Cochran

has made CSI a big part of his team’s

pay plans.

Cochran also conducts spot checks

on deals to ensure compliance, a pro-

cess implemented by F&I Resources,

a New England-based general agency.

As for training, Cochran leads weekly

meetings and is in charge of new-hire

training. Additional F&I training is

provided by F&I Resources.

“For me and my guys, [being an

F&I Pacesetter] validates all of the

work we put in,” Cochran says. “This

recognition also speaks to our leader-

ship here at Haddad.”

Trophy Room: Has won the Toyota

October 2011 F&I and Showroom 15

Pace the

FI1011pacers.indd 15 10/3/11 6:29:41 PM

President’s Award every year since

2008.

Giving Back: Haddad supports the

local Big Brothers Big Sisters of

America affi liate. The dealer group

also sponsors multiple youth sports

teams, and supports the annual Boys

& Girls Club Golf Tournament.

International Auto, Orland ParkBackground Check: Operated un-

der the AutoNation banner until

2009. Today, the Tinley Park, Ill.-

based dealership operates under the

16-store International Autos Group,

which operates stores throughout Il-

linois and Wisconsin.

The Numbers: Service-contract

acceptance rates are up 25 percent,

while profi t per vehicle retailed is up

10 percent.

Secret Weapon: Consistency. F&I

Director Paul Bednarz attributes

International’s success to the prod-

uct-based pay plan he installed for

his four-person F&I team. Commis-

sion levels increase as producers hit

certain acceptance rate targets. The

structure, he says, keeps his team ag-

gressive without having to resort to

high-pressure selling.

Compliance Check: The store com-

pletely revamped its compliance poli-

cies and procedures after it was ac-

quired by International Autos Group.

Much of its compliance rulebook was

sourced from its product provider,

JM&A Group.

Deals are reviewed monthly for

compliance and the F&I managers

are graded by customers through the

dealership’s CSI survey. The com-

pany also has set prices for all of its

F&I products. “We want consisten-

cy,” says Bednarz. “We’d rather have

three products at $200 dollars profi t

instead of one product at $1,000.”

Most F&I managers at the store

are holdovers from the dealership’s

AutoNation days, so most have been

trained and tested by the AFIP.

Trophy Room: Won several manufac-

turer-based CSI Recognition Awards.

Giving Back: Every dealership under

the group’s banner is inovlved in com-

munity support programs.

Jenkins & WynneBackground Check: Founded in

December 1953 by Vernon Jenkins

and his partner, Briz Wynne, the

Clarksville, Tenn.-based, single-

rooftop Ford, Lincoln and Honda

store is a two-time Time magazine

Dealer of the Year winner. The store

is currently operated by the founder’s

son, Don Jenkins.

The Numbers: The F&I department

is running 10 to 15 percent ahead of

last year. Sixty percent of the group’s

sales are to repeat customers.

Secret Weapon: According to

Angelia Butts, who manages a fi ve-

person F&I team, the organization’s

secret to success lies with the group’s

active dealer. He sets the tone for ev-

erything that goes on, she says. “No

one in this dealership is of any less

importance,” she says. “There’s defi -

nitely a culture here.”

The F&I process, which employs

Team One Research and Training’s

F&I menu-selling system, starts with

a thorough review of a customer’s

credit standing. The focus is on get-

ting them the best fi nance deal pos-

sible before products are ever intro-

duced. Butts adds that payments are

never quoted on the show fl oor.

Each F&I staffer is given specifi c

goals and growth plans. The store’s

management team also is active in

monthly performance reviews.

Compliance Check: Setting the tone

for the dealership’s compliance ef-

forts is its motto: “Our obsession is

your satisfaction.” That’s why regular

meetings are held among the opera-

tion’s management team to review and

update compliance policies. Bulletins

published by the state and national

dealer associations are required read-

ing for F&I team members.

The dealership also sources its

compliance material and training

from the The Plateau Group, its F&I

product rep and income-development

company. Completed deals also are

routinely audited for compliance, and

monthly reviews of the dealership’s

sales and F&I processes are conduct-

ed. CSI for the Ford segment is 90;

for Honda, 97.

Trophy Room: Won the Ford and

Honda presidents’ awards the last sev-

en and six years, respectively. Named

Time magazine’s Dealer of the Year

in 1984 and 2010, and Clarksville

residents have voted the dealership as

the “Best Place to Buy a Vehicle” for

10 years running.

Giving Back: Among its many com-

munity support activities, Jenkins

and Wynne is an active supporter

of the Fort Campbell military base,

runs a Soldier of Month program,

and supports the United Way and lo-

cal school athletics programs.

Lithia Motors Inc.Background Check: The group was

founded by Walt Deboer in 1946 as

a Chrysler Plymouth Dodge fran-

chise in Ashland, Ore. In 1996, the

85-rooftop operation became one of

the nation’s largest publicly traded

dealer groups.



Angelia ButtsJenkins & Wynne

▲

FI1011pacers.indd 16 10/3/11 6:29:43 PM

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The Numbers: Revenue in the sec-

ond quarter was up 30 percent year

over year, the highest second quar-

ter earnings for the company since

2006. Revenue generated from F&I

increased 32.3 percent, with average

gross profi t per retail unit up 8.9 per-

cent to $1,000.

Secret Weapon: The sheer scale of

this operation is its main advantage.

Its size and resources have allowed

Lithia to have a department, led by

Steve Justice, devoted to monitoring,

training and keeping performance

levels up among the group’s 145 F&I

producers.

Justice and his four-person support

team review all of the group’s deals,

which are scanned and emailed to

him by each store. They track the

performance of producers and cus-

tomize training to address specifi c

needs. The team also manages new-

hire training and runs the group’s an-

nual weeklong training event.

As for F&I product sales, the group

employs what Justice describes as a

hybrid between step and menu sell-

ing. The process starts with a fea-

tures and benefi ts review of the dealer

group’s four core F&I products. The

goal is to build value in the product

before the F&I manager presents a

customized package option of the

group’s core products.

Compliance Check: When Justice

and his team aren’t training, they’re

performing regular deal audits to en-

sure compliance. The group also hosts

a weeklong training course that all

F&I producers are required to attend.

Industry Involvement: Member of

the National Automobile Dealers As-

sociation.

Giving Back: Every dealership un-

der the Lithia banner is involved in

community support programs. At the

corporate level, Lithia is involved in

YMCA and Kids Unlimited. It also

hosts an annual golf tournament to

support Oregon colleges.

The Suburban CollectionBackground Check: The dealer

group was founded more than 60

years ago as a single-point Olds-

mobile dealership in Birmingham,

Mich. Today, it operates 21 loca-

tions throughout Michigan and South

Florida.

The Numbers: Managed by Gary

Allgeier, director of fi nance, and Jodi

Nicholson, fi nancial services support

manager, the group’s 45 F&I produc-

ers set an all-time record in August

for fi nancial services income. The

department is averaging well north

of one product per deal, but they’re

striving to achieve a consistent two

products per deal.

Secret Weapon: The group’s abil-

ity to go from a 30,000-foot view

of its operation down to street level

with one click. The operation in-

vested in a technology platform that

pulls data from all fi ve of the group’s

dealer management systems. It al-

lows Allgeier to monitor production

at each location and respond to any

trends with training or other tools.

That was the case when Allgeier

created his group’s lender matrix

last year. With lenders still guarded,

the matrix helped producers quickly

match customers with the right fi -

nance source. Today, the matrix is

the reason the department is success-

ful at getting 90 percent of fi nance

customers approved.

Allgeier also attributes his team’s

success to Intravision’s F&I video

recording system, which the group

began installing in every F&I offi ce

in April 2009. Compliance was one

of the factors considered, but the

main motivation for adding the sys-

tem was to help drive production the

right way, as it serves as an invalu-

able training tool.

Compliance Check: When the plat-

form was introduced, Allgeier asked

programmers to equip the system

with triggers that notify him by text

when a process is skipped. “We basi-

cally took the compliance regulations

in our 101-page manual and automat-

ed the follow up,” he says.

He also requires a menu on every

deal, as it serves as the trigger point

for many of the group’s automated

compliance activities. “We tried to

automate all non-revenue generating

activities,” Allgeier says.

Trophy Room: Named the 2010 F&I

Dealer of the Year and a 2009 F&I

Pacesetter.

Giving Back: The group is involved

in more than 80 charities, includ-

ing the American Cancer Society,

American Red Cross and the Boys and

Girls Club of Southeast Michigan.



(L-R): Steve Veldkamp, Jodi Nicholson, Raymond Borg and

Gary Allgeier on one of The Suburban Collection’s lots.

FI1011pacers.indd 18 10/3/11 6:29:45 PM

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Products and services are underwritten and provided by member companies of Zurich in North America, including Universal Underwriters Insurance Company and Universal Underwriters Service Corporation. Certain coverages and products and services are not available in all states. *Results based on 2010 data. ©2011 Zurich American Insurance Company

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F&I and Showroom mag-

azine and its sponsor,

Innovative Aftermarket

Systems (IAS), set out to

fi nd the best F&I presen-

tations in the following categories:

Vehicle Service Contracts, GAP,

Tire and Wheel, Key Replacement

and Theft Deterrent. One of the fi ve

individuals selected will be named

the 2011 winner of the magazine’s

inaugural F&Idol contest.

