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Tomorrow Belongs to the Connected Agent

Tomorrow Belongs to the Connected Agent

As an agent, how are you going to survive in the next five years? Looking to the future, what confidence do you have that you will not only survive the massive technological and process changes confronting our industry but also thrive in your relationships with dealer clients? In other words, how are you going to avoid losing control of your dealers as the industry finally embraces the winds of change?

The answer to that critically important question is tied directly to your ability to provide a roadmap of the right solutions that will sustain and grow profitability for your dealer clients. This mix of solutions will need to have both the human and technological principles of connection baked into them if they are going to build long-term asset value. If you’re an agent waiting for your dealer to ask for a solution or strategy for innovation, you may be too late.

While it’s still true that an increase in production is the best way for agents to solidify value to dealership performance, today’s agent needs to think beyond products. The agent of the future will become a true asset and trusted resource to the degree that they offer dealerships the intellectual property and leading-edge solutions that address systemic industry challenges.

1. Champion Change and Transform the Traditional F&I Customer Experience.

Regardless of your position on the future of F&I, we all realize that today’s consumer expects and demands more than ever. Customer experience is the new currency driving brand loyalty. Consumers are willing to pay more for positive experiences, and for those dealerships that are delivering, research shows they typically grow at double the rate of their competitors.

The data is clear. According to Forbes Insights’ latest “Data-Driven Customer Experience” report, 20% of revenue is lost annually due to poor customer experiences. Eighty-one percent of customers are willing to pay more for a superior customer experience, and 89% of customers have switched brands after a poor customer experience. Prospective customers desire a better purchase experience in F&I. Thankfully, as agents, we can respond by offering innovative solutions to our dealers to meet these growing demands.

So what qualifies me to write this article, and why am I so passionate about bringing transformation to the F&I process and product purchase experience? I’ve been on a four-year journey that started with a challenge put to me by a fourth-generation dealer who wanted to streamline his processes, provide a better customer experience, and increase brand equity without sacrificing profits. He said he wanted to transform his traditional retail and F&I purchase process into a one-price, one-person, one-hour dealership. What I heard, however, was that he wanted to eliminate F&I. His challenge came in the form of a question, “Are you all in or are you all out?”

Before responding to either option, I told him I would commit to research. One thing I was certain of was that I could not conduct research as part of a theory. I needed hard, concrete proof as to whether there really were any breakdowns in the F&I product purchase experience and whether early adopter dealerships of technology solutions had found the secret sauce. After all, F&I had been the lifeblood of my agency for decades and the primary source of my agency revenues, so admittedly I set out to prove this dealer principal wrong about his vision. Was I in for a surprise!

I spent the next few months looking for technology to support his vision. I took a hands-on approach to evaluating and testing iPad solutions, presentation pads, kiosks, and other digital F&I solutions of the time. I then began traveling to so-called “early adopter” dealerships of change, only to discover that the success stories fell far short of what was advertised.

Finally, a game-changing moment occurred in my research when I sat down with four women, all of whom had purchased a vehicle within the previous two years. After numerous questions, the one response that garnered a unanimous response was their poor experience in F&I. Each expressed extreme mistrust and visceral frustration with the experience, asking the question, “What are they hiding in there?” referring to the F&I desktop between them and the F&I manager. This input changed my entire mindset and I knew at this point that although I was asked to support a one-person process, I had to champion change in the traditional F&I process we all know and have been part of for the past 40 years.

The primary takeaway from months of intensive research was that we have been creating barriers and disconnecting with our customers in F&I. The techniques we have been using and training in the past have abandoned critical principles of human connection:

  1. Can you help me? This is best described by a quote from the greatest sales trainer of all time, Zig Ziglar: “If you help people get what they want, they will help you get what you want.”
  2. Do you care for me? Mutual concern creates connection between people. Consider your best purchase experiences from someone and most likely that person genuinely cared for you.
  3. Can I trust you? Have you ever purchased anything of significance, especially a large purchase, from someone you didn’t trust?

