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WHAT DO BOB DYLAN, AN IPAD, THE CFPB AND A SOCIAL SECURITY NUMBER HAVE IN COMMON?

By January 6, 2015 No Comments
DonONeill

Don O’Neill, V.P of Sales and Marketing at CreditMiner

NADA is upon us, and what better time to write an article about the changing business model in our vertical? Well my friends, as Bob Dylan so eloquently put: “Times, they are a changin’.” By that, I mean the very model by which we do business is changing. The interaction with our consumers, the profit model, marketing, digital, HR, it all is coming to a bright white head in our industry. I am here to tell you that if you are watching, grab a great seat early, because this is a game in which playing catch-up will be a near impossibility over the next couple of years. If you can catch up, it certainly will cost a heck of a lot of money. It would be like watching Carl Lewis race William “the Fridge” Perry. I guess the Fridge winning is possible, but not really probable.

So too, is the race for technology in our market space. Consumer engagement will be led by those who are willing to provide the information that the consumer desires. Readily available, easy to access, and seamless in its delivery. I meet with dealers and Dealer groups most days of the week. I hear some amazing things from dealers each and every day. “That will never happen,” and, “customers still want the touch and feel of the car buying experience,” and my favorite, “this is too big an item to purchase solely on the web.” I always reserve the chuckle, as not to offend. But let me refresh your memory to 2005, even 2008. Would any of you have purchased a 65 inch television online then? Would you now? Not so funny, is it?

The reality is that the number one change in our game is that consumers are preparing themselves, training as if it were battle, to fight the dealer for every penny. They know how much you pay, they understand what hold back means, and they certainly don’t mind if you don’t profit on their transaction. TrueCar proved the model that people will drive 75 miles to save 150 bucks. Yet here we are, the same worn out battle weary soldiers fighting with the same weapons, same formations, and wondering why we keep getting crushed. So what, you ask, is the answer? Embrace. Embrace technology that does something none of your competitors do. Embrace technology that makes your first thought say, “that’s crazy.” Einstein once said, “If at first the idea is not absurd, then there is no hope for it.” I am going to take you one step down the garden of insanity, all I ask is that you simply imagine.

Imagine a technology that allows the consumer to get pre-approved from any and all of the lenders in a dealer’s portfolio. A rate and term, along with max PTI and max LTV, where you, the dealer, can simply enter the income and back into a car deal. Imagine if that same technology allowed lenders to change their parameters on the fly, to adjust for what is happening in their portfolio today, and to approve your customers before they even step foot on your lot. More importantly, imagine this were transparent with the consumer, knowing the banks that want the loan, and share with the consumer the rate and term, (with markup or flat) and the consumer comes on to the lot ready to buy, financing questions out of the way. Imagine that your dealership was the only place these rates and calls were honored at. Imagine if the buyer came in with certificate in hand, ready to buy a car from you, that very day. Now imagine that once you are ready to contract and deliver the car to the consumer, you never have to ask for their social security or date of birth again. Ever. I’ll repeat that, you never have to ask for social security or date of birth again. Vehicle delivered, loan funded, and you never got past a driver’s license. Would that speed up your buying process? Would it give your consumer comfort knowing their secure data could never be breached on your watch? Right now about half of you are laughing.

Welcome to the next generation. As of 1/23/2015, this technology will launch in a market near you. It’s called BASIS₂, and frankly, it’s a game changer. With the ability to provide complete transparency between the dealer, the lender, and the consumer, you the dealer take on the role of consultative F&I. Maybe that low rate carries a much lower LTV, maybe the highest gives the best advance…either way, this product was geared to providing all three parties in the transaction with a seamless, profitable and fast way to consummate a vehicle loan. The bonus? You still have the loan, the rate or flat, but are providing an experience that the consumer wants, quick and transparent.

Now I have heard all of the arguments, it limits our reserve, we can no longer make the two point’s markup. Well, my answer is simple. First, the average markup of franchise dealers F&I nationwide is 92 basis points. The same people who argue to hold the rate option, are the same dealers who penalize their F&I department for allowing markup account for more than 25% of the F&I gross profit. Let’s be honest, any of us who believe we will roll into 2016 with dealer discretionary markup intact, has not been following a little group called the CFPB. They want it abolished, and are subpoenaing their way to completion of their initiative. With or without you, the model is changing. Customer needs and desires have made the huge changes a reality thus far. Are you really willing to bet it all on red, and spin that wheel that it won’t happen in finance? “Black 23,” dealer rakes, every time. This time the CFPB is the house, and the house always wins.

So, let’s just imagine, if you will, that we all embrace the changing technology and sales environment we call Retail Automotive, and smile. Some of you will make the cut, some of you won’t, but either way Bob is singing away “Times, they are a changin’.”

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