In July, readers of the magazine

were asked to submit a video of a

mock customer interaction. The

videos had to be less than

fi ve minutes long, and

each contestant had to

successfully handle at

least two customer objec-

tions. The prize for each of the cat-

egory winners: $1,000, plus airfare

and hotel accommodations at the

Las Vegas Hilton.

Judging the entries were Bob Corbin, president and CEO of IAS;

Gregory Arroyo, the magazine’s

executive editor; ‘Mad’ Marv Eleazer, monthly

columnist and F&I direc-

tor at Langdale Ford; Ron Reahard, magazine con-

tributor and president of Reahard and

Associates Inc.; Steve Veldkamp,

training director at Great Lakes

Companies; Alan Miller, senior vice


F&Idol Contest

g yn

-

f h

ex

Reib d

Lights, Camera,

Action!These fi ve individuals were named category winners for having the best on-camera F&I presentations in fi ve categories. Find out

what strategies they employ in the F&I offi ce. By Jennifer Washington

PHOTO ©ISTOCKPHOTO.COM / DPMIKE

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president of CNA National Warranty

Corp.; Robert Harkins, president of

RAH Consulting; and Randall Criso-rio, president and CEO of United De-

velopment Systems.

Entries were judged for their tran-

sition statements and overall fl ow,

customer rapport, product disclosures

and knowledge, effective use of per-

sonal stories, and objection handling.

In all, judges reviewed more than 30

entries and selected the fi ve individu-

als profi led below.

The videos were posted on the

Industry Summit Website to allow

readers to vote for their favorite fi nal-

ist and help decide who would walk

away with the F&Idol trophy — and

an additional $2,500. Here’s a look at

the fi nalists:

GAPName: G.P. Anderson, fi nance man-

ager

Store: Thielen Motors, Park Rapids,

Minn.

Years in the Business: More than

20

Years At Current Dealership: 12

Claim to Fame: His fi nance penetra-

tion rate stands at 78 percent, and

he’s working toward averaging at

least three products per deal.

Keys to Success: The constant need

for improvement. “F&I managers

need to strive to get 1 percent better

every single day,” he says.

Customer Objection: I’m concerned

about GAP raising my payments.

G.P.: In your situation, it will run

you $499 for fi ve years. Divide that

by fi ve and that comes out to $99 a

year. Divide that by 365 and it costs

you 28 cents a day to have that cov-

erage. One of the great things about

this coverage is that it covers you

for fi ve years. Let’s say that, in three

years, you decide to trade out of [the

vehicle]; you’ll still have two years

of coverage remaining. If you cancel

it, you get the balance of the money

back, which we can use on your next

vehicle purchase. It’s prorated.

Also, you said you wanted your

payment to be under $300. Well, with

the product, your payment is going to

come in at $295.

Key ReplacementName: Jim Hesselgrave, fi nance di-

rector

Store: Crown Honda, Pinellas Park,

Fla.

Years in the Business: 32

Years At Current Dealership: 14

Claim to Fame: He was his store’s

Finance Manager of the Year in 2010,

and he averages two products per deal.

Additionally, one out of every two

customers buys a product from him.

Keys to Success: Doing the same

thing every time and the training he

received from Gerry Gould of United

Development Systems.

Customer Objection: I’ve never

lost my keys and I don’t plan to lose

them in the future. I don’t think it’s a

good product for me.

Jim: Let me tell you about another

customer’s experience. A man takes

his family to a theme park and, at

some point during a rollercoaster

ride, his keys fall out of his pocket.

But he’s got one of these (holds up a

customer card). He makes a phone

call, gets picked up and is driven to

the nearest dealership about six miles

away at no charge. The dealership

makes him a new key at no charge

and they drive him back to the en-

trance so he can rejoin his family. All

of that took less than an hour. Does

this make more sense to you now?

Vehicle Service ContractName: Chris Bonilla, fi nance manager

Store: Auburn (Wash.) Chevrolet

Years in the Business: 6Years At Current Dealership: 6Claim to Fame: In August, his ser-

vice contract penetration rate was at

68 percent and his average profi t per

retail unit was at $1,846. That means

only 10 percent of his customers

don’t buy products from him — the

rest do.


F&Idol Contest

G.P. AndersonThielen Motors

Cars aren’t actually broken into, as least from the profes-sional jobs we’ve seen. Instead, they’re fl at-bedded. Once it

gets into a garage, it’s disassembled into 50 parts or so.

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Keys to Success: The mentorship of

his owner, Phil Bivins, as well as the

infl uence of his trainer, Joe Papa. He

also credits training received from

Resource Automotive.

Customer Objection: I don’t want

my payment to go up, and I think this

is a quality car.

Chris: Let’s say your car was 99.9

percent problem-free. So, if you mul-

tiply 15,000 parts by 99.9 percent,

that means 14,985 parts will be prob-

lem-free. But that still leaves 15 prob-

lem parts. Let’s say your car is better

than 99.9 percent and cut that number

in half to seven problem parts. Our

average repair order is $500. If I mul-

tiply $500 by seven, you get $3,500.

Well, our service contract is $1,999,

so you can see how our service con-

tract is going to save you money in

the future.

So, will 72 or 78 months work bet-

ter for you?

Theft DeterrentName: Raymond Borg, fi nance

manager

Store: Suburban Collection, Troy,

Mich.

Years in the Business: 18

Years At Current Dealership: 8Claim to Fame: The operation’s

magic number for product per vehicle

retailed is $1,000, so he likes to be

around there. He also tries to achieve

a two-product average per retail unit.

Keys to Success: The insights of-

fered by his F&I Director, Gary

Allgeier. The dealer group’s video

recording system also allowed him

to get his customer interactions really

dialed in.

Customer Objection: The car uses

a smart key. You can’t “jimmy” the

lock or hotwire the car, so I think I’ll

pass.

Raymond: Cars aren’t actually bro-

ken into, as least from the profession-

al jobs we’ve seen. Instead, they’re

fl at-bedded. Once it gets into a ga-

rage, it’s disassembled into 50 parts

or so. Our process etches traceable

numbers into the vehicle. If your car

is stolen and the parts did show up,

police and body shops can use their

black lights to see the phone number

and VIN permanently etched [onto

the parts]. We also warn thieves

with a sticker that goes in the win-

dow. And the package comes with

an additional $5,000 to help replace

the car.

Customer: AAA has always covered

me.

Raymond: They won’t cover the

taxes, and the car loses about 20 per-

cent in depreciation when you drive

off the lot.

Customer: I could see how that

would make sense.

Raymond: It’s approximately $7 or

$8 a month to possibly deter a thief

from thinking about stealing your

car. And it helps you get your money

back if it’s stolen. Want to go ahead

and include it with your purchase?

Tire and WheelName: Paul Vander Kamp, business

manager

Store: DeNooyer Chevrolet, Kala-

mazoo, Mich.

Years in the Business: 7Years At Current Dealership: 7His Approach: Using both vi-

sual aids and real-life occurrences.

“You’re in a high-importance posi-

tion, so the more professional you are

with customers, the better impression

they have of you and the dealership,”

he says.

His Key to Success: The training

and support provided by Ally Finan-

cial.

Customer Objection: I like the cov-

erage, but I can get it through ABC

Tires for less.

Paul: ABC Tires has a great pro-

gram. But if you’ve purchased there,

they only give you a prorated replace-

ment warranty. Ours is not prorated.

If you’re 70 percent worn out and you

need a new tire, they’re going to pay

that kind of money for it. ABC Tires

also does not cover the rim.

Customer: I also considered self-

insuring because the tires and rims

can’t be that much.

Paul: The truck model you’re buying

has 20-inch rims, so you’re looking at

about $200 per tire. Also, it’s going to

be about $600 to $700 per wheel.

Customer: Those are a lot more ex-

pensive than I thought.

Paul: You have to ask yourself, is it

easier to budget $2 to $3 a week, or

is it easier to budget for a $900 unex-

pected repair?”


F&Idol Contest

Raymond BorgThe Suburban Collection

The truck model you’re buying has 20-inch rims,

so you’re looking at about $200 per tire. Also,

it’s going to be about $600 to $700 per wheel.



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The mobile race is on.

Technology companies

and even F&I product

providers continue to

roll out solutions aimed

at mobilizing processes away from

the sales desk and outside of the F&I

offi ce. Industry insiders and dealer

personnel are mixed on whether that

future will ever be realized, but all

agree that there is a place in the deal-

er world for today’s mobile devices.

Last year, Mercedes-Benz Finan-

cial Services became the fi rst captive

lender to introduce a dealer-facing

Apple iPad solution. Now, ADP

Dealer Services, BMW Financial

Services, DealerTrack, Innovative

Aftermarket Systems, Reynolds and

Reynolds, and Warrantech are look-

ing to do the same. Most current solu-

tions are focused on helping dealers

manage customers and their opera-

tions, but these offerings also leave

open the possibility of these tools

making their way into the sales and

F&I process.

Fueling this trend are stats like

the ones published by Cambridge,

Mass.-based Forrester Research,

which showed that consumers have

purchased nearly 29 million Apple

iPads since the tablet was introduced.

The acceptance of these devices is

allowing solution providers to move

away from costly, device-dependent

strategies toward more Web-based

solutions, allowing dealers to decide

on the hardware they’ll use to access

these tools. Here’s a look at what’s

available now or will be in the near

future:

ADP Dealer Services: Performance Tracking

ADP Dealer Servic-

es’ Drive for Mobile

is a mobile Website

companion for its

ADP Drive DMS. It

is designed to allow a

dealership’s executive

management team to access key per-

formance metrics for every depart-

ment from their iPhone or Android-

based smartphone.