If the customer is unable to say “Yes” to all three of these basic principles, we are not and have not been connecting with them. Knowing when we’re disconnecting in one of these ways is as powerful as connecting, because it reveals the work that needs to be done to create a real connection.

Inspired by my research, providing the best F&I process required me to harness the power of human connection and bake it into a solution. I notified my dealer that I was prepared to provide a roadmap forward. The presentation and proposal was simple: Instead of eliminating F&I managers, we shifted their role to team leads, creating a simple, fast, digital process that reduced transaction times.

This seamless and streamlined process built from the back forward resulted in a time efficient, completely transparent purchase and F&I experience. Today, this dealer has over 260 trained users of the process and has completed over 25,000 transactions.

2. Learn How to Select the Right Technology Solutions.

If you attended NADA this year or have spent any time reading leading industry magazines or online content, one thing is clear: There is an onslaught of digital solutions and technology flooding the market. Many of these companies are prospecting our dealers through distribution channels that don’t include agencies. So what should you as an agent be looking for when considering which solutions to bring to your dealer clients? I want to provide four non-negotiable questions to ask:

  1. Does the solution have a 360-degree customer view? Superior insight is the key to winning in business. It’s not enough to learn what a customer does; you need to understand why they do it. The most effective solution will have actual customer input built into its development. My research revealed many solutions in the marketplace today were developed by software executives and developers that have never been in F&I and have never interacted with real customers — both the consumer and the F&I producer or client advisor. Knowing your product but not your customer will mean having something to sell but no one to buy.
  2. Does the solution maintain a business document rule? Steer clear of solutions that look gamey and present products in video formats. Consumers have not responded well to these kinds of product presentations. F&I is a serious business transaction and a significant investment on the part of your dealer client’s customers. Our research revealed that consumers were quick to disconnect from presentations that did not reflect this understanding.
  3. Does the solution provide transparency and foster interaction? Customer demand for full disclosure and interactivity throughout the F&I process is stronger than it’s ever been. In virtually every other purchase, the customer is in control of the process. Look for a solution that provides the ability for the customer to drive the process and offers an open-facing approach that breaks down barriers. This will maintain trust throughout the process and ensure human connection isn’t lost.
  4. Does the solution allow for soft entry into a future retail experience? Once dealer clients realize the power of a real solution that adds significant bottom-line savings, the greater demand there will be from dealers to ask for a roadmap to a proven, seamless, end-to-end retail and product purchase experience. It was built from the back forward to provide a turnkey solution for future retail (e.g. desking, purchase journey analysis). Offering multiple, disparate solutions will not set client dealers up with a seamless and integrated process.

3. Leverage Mobile Technology to Turn One-Time Customers Into Lifelong Clients.

For decades, F&I has been one of the most profitable departments in the dealership. In the course of my research, another profound discovery was made in regard to how F&I can add even more value to the dealership by being used to create long-term client dependency: the mobile app.

Including F&I products in a mobile app transforms the customer experience by eliminating the perception that contracts will go unused, taking up space in the glovebox. An F&I mobile app provides push notifications, reminders, rewards and product information, and it meets customers right where they are — on their phones!

The average person purchases 17 vehicles in their lifetime. Why not create long-term client dependency by leveraging technology to keep them connected to the dealership through campaigns for parts and service incentives, new vehicles and new products?

In a world of uncertainty, change is the only constant. Secure the future of your agency and your dealer clients by maximizing the power of human connection baked into a complete solution. Your agency and, more importantly, your dealer clients will be amazed by the results.

Posted in F&I, Featured Articles, Review Feature0 Comments

Tangible and Intangible – Customizing Presentations to Deliver Success

Tangible and Intangible – Customizing Presentations to Deliver Success

No F&I department can survive off service contracts, GAP and reserve alone. In order to achieve a solid PVR without the reliance on those three products, the F&I office has to be very, very good at what we have learned to call tangible and intangible products. These unique types of offerings need to be presented separately to the consumer, because the consumer buys tangibles differently than they buy intangibles. Being very good at both is a solid plan to increase PVR and to meet each customer’s unique needs.