Currently used by more than 1,000

registered clients, ADP Drive for

Mobile provides mobile access to

stats for every department, as well

as drill-down capabilities. Users can

monitor cash fl ow, accounts receiv-

able and payable. Managers also can

view service department repair or-

ders, as well as a wide array of ser-

vice-related performance data. ADP

Dealer Services also offers a cus-

tomer-interaction tool for the service

department. Called Customer Touch,

it is designed to send out service re-

minders and notifi cations to custom-

ers via mobile text, direct mail, auto-

mated or live voice, or email.

BMW Financial Services: Mobile Dealer PortalBMW’s InfoBahn Mobile is an iPad-

compatible version of its dealer por-


Technology

MobileMainstreamGoes

The pace of mobile technology adoption is quickening, and companies are lining up to help dealers transition to a mobile marketplace. Here’s a breakdown of seven solutions that are available now or will be in the near future. By Jennifer Washington

FI1011mobileapp.indd 28 10/3/11 3:59:13 PM


tal. It allows users to handle credit

applications and inquiries and con-

duct lease-return inspections. On the

lease-return end, dealership staff can

use InfoBahn Mobile to pull up an

inspection worksheet and calculate

damages while conducting the in-

spection. On the F&I side, the captive

fi nance company is currently work-

ing with about eight to 10 dealers to

test what Shawn Bugbee, a senior

marketing executive for BMW Fi-

nancial Services, terms as “full mo-

bile F&I.” The company also added

Silanis Technology’s e-signature so-

lution to its solution last September,

signaling its long-term plan to allow

for e-contracting over the iPad.

DealerTrack eCarList: Customer ManagementWhen DealerTrack acquired eCarL-

ist in July, the company also acquired

the inventory management and mer-

chandising solution provider’s Tru-

eTarget mobile app. It

can run on an Apple

iPad or iPhone, as well

as Android-based de-

vices. For salespeople,

the free version allows

access to data from

AutoTrader, Cars.com

and eBay Motors from

anywhere. They can

even see the pricing of their competi-

tors. The app also acts as an appraisal

tool, allowing salespeople to scan

VINs or a vehicle’s window sticker.

The merchandising features allow

dealerships to photograph vehicles

and manage their online vehicle list-

ings from their mobile device. It also

allows them to see market pricing so

they can price their vehicles to the

market. The upgraded version of the

app also provides access to data from

BlackBook, AuctionNet, Manheim

and Adesa.

IAS: Customer Management and TrainingInnovative Aftermarket Systems

SmartPad mobile tool can be used

to present F&I products to custom-

ers before they make the transition to

F&I. Its primary purpose, however, is

to help users manage

the customer experi-

ence at their stores.

Part of the after-

market program pro-

vider’s SmartDeal-

erProducts software

suite, SmartPad is

compatible with the

Apple iPad, most Google-based

Android tablets and the Blackberry

Playbook. Whether answers are

keyed in by the interviewer or the

customer, results can be transmit-

ted to the dealership’s management

team via text message or e-mail.

Dealers also can equip SmartPad

with multimedia presentations and

even video clips.

Mercedes-Benz Financial Services: Mobile Dealer PortalThis month marks the one-year anni-

versary of Mercedes-Benz Financial

Services’ (MBFS) full-scale deploy-

ment of the mobile version of its MB

Advantage software. The mobile of-

fering is built around MBFS’s deal-

er point-of-sale system and allows

front-end staff to start loan applica-

tions and check for fi nancing options

while working with a customer.

The mobile version of MB Advan-

tage also can be used

to ground lease-return

vehicles. Michael

Kanzleiter, senior

marketing manager

for the company,

wouldn’t tip his hat

as to what’s next for

MBFS’s mobile strat-

egy, but he says his technology staff

will continue to look for more uses.

Reynolds and Reynolds: Customer ManagementReynolds and Reynolds‘ dealerPAD

solution is available at no additional

charge to current users of the com-

pany’s Contact Management system.

Designed to represent the mobile

version of the company’s customer

relationship management system, it

allows salespeople to create customer

records while interacting with them

on the lot. Sales consultants can even

check their appoint-

ment schedule and re-

cord recent activities.

Users must have an

existing account with

CarLocate.com, the

vehicle search portal

Reynolds launched in

2009. That’s because

the site is used to populate the iPad

with the same vehicle photos and in-

formation customers are seeing on

dealers’ Websites.

Warrantech: Customer Management and TrainingWarrantech will enter the mobile race

early next year with a Web portal that

dealers can access from their desktop

computer, mobile tablet device or

smartphone. The product provider’s

offering will serve as both a customer

interaction tool and training aid.

The company has yet to give its

dealer-facing solution a name, but of-

fi cials say dealers will

be able to load it with

closing videos, cus-

tomer presentations

and even evidence

manuals. So, while

the portal will act pri-

marily as a customer-

satisfaction moni-

tor, dealers will have fl exibility in

how they use the mobile solution.


Technology

h


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Auto Finance

A few bumps in the road may have slowed

the economic recovery, but that wasn’t

the case for auto fi nance, especially in the

second quarter. Dealers were able to fi nd

more sources for their credit-challenged

customers, with Experian Automotive’s quarterly auto fi -

nance data showing a signifi cant increase in loans made to

below-prime car buyers.

That segment represented 22.29 percent of all new-ve-

hicle loans originated during the second quarter, an 18.21

percent increase from the year-ago period. This was wel-

come news to both dealers and manufacturers, especially

with half of all potential consumers falling into the high-

risk credit tiers.

For their part, consumers continued to improve their loan

repayment patterns, and their good behavior is driving the

■ New-vehicle loans made to subprime customers increased by 22.4 percent during 2Q 2011 compared to the year-ago period.

■ Average customer credit scores for both new- and used-vehicle loans dropped by 10 and eight points, respectively.

■ Average loan amountsfor new vehicles were up only $17, but average loan amounts for used vehicles jumped by $476.

■ Monthly paymentswere relatively fl at, dropping $5 for new vehicle loans and rising by $4 for used vehicle loans.

2Q 2011 by the Numbers

Below PrimeGoes

Prime TimeIn the second quarter, fi nance

sources continued their drive down into the high-risk credit tiers and consumers continued to pay on

time. But the magazine’s resident fi nance insider wonders how long

those trends can continue in this month’s review of quarterly

auto fi nance trends. By Melinda Zabritski

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FI1011experian.indd 32 10/3/11 5:15:02 PM

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push into the high-risk credit tiers on the part of fi nance

sources. That pattern also is driving down delinquencies,

repossessions and dollar volumes of at-risk loans. The up-

tick in average loan amounts for new ($17) and used ($476)

vehicles also served as an indicator of the auto fi nance in-

dustry’s improving health and appetite.

Delinquencies Continue to FallAs previously mentioned, consumers continued to make

their payments on time and gave fi nance sources every

reason to delve deeper into the lower credit tiers. The 30-

day delinquency rate, for instance, declined by 10.39 per-

cent in the second quarter, falling from 2.89 percent to

2.59 percent of all open automotive loans. Additionally,

the 60-day delinquency rate fell by 14.46 percent, with

fi nance companies experiencing the largest rate decline.

The decreases in the 30- and 60-day delinquency rate

led to a nearly 20 percent decline in overall dollar volume

of at-risk loans, which fell from $21 billion a year ago to

$16.9 billion in the second quarter.

Below Prime in the Fast LaneThe most positive sign for dealers was the 22.4 percent

year-over-year jump in new-vehicle loans made to credit-

challenged customers. That increase shouldn’t be a sur-

prise, given the improvements in delinquencies and dollar

volumes of at-risk loans.

Breaking down the high-risk segment, the share of auto

loans made to nonprime customers rose from 10.57 per-

cent a year ago to 11.99 percent. The share of loans for

subprime customers rose from 6.16 percent in the year-

ago quarter to 8.17 percent. The biggest jump in share

was made by the deep subprime category, which rose 44.1

percent year over year to 2.13 percent.

Loans made to the below-prime risk tiers also jumped

in the used segment, increasing by 7.7 percent year over

year. Overall, 52.7 percent of used-vehicle loans were

made to nonprime, subprime or deep subprime car buy-

ers, up from 48.93 percent in the year-ago quarter.

Average Amount Financed Spikes for Used The average amount fi nanced for new vehicles remained

relatively unchanged from the same quarter last year.

Used-vehicle loans, on the other hand, experienced a sig-

nifi cant jump from the second quarter of 2010.

The average loan amount for a new vehicle increased

$17 to $25,240, while the average for used rose by $476

to $17,062. The spike in loan amounts for used vehicles,

however, was not a refl ection of lenders loosening their

credit criteria. The increase could instead be attributed to

the rise in used-vehicle pricing during the quarter.

Average monthly payments for new vehicles were


Auto Finance

2Q 2010

100%

80%

60%

40%

20%

0

New-Vehicle Financing by Risk Segmentation

1.48%6.16%

10.57%

13.55%

68.24%

2Q 2011

2.13%

8.17%

11.99%

14.06%

63.65%

44.1%

Deepsubprime

32.6%

Subprime

13.4%

Nonprime

3.7%

Prime-6.7%

Superprime

Year-Over-Year Change in Risk Distribution

50%

40%

30%

20%

10%

0

-10%

The spike in loan amounts for used vehicles, however, was not a refl ection

of lenders loosening their credit criteria. The increase could instead be attributed

to the rise in used-vehicle pricing during the quarter.

2.55%2.25%

Bank

3.08%2.66%

Captive

2Q 2010 2Q 2011

1.59%

1.49%

Credit union

5.89%

5.14%

Finance/other

30-Day Delinquency Rate

5.5%

4.5%

3.5%

2.5%

2.0%

1.5%

1.0%

0

0.64%0.54%

Bank

0.58%0.42%

Captive

2Q 2010 2Q 2011

0.37%0.33%

Credit union

1.79%

1.54%

Finance/other

60-Day Delinquency Rate

2.0%

1.5%

1.0%

0.5%

0


fl at as well, with the average payment decreasing $5 to

$450. The average payment for used, however, jumped

by $347.

Loan terms showed little movement, with new-vehicle

terms rising just one month to 63 months. Used terms

increased from 58 months in the year-ago period to 59

months.

3 Potential Threats to Industry’s Good HealthFinance sources are feeling a lot better these days, but will

it last? Consumers are getting better at paying off their

loans, which is causing delinquencies and dollar volumes

of at-risk loans to fall. But this renewed stability could also

lead to higher risk taking on the part of fi nance sources.

The auto fi nance market also is operating in what re-

mains a relatively fl at retail market. The danger here is

that a battle for deals could fuel a return to the prereces-

sion race for market share. That wouldn’t be a bad thing

for dealers in areas with a large pool of nonprime custom-

ers, but it would not be good for the long-term health of

the industry.

The other threat is the teetering economy. If the coun-

try were to fall into another recession, there’s no telling

what strategies lenders will employ for the remainder of

the third quarter and beyond. There is a possibility that

they might continue to reach deeper into nonprime, but

they could just as easily pull back in the face of high un-

employment and the roller-coaster ride the stock market

has been on in recent months.

If we can avoid a double-dip recession, fi nance sources

will be well positioned going forward. If not, the spike

in riskier loans could turn into a slippery slope for the

industry.

Melinda Zabritski serves as director of automotive credit for Experian Automotive. E-mail her at [email protected].

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Average Amount Financed

$25K

$20K

$15K

$10K

$5K

0

$16,586$17,062

Used

$25,223$25,240

New

2Q 2010 2Q 2011


mailto:@bobit.com


D kD kReorganizing

the

The desk can be critical to a dealership’s success,

but overstepping its boundaries can leave a

store vulnerable. The magazine’s F&I pro

draws a line in the sand. By Ronald J. Reahard

There is an ugly trend tak-

ing hold at many dealer-

ships today. The sales

desk is being tasked with

many of the duties and

functions that have traditionally been

the responsibility of the F&I depart-

ment. The list includes taking credit

applications, pulling credit bureaus,

submitting deals to lenders, and quot-

ing payments and interest rates.

In such cases, F&I is a separate

department in name only. And un-

less the customer has terrible credit,

the desk basically handles the entire

process while the fi nance offi ce is

relegated to simply preparing the pa-

perwork and presenting the customer

with additional products to purchase.

Paper Pusher vs. F&I ManagerIs this what’s happening at your deal-

ership? If you’re not sure, consider

the following questions:

1. Who takes the credit application

and obtains the credit bureau report?

2. Who reviews the app with the

customer prior to submission?

3. Who decides which lender to

submit the deal to, and who actually

submits the deal to the lender?

4. Who determines the interest

rate, down payment and maximum

advance?

5. Who decides whether the cus-

tomer matches the vehicle, and who

decides whether or not to deliver the

unit?

If you answered “the desk” to a

majority of those questions, then

you no longer have an F&I depart-

ment. What you have is a secretarial

service for the sales department.

All you’re doing is typing up the

fi nance terms the sales department

negotiated.

F&I managers are there to help

customers attain the car they want at

terms they can afford. Removing the

“fi nance” function from the F&I de-

partment reduces it to mere product

pushers. Worse yet, if the F&I man-

ager is not reviewing the credit appli-

cation and credit bureau with the cus-

tomer prior to submitting a deal to a

lender, the customer will not perceive

him or her as having any role in the

credit process — and they’d be right.

The biggest problem, however,

is that there is no way for the F&I

manager to attain the necessary in-

formation he or she needs to make

a needs-based product presentation.

And if an F&I manager doesn’t get

the customer’s story regarding infor-

mation contained in the credit app or

the bureau, the F&I sales process be-

comes nothing more than a series of

generic product pitches.

Checks and BalancesThe F&I department also plays a vi-

tal role in protecting the dealership,

because all it takes to put a dealership

out of business is a desperate sales-

person infl ating a customer’s income

or a rogue sales manager power-

booking cars. That’s why every store



PHOTO BY GREGORY ARROYO

FI1011desk.indd 36 10/3/11 6:27:44 PM

AF0

5-39

.10

AT BOBIT BUSINESS MEDIA, WE’RE KEEPING THINGS

You can feel confi dent that within our magazines, websites and trade shows, Bobit Business Media is doing our share to maintain a “green” working environment.

As individuals and as a company, we are dedicated to maintaining green initiatives and strive to be good

citizens of this planet. Finding new and innovative ways to reduce our carbon footprint is always a priority for Bobit Business Media.

AT BOBIT BUSINESS MEDIA, WE RE KEEPIN

Here are a few of the ways we’re keeping GREEN:

RECYCLED PAPER PROGRAM: • 5,000 lbs

per month

RECYCLED CANS & BOTTLES PROGRAM: • 40 lbs per month

WINDOW TINTING: reduces energy loss • by 75%

VARIABLE SPEED CONTROL ON HVAC • UNITS: 7500 kWh saved per month

RETROFITTING OLD T-12 FLUORESCENTS TO • NEW T-8S: 3400 kWh saved per month

EFFICIENT BOILER/HEATER: • 3000 thermssaved per month

PARTNERING WITH OUR PRINTER: developed • a “green” game plan, saving paper,

ink and energy

RECYCLED TONER CARTRIDGES AND • BATTERIES PROGRAM

AND OUR• ENVIRONMENTALLY FRIENDLY

Digital EditionsAF0

5AF0

539-39.1010

HHeerree aarree aa ffeeww ooff tthheeee wwwwaayyssss p gwe’re keeping GREREEEN:

RECYCLED PAPER PROGRAM: • 55,0000 llbsper month

RECYCLED CANS & BOTTLES PPROOGRAMM: • 40 lbs per month

WINDOW TINTING: reduces eeneergy losss • by 75%

VARIABLE SPEED CONTROLL ONN HVAC •UNITS: 7500 kWh savedd perr month

RETROFITTING OLD T-12 FFLUOORESCENTTS TO •NEW T-8S: 3400 kWh ssavedd per monnth

EFFICIENT BOILER/HEATEER:• 30000 theermssaved per month

PARTNERING WITH OUOUR PRINNTER: develloped•a “green” gameme plan, , saving papper,

ink and energyyene

RECYCLRECYCL ONER CARTRIDCLED TO IDGES AND • BATTE GRAMERIES PROGRAM

AND OOUR• ENVIRONMENTALLY FRIENNDLYY

Digitital Editions

We care about the environment and are setting a positive example.

FI1011desk.indd 37 10/3/11 6:27:50 PM

capacity for the sales department. If

you let the fox guard the henhouse,

you’ll run out of chickens pretty fast.

If you eliminate the critical checks

and balances for the sales depart-

ment, you may not have a dealership.

The F&I department also is re-

sponsible for building and maintain-

ing the dealership’s lender relations,

which means they have to be the ones

to confi rm the information sent to the

lender is correct. The department

also must manage the dealership’s

portfolio mix and look-to-book ra-

tio for all of the dealership’s lenders.

That is impossible to do when you’re

not the one submitting the deals to

the dealership’s fi nance sources.

To protect the dealership and en-

sure the customer sees value in the

F&I process, the sales desk must

operate within certain parameters.

The most successful — and profi t-

able — dealerships establish writ-

ten guidelines for both the sales and

F&I departments. Those guidelines

should refl ect the fact that the sales

department is responsible for selling

new and used vehicles. It should also

indicate that the sales department is

not responsible for selling or giving

away dealership fi nancing or F&I

products in an effort to sell those

vehicles. Additionally, the sales

desk should not be allowed to sub-

mit deals to lenders without an F&I

manager fi rst reviewing the deal and

interviewing the customer.

If a customer indicates they want

the dealership to arrange their fi -

nancing, the desk can certainly have

a salesperson assist them in complet-

ing a credit app. The sales desk also

can and should obtain a credit bureau

report to help determine the interest

rate for which the customer is likely

to qualify. Additionally, payments

and interest rates should be quoted

by the desk utilizing the dealership’s

guidelines before and after a credit

bureau report has been obtained.

Once the customer makes a com-

mitment to buy, it becomes absolutely

essential that an F&I manager inter-

view the customer prior to submitting

the deal to a lender. Again, informa-

needs someone outside of the sales

department to confi rm that the cus-

tomer’s information is correct and to

verify that every deal is structured

properly for a particular lender prior

to submission.

Every dealership and every de-

partment in the dealership needs a

checks-and-balances system. If a

particular form is missing, fi lled out

incorrectly or not signed, someone

from accounting will gleefully prance

into the F&I offi ce, wave the form in

the manager’s face and chortle, “You

forgot to get this signed!” And just as

the accounting offi ce is a branch of

our checks-and-balances system, the

F&I department must act in the same



FI1011desk.indd 38 10/3/11 6:27:51 PM

Gulf States Financial Services (GSFS) is an expert reinsurance administrator with national coverage and a 29-year history of success. We provide a nationwide suite of participation programs – Dealer Obligor, Dealer-Owned Warranty Company, NCFC, CFC and Retro. Our products include Vehicle Service Contracts, GAP, Pre-Paid Maintenance, Credit Insurance and Tire & Wheel.

In addition, our dealers benefit from a highly effective training support team designed to generate dealer revenue. To find out how easy it is to switch to us, contact Tony Orozco at 713-580-3023 or [email protected].

Agent and dealer inquiries welcome.

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Your F&I offerings are incomplete without GSFSGroup®.

tion needs to be confi rmed and the

F&I manager must have the opportu-

nity to learn the details and circum-

stances related to any adverse infor-

mation contained in the customer’s

credit report. Not only is it essential

for justifying an approval from your

buyer, the information provides the

foundation for a needs-based product

presentation in the F&I offi ce.

Selling the DealRemember, the fi rst thing every

lender considers is the deal structure

itself. Based upon the lender’s stated

guidelines, maximum advance, debt-

to-income ratio, etc., ask yourself

whether the deal meets the lender’s

requirements. Nothing irritates a pa-

per buyer more than receiving a deal

that clearly wasn’t structured with his

bank’s guidelines in mind.

We’ve all had deals approved pend-

ing proof of income, only to fi nd that

we can’t actually provide the proof.

You know what that looks like to a

lender? It looks like we didn’t do

our job. That’s why it’s critical that

every dealership have written guide-

lines for the sales department when

it comes to taking the credit applica-

tion, obtaining a credit bureau report,

and quoting interest rates and month-

ly payments prior to introducing the

customer to the F&I department.

Lastly, your dealership’s guidelines

must require that the F&I department

evaluate the deal structure, as well

as review the credit application and

credit bureau with the customer prior

to submitting the deal to a lender.

So, again, if your F&I department

is not responsible for confi rming the

information on the credit applica-

tion, reviewing the customer’s credit

history with him or her, helping to

structure the deal and then submit-

ting it to a lender, maybe it’s time to

reorganize your desk!

Ron Reahard is president of Reahard & Associates Inc., an F&I training company providing classes, work-shops, and in-dealership and online training. Email him at [email protected].

October 2011 F&I and Showroom 39PHOTO COURTESY LANGDALE FORD

If an F&I manager doesn’t get the customer’s story regarding information

contained in the credit app or the bureau, the F&I sales process becomes nothing

more than a series of generic product pitches.

FI1011desk.indd 39 10/3/11 6:27:52 PM


Maximizing

PPMPPMReturnCustomer retention isn’t

the only thing prepaid maintenance plans drive.

With the right product mix, they also can add

serious revenue to your store’s bottom line.

By Mike Gorun

When a dealership

offers a prepaid

m a i n t e n a n c e

program (PPM)

to its customers,

what does the store hope to get in re-

turn? Customer affi nity is one thing,

but there are other benefi ts to this

bottom line-driving F&I product.

Not only does a PPM plan deliver

affi nity, it provides dealers with prof-

itable affi nity. And experience shows

that customers who use a dealer’s re-

pair facilities are 17 times more like-

ly to purchase their next vehicle from

that dealer. As great as that is, the

true long-term benefi t is that PPM-

plan customers frequently purchase

additional customer-pay retail parts

and labor services that boost repair

order profi tability.

To capture that opportunity, deal-

erships need to commit themselves

to delivering a safety and reliability

inspection to every vehicle owner.

Doing so helps verify the needs that

brought the vehicle into the shop and

allows technicians to identify other

legitimate maintenance and repair

needs beyond those covered by the

customer’s PPM plan.

Boosting a PPM repair order by

upselling an additional $150 to $350

of retail customer-pay business will

add serious money to the bottom line.

When a PPM plan is built into used-

vehicle prices, a dealer can bump af-

ter-sale service from about 15 percent

to upwards of 50 percent.

A dealer who plugs a basic three-

product PPM plan into every one of

the 600 used units he or she sells each

year can expect to generate more than

$1.3 million in total incremental ser-

vice revenue. This return is based on

a $682 retail upsell per customer per

service visit over the two-year plan

term, even after factoring in a 55 per-

cent utilization rate and plan costs.

PPMs Convert to More RO DollarsStudies of current customers purchas-

ing a PPM program reveal a remark-

able statistic: While current industry

stats indicate that roughly one in fi ve

customers return to the dealership for

service, this company’s plan holders

are visiting their servicing dealers at

a rate of 72 percent.

Additionally, plan holders that re-

turn to the dealership to redeem their

plan benefi ts purchase incremental


Service

PHOTO BY GREGORY ARROYO

FI1011ppm.indd 40 10/3/11 2:48:22 PM

retail service about 90 percent of

the time. In addition to the increased

visit frequency, those plan holders

are spending an average of $128 per

visit, which includes upsell products

and services.

A dealer who writes 1,500 repair

orders per month can easily sell 150 to

200 maintenance policies by simply

asking customers visiting the service

department. In the F&I offi ce, it takes

a 500- to 600-unit store to generate

the same 200 maintenance policies.

Given these upsell profi t oppor-

tunities, why is it that some dealers’

prior experience with PPM programs

is so disappointing? Many have said

that customers simply won’t buy

these plans. But upon closer inspec-

tion, it becomes clear why customers

wouldn’t be interested: the plans were

loaded with services of low value to

the customer yet priced quite profi t-

ably for the dealership. This is unfor-

tunate, as the nature of these low-val-

ue plans — and dealers’ inability to

sell the plans — result in lost service

business for the dealer.

Newer, redesigned PPM programs

help to eliminate this problem by of-

fering a wider range of products and

services. These programs — usually

administered and managed to offer

what is considered valuable to the

dealership’s customers and market

— seem to really work for both the

consumer and dealer.

Next-Gen PPM PlansToday’s PPM plans also are software-

driven, handling once time-consum-

ing chores like plan registration,

service claims and premium submis-

sion. Because dealers control these

programs, any reserve or forfeiture,

or money remaining in reserve for

plan services not redeemed by pur-

chases, is immediate.

Every plan must also account for

forfeiture, i.e., when a customer ter-

minates the plan early or does not

use the plan for whatever reason. For

most traditional plans, the third-party

administrator holds a dealer-funded

reserve. It is from this reserve that

the administrator could take up to 60

percent of the value of the cancelled

services as part of its fee structure.

The new generation of self-admin-

istered, self-managed plans offers at-

tractive advantages to today’s market

and value-conscious buyer. Custom

plan content really appeals to them,

and it makes these plans more at-

tractive. These plans also enhance

the owner’s investment by having the

vehicle maintained by the dealership

that sold his or her plan. This, in turn,

enhances opportunity for alert advi-

sors to upsell additional services for

healthier repair orders.

Michael Gorun is managing partner of MediaTrac, a technology-based owner retention and loyalty com-pany. He has worked in operational service management positions for Ford, Nissan and General Motors. He can be reached at [email protected].


FI1011ppm.indd 41 10/3/11 2:48:26 PM

mailto:@bobit.com


Sales Driver

The magazine’s sales columnist delves deeper into his call for change in Part 2 of a two-part series on creating sales momentum at your dealership. By Cory Mosley

T he excitement that comes

when things click on an in-

dividual and business level

is indescribable. There are plenty of

customers on the lot, tons of Inter-

net leads fl owing and customers and

banks saying, “Let’s do the deal!” We

in the car business like to refer to that

as “good times.”

In my previous article, I laid out

four potential game-changers that, if

implemented, can ensure increased

success for your retail operations.

By defi nition, momentum cannot

be achieved without motion. To put

things in motion, a foundation must

be laid fi rst. So, let’s fi re up the ce-

ment mixer and start pouring.

■ Identify one idea, process or strategy that must be changed: One

reason many of us never get around to

changing things is that the challenges

appear too great and we don’t know

where to begin. If you start with one

item at a time, you can signifi cantly

increase your chances of making a

complete change. When I take on a

turnaround project at a dealership,

I use this same strategy. The little

changes add up, and the snowball ef-

fect begins to create momentum.

■ Ask a respected colleague how they do things: The ego can

be a dangerous thing. Unwillingness

to seek advice keeps some really tal-

ented people from getting to the next

level. If you are the top guy at your

dealership, make it your responsibili-

ty to mentor a new sales professional.

If you’re looking for answers, seek

out people who are operating at the

level to which you aspire. Come up

with some intelligent questions, track

them down and ask away. This is how

you’ll become a better salesperson,

manager, GM or even dealer. If you

are in senior management, join a 20

Group. If you are a sales professional,

seek out a professional network for

auto sales people. If you can’t fi nd

one, let me know.

■ Put a new issue on the table:Sometimes the breakthrough comes

from the things you don’t see or think

about normally, like an untouchable

process, employee, vendor or ritual.

Take a look at some of my previous

articles for inspiration in this area.

■ Re-establish your goals: Goals

usually range from sales, gross and

income. They can be determined by

you, your manager, dealer or, best of

all — insert sarcastic smirk here —

the manufacturer. As we enter the

fourth quarter and the fi nal push for

2011, don’t be afraid to adjust your

goals. ... And I don’t mean lower. In-

stead, recommit yourself and, while

you’re at it, think even bigger!

■ Review your ‘Why’: What’s the

mission? Why are you doing what

you’re doing the way you’re doing

it? We can forget about the spiritual

awakening for now and just keep this

idea focused on your career.

■ Rally the troops: If you are in

management, get everyone involved

by spreading the word about fresh

ideas, new goals and a renewed ap-

proach. Leverage energy and these

new ideas to accelerate momentum.

If you are fl ying solo, tell someone

about your new changes and the new

outcomes you are going to attain. Tell

the guy or gal in the desk next to you,

Tweet about it or tell all your Face-

book friends — and be accountable.

■ Start taking positive action:“Action” is a word that’s often ref-

erenced but rarely realized, usually

because it involves work. Business

guru Jim Rohn once said, “What is

easy to do is also easy not to do.” In

a sense, this makes doing nothing

a form of action; it’s just the wrong

kind. Amongst the many nuggets of

wisdom that were imparted to me by

my barber as a teenager, the phrase

“Don’t talk about it, be about it,” was

one of the greatest.

The truth is, we need momentum.

It calls for energy, drives belief in

things to come and can make people

fearless. It can drive you to make

that extra call, take that extra “up”

and refuse to give up the gross when

a customer counters your numbers.

Momentum keeps the competitive

spirit alive in the store. You need it, I

need it and the dealership must have

it to dominate.

The path to the next level requires

creative thinking, the courage to

change and the courage to try some-

thing you’ve never done before. The

spirit of the car business is alive and

is ready to reward those willing to

step up to the plate and get it done. I

challenge myself every day and now I

will challenge you: E-mail me and let

me know what actions you are going

to take today. I’ll follow up with you

in 30 days to see how it’s going.

Cory Mosley is principal of Mosley Auto-

motive Training, a company focused

on new-school techniques, products

and services. E-mail him at cory.mosley

@bobit.com.

Momentum: Getting It and Keeping It

FI1011salesdriver.indd 42 10/3/11 3:13:49 PM

mailto:@bobit.com


FI1011salesdriver.indd 43 10/3/11 3:13:50 PM

1

2


On the Point

Even the most talented sales teams need supervision. “Da Man” has a plan for keeping your process running like clockwork. By Jim Ziegler

Every deal has a heartbeat. From

the moment we fi rst interact

with a customer until his or her

taillights cross the curb, the deal has

a pulse. That means there is a cer-

tain energy level we must maintain

throughout the sale. Unfortunately,

many dealerships have sales staff that

look like the walking dead.

All too often, we get so caught up

in being managers that we forget we

also must supervise the selling ef-

fort. The best sales managers have

a quality I like to call “Hyperaware-

ness.” It’s the ability of management

to be acutely aware of every deal as it

progresses through the dealership, as

it happens and at every stage of the

sales process.

From the moment a consumer

shakes hands with a salesperson, I’m

all over it. If most blown deals are

the result of a salesperson’s inappro-

priate behavior, you have to stop and

ask, “Where was his supervisor?”

Chances are he or she was sitting at

the sales desk, oblivious to what was

happening on the lot.

In a volume-selling environment,

or during peak traffi c times, manag-

ers need to be in motion. Like sharks

that can never stop swimming, man-

agers must be in constant motion.

Unless we’re working three deals

right now, there shouldn’t be three

managers sitting at the sales desk.

Generally speaking, a customer’s

shelf life is less than two hours. At

that point, the deal begins to disinte-

grate. That’s why everything the sales

department does must be achieved

within that window. So many deal-

erships today have far too many

four-hour marathon deals because

managers are allowing salespeople to

manage themselves.

From the moment customers step

out of their car, the clock starts tick-

ing. It’s crucial that management

knows exactly what time they arrived.

Unfortunately, most CRM systems

don’t pick up the deal and record the

fact that we even have a customer un-

til their information is in the system.

That’s way too late, in my opinion.

I need a system that identifi es when

the handshake happened.

For the most part, deals are blown

outside of the building. That’s why the

F&I manager should be writing up the

deal while the customer prepares to

take the test drive. Very few manag-

ers manage “outside the building” by

monitoring the activities of their sales

team on the lot. That’s where the man-

agers-in-motion concept pays off.

Managers should touch the custom-

ers early and often. I’ve always said,

“Never meet the customer for the fi rst

time when you are in combat.” The

fi rst checkpoint should occur when

the salesperson has been with the

customer for 45 minutes. If the sales-

person hasn’t checked in with his or

her manager, we need to go looking

for the deal and we need to fi nd out

what stage of the sale they’re in at

that time.

In most stores, salespeople fall into

one of two categories:

Track Stars: A track star will shake

hands with a customer and, before

you can turn around, will try to write

up a deal 15 minutes later. No com-

mon ground, no relationship. You

methodically build a sale much the

same way you build a house with a

foundation. Start with a framework

and move onto a step-by-step pro-

cess, beginning with a friendly con-

versation and a needs assessment.

Track stars will have achieved none

of that.

Tour Guides: A tour guide is a social

animal who, if left unsupervised, will

march customers around until they

leave — never quite getting around

to selling the car. It is management’s

responsibility to be aware of the deal

and to be willing to step in and move

it along or slow it down when appro-

priate. Great managers don’t wait for

the “TO”; they take it!

Most sales departments become to-

tally brain-dead when they’ve fi nally

gotten the customer to sign the pur-

chase order. Excuse me, but the deal

should be in the F&I offi ce within

minutes after the signature has been

obtained. At this point, the shot clock

is running and the F&I offi ce is at

the basket. I’ll never understand why

so many sales departments miss the

pass and allow the deal to deteriorate

while the salesperson runs around

gathering information they should

already have. That’s the way I see it,

but I could be wrong. Let me know

what you think.

Jim Ziegler is the president of Ziegler

SuperSystems Inc. E-mail him at jim.

[email protected].

The Heartbeat of the Deal

Generally speaking, a customer’s shelf life is less than two hours. At that point, the deal begins to disintegrate.

FI1011onthepoint.indd 44 10/3/11 5:16:50 PM


FI1011onthepoint.indd 45 10/3/11 5:16:52 PM

Legal

Do you know who your regulator is? The answer may not be as clear-cut as you think. The magazine’s legal wiz weighs in. By Michael A. Benoit

Many of my clients have been

asking me what to expect

from the new regulatory en-

vironment we fi nd ourselves in. With

the passage of the Dodd-Frank Act,

it’s truly a brave new world. More

surprising is how many clients are

asking me who their federal regulator

is. Believe it or not, that’s not a stupid

question, especially for dealers who

have always been regulated by the

Federal Trade Commission (FTC).

By this time, all of you should have

gotten the memo regarding the new

Consumer Financial Protection Bu-

reau (CFPB). The agency’s job is to

write and enforce new and existing

federal consumer fi nancial protection

laws, including the Truth in Lend-

ing Act, the Equal Credit Opportu-

nity Act, the Fair Credit Reporting

Act and just about any other federal

law that touches your F&I business.

It pretty much has authority over

all providers of consumer fi nancial

products or services.

At this point, you might be asking

yourself, “Didn’t auto dealers get a

pass on CFPB jurisdiction? Isn’t the

FTC still our regulator?”

The answer to those questions de-

pends on what kind of dealer you are.

Are you a duly licensed dealer who

sells and/or leases motor vehicles,

services motor vehicles and routinely

sells retail installment sale contracts

to unaffi liated third-party fi nance

companies? If so, then you’re an

FTC-regulated dealer.

The CFPB can’t write a rule that

applies to FTC dealers, nor can it en-

force your compliance with rules. For

you, it’s the FTC all the way. But it’s

not business as usual. The FTC can

now write and enforce rules appli-

cable to FTC dealers that defi ne and

prohibit unfair and deceptive acts

and practices.

If any of the three criteria are ab-

sent, you fall under the CFPB’s juris-

diction. And if you are such a dealer,

you are subject to the agency’s rule-

making powers, including its defi ni-

tions on what it deems unfair, decep-

tive and abusive acts and practices.

“Abusive” has become the new

standard, but we haven’t yet fi gured

out an objective way to determine

whether an abusive act is unfair or

deceptive, or whether an unfair or

deceptive act is, per se, abusive. Nor

have we fi gured out why CFPB deal-

ers may have rules prohibiting abu-

sive acts but FTC dealers will not.

Anyone confused yet? But wait, it

gets better.

The CFPB can make amendments

to existing regulations that currently

apply to all dealers, but those amend-

ments won’t, on their own, apply to

FTC dealers. Nor can the CFPB en-

force rules against FTC dealers. This

leaves the door open for a situation

where universal consumer fi nancial

protection laws apply to some entities

and not to others, even if they are of-

fering the same fi nancial product or

service. That problem occurred to

Congress, so they made a patch.

What Congress did was get the

Federal Reserve Board involved in

the rulemaking process. So, if an

amendment is made to Regulation

Z, it will be jointly published by the

FRB and the CFPB. The amendment

will look the same, but it will be cod-

ifi ed in two different places so it can

apply to different entities. In the case

of dealers, this patch will allow that

amendment to apply to both CFPB

and FTC dealers.

Obviously, this knuckle-headed

and bifurcated regulatory system

isn’t going to work, at least not well.

It wouldn’t be the fi rst time Congress

did something knuckle-headed, but

unlike Congress, we all live in the real

world. So the question becomes, how

do we reconcile this dual system?

I don’t know what the CFPB and

the FTC will do, but they must see

the ineffi ciency of this awkward

regulatory scheme. If I had to read

the tea leaves, I would guess that they

would fi nd a way to vest primary au-

thority over all dealers in one agency

or the other. In this case, it would

make sense to vest that authority in

the FTC. Congress was pretty explicit

about the CFPB keeping its hands off

of FTC dealers and it was clear-sight-

ed enough to give the FTC concurrent

jurisdiction over CFPB dealers.

So will the FTC be your federal

regulator? I don’t know, but that’s

what would make sense to me. The

irony is that if they go this route, the

FTC was the primary federal regula-

tor for auto dealers before all this fi -

nancial reform drama, and we’ll have

to come full circle back to where we

started. How rich is that?

Michael Benoit is a partner in the Wash-

ington, D.C., offi ce of Hudson Cook

LLP. He is a frequent speaker and writer

on a variety of consumer credit topics.

He can be reached at michael.benoit@

bobit.com. Nothing in this article is le-

gal advice and should not be taken as

such. Please address all legal questions

to your counsel.

A Tale of Two Agencies


FI1011legal.indd 46 10/3/11 3:13:07 PM

Are you tuning in every

week to F&I’s Insider

Tip of the Week?

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Bottomliners


XYZMO HAS ANNOUNCED

the launch of a mobile version of its e-signa-ture platform. The app, which can be down-loaded for free from the Apple App Store, allows users to e-mail a PDF document to a customer, who can then down-load the xyzmo app onto their

iPad. The app will allow car buyers to open and sign documents and return them to their dealers, who can then use Adobe Reader to verify the signature and content integrity of the PDF, according to xyzmo.

For more information, visit www.xyzmo.com.

Xyzmo Offers Free e-Signature App

AUL Offers The ZERO PlanUSED-CAR SERVICE CONTRACT

provider AUL Corp. has signed up for The ZERO Plan, Universal Lend-ers’ F&I product fi nancing program. The partnership will allow AUL dealers to offer products with an interest-free fi nancing program. The ZERO Plan can be used for most F&I products and promises to pay dealers within seven days, according to the provider. For more information, visit www.the-zero-plan.com.

Charter Warranty Adds Product Funding OptionCHARTER WARRANTY HAS LAUNCHED

a new service-contract fi nancing program, Save A Deal. It can be used to pay for repairs and vehicle add-ons, is not limited to Charter Warranty’s products and can be approved in about 72 hours, ac-cording to the company. Customers must have a checking account in good standing and no tax liens or open bankruptcies. A one-year en-rollment kit includes downloadable software and an online tutorial, as well as the required credit card machine and check scanner at no additional cost. For more informa-tion, visit www.saveadeal.com.

Car-Buying Site Offers Free Leads GeneratorCARS OUT THE DOOR, A NO-HAGGLE

car-buying Website, is offering a free lead generation tool designed to deliver an unlimited number of leads. “Cars Out the Door 1.0” requires no interaction between the dealer and car buyer until after the buying decision is made. There are no contracts or upfront fees, and the tool requires no access to the dealer’s database, according to the company. The site does charge a modest fee to users when a vehicle is delivered. To sign up, go to www.carsoutthedoor.com/dealers.php.

VisionMenu Offers Reynolds-Certifi ed InterfacesVISIONMENU INC.’S VISIONMENU

and VisionReport systems now of-fer Reynolds and Reynolds certifi ed data interfaces. The interfaces al-low VisionMenu users to push and pull dealer information from their Reynolds DMS. The integration also allows VisionReport to immediately update once a deal is closed in the DMS, according to the provider. For more information, visit www.visionmenupro.com.

Product Feature

uvcP

FI1011bottom.indd 48 10/3/11 3:11:50 PM

http://www.the-zero-plan.com

http://www.saveadeal.com

http://www.carsoutthedoor.com/dealers.php

http://www.carsoutthedoor.com/dealers.php

http://www.visionmenupro.com

http://www.xyzmo.com

© 2011 Innovative Aftermarket Systems L.P. All Rights Reserved.

Contact IAS Sales at 800-346-6469 x8989

or www.iasdirect.com for more information.

SmartPad software runs on the world’s most popular tablets, including the

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SmartPad can dynamically

conduct the F&I interview and

electronically deliver results to

managers while the customer

waits to enter F&I. Alerts can

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the sale is lost or irreversibly

damaged.

“SmartPad has given our

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SmartPad affords the dealers

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gains this knowledge prior to

F&I involvement in real time.

I N N O V A T I V E A F T E R M A R K E T S Y S T E M S

It gives the F&I manager time to formulate

an approach to maximize sales product

penetrations and if the customer isn’t

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the dealership is alerted in time to correct

it and turn a negative situation into a

positive one before they drive off to show

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If you’re not using tablet-based technology at your

dealership, you’re leaving money on the table.

FI1011bottom.indd 49 10/3/11 3:11:54 PM




Products

Established 1984

I’m Dave Mathews, President & CEO of UCC.

Over 27 years, I have built a company of value.

My experienced team will help your agency with:

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��'HDOHUVKLS�(GXFDWLRQ�DQG�7UDLQLQJ��&XVWRPL]LQJ�D�SURJUDP

Vehicle Service Contracts ��Prepaid Maintenance ��Theft Deterrent

www.UnitedCarCare.com/dealeragent.html

STATEMENT OF OWNERSHIP, MANAGEMENT AND CIRCULATION(Required by 39 U.S.C. 3685)

PUBLICATION TITLE PUBLICATION NO. FILING DATE

F&I and Showroom 2154-1728 10/01/2011

NO. OF ISSUES ANNUAL

ISSUE FREQUENCY PUBLISHED ANNUALLY SUBSCRIPTION PRICE

Monthly 12 $20 per year

COMPLETE MAILING ADDRESS OF KNOWN OFFICE OF PUBLICATION

Bobit Business Media, 3520 Challenger Street, Torrance, CA 90503-1640, Los Angeles County

COMPLETE MAILING ADDRESS OF PUBLISHER’S HEADQUARTER’S

Bobit Business Media, 3520 Challenger Street, Torrance, CA 90503-1640, Los Angeles County

FULL NAMES AND COMPLETE MAILING ADDRESSES OF PUBLISHER, EDITOR, AND MANAGING EDITOR

PUBLISHER: David Gesualdo, Bobit Business Media, 3520 Challenger Street, Torrance, CA 90503-1640, Los Angeles CountyEDITOR: Gregory Arroyo, Bobit Business Media, 3520 Challenger Street, Torrance, CA 90503-1640, Los Angeles CountyMANAGING EDITOR: Tariq Kamal, Bobit Business Media, 3520 Challenger Street, Torrance, CA 90503-1640, Los Angeles County

OWNER COMPLETE MAILING ADDRESS

Ty F. Bobit, CEO Bobit Business Media, 3520 Challenger Street, Torrance, CA 90503-1640, Los Angeles County

KNOWN BONDHOLDERS, MORTGAGEES, AND OTHER SECURITY HOLDERS OWNING OR HOLDING 1 PERCENT OR MORE OF TOTAL AMOUNT OF BONDS,

MORTGAGES, OR OTHER SECURITIES

None

ISSUE DATE FOR CIRCULATION DATA BELOW

August 2011 AVERAGE NO.

COPIES EACH ACTUAL NO.

ISSUE DURING COPIES OF RECENT

EXTENT AND NATURE OF CIRCULATION LAST 12 MONTHS SINGLE ISSUE

15a TOTAL NO. COPIES (NET PRESS RUN) 21,739 21,623

15b PAID/REQUESTED CIRCULATION - -

15b.1 OUTSIDE COUNTY PAID/REQUESTED MAIL SUBSCRIPTIONS 12,594 12,028

15b.2 IN-COUNTY PAID/REQUESTED MAIL SUBSCRIPTION - -

15b.3 SALES THROUGH DEALERS/CARRIERS 3 1

15b.4 REQUESTED COPIES USPS OTHER MAIL CLASSES - -

15c TOTAL PAID/REQUESTED CIRCULATION 12,597 12,029

15d NONREQUESTED CIRCULATION - -

15d.1 OUTSIDE COUNTY NONREQUESTED COPIES 8,222 8,679

15d.2 IN-COUNTY NONREQUESTED COPIES - -

15d.3 NONREQUESTED DISTRIBUTED BY OTHER CLASS OF MAIL - -

15d.4 NONREQUESTED OUTSIDE USPS 201 196

15e TOTAL NONREQUESTED DISTRIBUTION 8,423 8,875

15f TOTAL DISTRIBUTION 21,020 20,904

15g COPIES NOT DISTRIBUTED 720 719

15h TOTAL 21,739 21,623

15i PERCENT PAID/REQUESTED CIRCULATION 59.9% 57.5%

This Statement of Ownership will be printed in the October 2011 issue of this publication.

I CERTIFY THAT ALL INFORMATION FURNISHED ON THIS FORM IS TRUE AND COMPLETE. I UNDERSTAND THAT ANYONE WHO FURNISHES FALSE OR

MISLEADING INFORMATION ON THIS FORM OR WHO OMITS MATERIAL OR INFORMATION REQUESTED ON THE FORM MAY BE SUBJECT TO CRIMINAL

SANCTIONS (INCLUDING FINES AND IMPRISONMENT) AND/OR CIVIL SANCTIONS (INCLUDING MULTIPLE DAMAGES AND CIVIL PENALITES).

x Publisher Filed on 10/1/2011

Get Connected!F&I and Showroom readers are among the nation’s best-informed automotive

sales and fi nance professionals.

FI08-88.11

To advertise in the next issue of F&I and Showroom, contact David Gesualdo at 727.947.4027 or [email protected].

FI1011index.indd 50 10/3/11 4:09:50 PM

http://www.UnitedCarCare.com/dealeragent.html


we are.

Allstate Dealer Services 904-992-6185 allstatedealerservices.com 13

Ally Auto 877-357-8477 (option 6) ally.com/auto C3

Association of Finance & Insurance Professionals (AFIP) 817-428-2434 afi p.com 43

American Financial & Automotive Services 800-967-3633 afasinc.com C4

AUL Corp. 800-826-3207 aulcorp.com 17

CARLAW Auto Dealer Suite 877-464-8326 counselorlibrary.com 51

Charter Warranty 877-404-6823 saveadeal.com 31

Chem Etch Manufacturing Inc. 877-564-2565 chemetchmfg.com 50

CNA National 800-345-0191, ext. 720 cnanational.com C2-1

CUDL 877-744-2835, ext. 2334 CUDL.com 48

Dealerlink 800-890-8850 DealerLink.us 38

Friendly Finance Corp. 800-872-2877 friendlyfi nancecorp.com 33

GSFS Group 713-580-3023 [email protected] 39

Innovative Aftermarket Systems (IAS) 800-346-6469 x8989 smartdealerproducts.com 3, 49

NAC (National Auto Care Corp.) 800-548-1875 nacsolution.com 7

National Automotive Experts 800-810-8859 nationalautomotiveexperts.com 9

Old Republic Insured Automotive Services Inc. 800-331-3780, ext. 7386 orias.com 35

Protective 800-794-5491 protectiveassetprotection.com 5

Reahard & Associates Inc. 866-REAHARD go-reahard.com 25

Resource Automotive 312-560-9182 thewarrantygroup.com/automotive 26-27

RoadVantage 855-762-8268 roadvantage.com 21

TD Auto Finance 800-200-1513 tdafdealer.com 11

United Car Care 800-571-6412 unitedcarcare.com 41, 50

United Development Systems Inc. (UDS) 800-282-1154 UDSDealerServices.com 29

Warrantech 800-723-1154 warrantech.com/auto 23

Wise F&I 800-849-1080 WiseFandI.com 43

Ziegler SuperSystems 800-726-0510 ZieglerSuperSystems.com 45

Zurich 877-368-7513 FandIResourceCenter.com 19


Ad Index

FI1011index.indd 51 10/3/11 4:09:53 PM



Mad Marv

Would you lower your rate to sell a product? The magazine’s from-the-trenches columnist weighs in on this $64,000 question. By Marv Eleazer

Over the years, I’ve discovered

that most of my colleagues

share my passion for sacri-

fi cing reserve in favor of products. I

might be walking on thin ice here,

but, as far as I’m concerned, fi nance

reserve is the least important profi t

category in the fi nance offi ce. Yes,

we earn a portion of our total profi t

from reserve, but it provides abso-

lutely no benefi t to the customer.

Listen, I realize we should earn

something for arranging fi nancing

for the customer. We provide a con-

venience to them and, in most cases,

we save them money by matching or

beating any offer they can get on their

own. Again, I’m not against earning

reserve; I’d just rather sell product.

Now, we need to tread carefully

when reducing rate in favor of a prod-

uct sale. Remember, you cannot le-

gally offer a rate reduction as a condi-

tion of buying an F&I product. Doing

so violates the Clayton Antitrust Act,

an amendment created to strengthen

the Sherman Antitrust Act. The lat-

ter prohibits tying arrangements or

the acquisition of one product based

upon the purchase of another.

That’s why you can’t pull back a

rate reduction offer if the customer

elects not to purchase a product.

You just have to accept that you lost

your potential reserve and move on.

In my experience, most customers

will appreciate your effort in trying

to save them money and are far more

agreeable once you’ve announced

the reduction.

If losing reserve scares you, con-

sider the downsides of poor rate ad-

ministration:

■ Early payoffs (EPOs): These oc-

cur when customers discover their

local bank has a substantially lower

rate. This also is your fi rst indicator

that your rate markups are too high,

so watch these carefully.

■ Product charge-backs: Each

bank likely has its own version of

products, which means yours will get

cancelled.

■ Poor customer service: Credi-

bility is lost and the CSI report suf-

fers, which affects everyone.

■ Loss of repeat business: The

customer will likely do their fi nanc-

ing elsewhere — if they return at all.

It’s my belief that far too many F&I

managers rely too heavily on fi nance

reserve as a profi t center. I recently

reviewed a dealership’s month-end

report that showed a 90 percent fi -

nance penetration rate. Its fi nance

reserve was 67 percent of the store’s

profi t portfolio. The remaining 33

percent was product. Yeah, I had to

do a double take, too. Those numbers

should be reversed, with product at or

above 70 percent.

“Shouldn’t the bottom line be the

only thing that counts?” you ask.

Well, wouldn’t the dealership be less

exposed to EPOs if the F&I depart-

ment had turned 70 percent product?

At the very least, the log would have

revealed more fl ats and greater prod-

uct penetration, which translates into

greater benefi ts for the customer and

the dealer. And let’s not forget what

our products do for fi xed ops.

Now, do me a favor. Pull those

dealer agreements out from the back

of your fi le cabinet and look them

over. You’ll fi nd clauses that say the

fi nance company will withhold a

sizeable percent of the rate spread.

Depending on credit quality, loan

term, vehicle type and other factors,

that could be in the range of 25 to 40

percent. So, for every dollar of re-

serve you think you earned, 25 to 40

percent is withheld by the lender.

Lenders will say they withhold

those funds to offset future losses. I

suspect they want you to mark it up to

increase profi t. No harm there, right?

So, why don’t F&I managers consider

this when structuring deals? One rea-

son is that DMS providers have built

the dealer’s commission — with the

lender’s hold already subtracted —

into their software. The result is the

number we see when we recap the

deal. Out of sight, out of mind.

I’ve said this before, and I’ll say it

again: Finance reserve only benefi ts

the lender and the dealer. Product is

good for everybody, including your

customers.

And hey, consumer advocates have

been after reserve for years. There’s

no telling when and if they’ll get their

way. So, why not prepare now by con-

centrating on selling product?

Listen, if your EPOs and charge-

backs are satisfactory, then you

probably have a good handle on rate

administration. All I’m suggesting

by addressing this topic is that you

review your processes and practices,

take another look at your presenta-

tion, communicate with your menu

provider and agent, and examine the

components of your month-end num-

bers to see how you got there. You

might be surprised.

Marv Eleazer is the fi nance director at

Langdale Ford in Valdosta, Ga. E-mail

him at [email protected].

The Great Rate Debate

FI1011madmarv.indd 52 10/3/11 2:56:09 PM


Give us 30 minutes. We’ll give you something to build on. Contact us today at 877-357-8477, option 6 to start designing your

personalized Ally Blueprint for Dealer Growth.

© 2011 Ally Financial. All rights reserved.

To learn more, just take a picture of this JAGTAG. Verizon and AT&T customers, text the picture to 524824. All other networks, text or e-mail the picture to [email protected]. Or, scan it with a QR code app. Messaging and data rates may apply. For terms and conditions, visit www.jagtag.com/t&c.

e M 2 Q I

Have you found the key to increased PVR and improved CSI in your dealership?

We call it Plan – The Ally Blueprint for Dealer Growth. It’s our own proven process to help you improve PVR and CSI. It starts with an individual, face-to-face assessment of your dealership’s strengths, opportunities and goals with your highly skilled, industry-experienced Ally sales team. Then, we provide best-in-class dealership training,

4

A8

How to Make Compliance Issues Less of an Issue. Consistently manage customer information to help ensure that every deal jacket is complete, compliant and secure.

3

A6

Making the Service Bay Pay. Get the tools, techniques and training to help you maximize every opportunity.

1

A2

Using F&I to Improve Your P&L. Ally can show your entire team how to make the most of every sales opportunity – every time.

5

A9

Pay Plans That Work for You. Structure commission plans that both reward the dealership and motivate your people.

2

A5

Menu Presentations That Sell. The real selling starts after you sell the car. And with an att ractive visual presentation of the features and benefi ts of every item on your dealer’s menu, you can sell more.

FI1011madmarv.indd 993 10/3/11 2:56:12 PM


http://www.jagtag.com/t&c

AUTHENTICThe American Bald Eagle became the national emblem on June 20, 1782.

Just like the eagle, American Financial & Automotive Services, Inc. has become

an established symbol in the Automotive Industry.

t Over 30 years assisting dealers and maximizing profit

t Agents possess superior creditinals in automotive industry

t Endorsed by various state and local dealer associations

t Proven track record of exceeding client expectations

MasterTech Vehicle Protection Program | Automotive Training Academy | Panoptic® Insurance

FI1011cover.indd 994 10/3/11 6:31:39 PM

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