Intangible products are the fear of loss products – service contracts, GAP, identity theft, and credit insurance. They offer the consumer protection in the event of a mechanical breakdown, an insurance event where their vehicle is deemed a total loss, or if their Identity is stolen. Intangible products offer protection against future problems such as an unforeseen change in a customer’s financial picture that could come at a great financial loss to the customer.

Tangible products are products that can be described with visual words – rips, tears, ding, dent, interior, exterior, loss of gloss, burns, and road hazards. They are the appearance products that encompass tire and wheel protection, paintless dent removal and offer paint and interior fabric protection. These products offer the advantage of providing coverage that does not exist on a vehicle otherwise, even with new vehicles still covered by the manufacturer’s warranty. Tangible products offer the customer protection in many of the areas a warranty does not cover.

Differing Your Menu Presentation

You must embrace a process that separates these two types of products. We discourage a process that comingles these two types of product offerings, because they should be offered completely differently. We train F&I managers to understand that if they are not successful selling intangibles, that buyer may still buy the tangibles, or vice versa.

By presenting tangibles and intangibles separately, you can still present tangible products to the customer who is very vocal about not wanting or needing intangible coverage. Often these customers are interested in tangible products. These are the products that a customer can immediately see the results of ­– such as sealants that protect the vehicle from various environmental damage, eliminating their need to wax. Even a hard to sell customer with no problem paying possible repair bills in the future can see the value in a product that can prevent them from ever having to wax their car to maintain its appearance.

There are many menus to choose from, and I truly attribute our success to choosing the right one. We have created an interactive component to the menu that gives the F&I manager and the consumer more interaction and involvement in the process. The program is successful because it separates tangibles from intangibles, along with providing an interactive experience.

The consumer feedback on our interactive menu has been unparalleled. I have some business managers, and even salespeople who were working in the mall as recently as three months ago who are now in a “Start to Finish” or “A to Z” sales process and are now using the menu successfully. Today, they are seeing solid CSI and profits. After the F&I manager or salesperson utilizes the interactive component of the menu, it then provides a smooth transition to a full disclosure of the complete transaction for signatures.

Tangible Products

Tangible products offer a great opportunity to commit the customer not only for profitability, but also for retention. They add value to a vehicle when it comes time to trade it in, because tangible products protect the vehicle’s appearance. Making this clear to customers can make buyers out of many customers – especially those who plan on keeping their car for only a few years. They also offer great appeal to lease customers. Tangible products will prevent them from having to pay for visual damage at the end of the lease. Educating the customer of the future benefits of tangible products is a great way to start a conversation with them.

Tangible products such as theft recovery products, planned maintenance and appearance programs provide built in retention components, including vehicle replacement benefits, service retention, and increased trade values at the issuing dealer.

To sell tangible products, you have to get the customer to recall a situation where something occurred with their vehicle in the past, which could have been remedied by a tangible product’s coverage. Use visual words to describe the scenario and be as descriptive as possible. Get them to imagine the sinking feeling in the pit of their stomach when they hit a giant pothole and realize they have just ruined one or more of their shiny new wheels. Bring to the customer’s mind the way a car’s appearance looks after the newness wears off. No one sets out planning to eat and drink in their new car, but inevitably, it happens, with spills and stains as the result – especially when children are in the vehicle. Describe the products in a way that illustrate how the customer would have benefitted from their coverage in the past. Use real life scenarios.

Customers buying luxury cars are ideal candidates for tangible products. They may not be worried about the cost of a potential mechanical repair in the future since they feel they can afford the cost. But, if they are spending top dollar on a car, then chances are, they will want to ensure that their vehicle stays shiny and new, both inside and out. When presented well, products that guarantee their cars’ appearance will be maintained throughout the course of their ownership, will be of real value to these customers.

Intangible Products

While intangible products do not offer immediate results, they protect the customer from exposure to risks down the road. Intangible products can be especially appealing to customers who are buying new mid-level or lower-end used vehicles, and who don’t have much cash to spare at the end of the month. A costly repair or loss would cause a significant strain on their finances. The various types of service contracts offer protection in the case of a mechanical breakdown for a relatively small correction in the consumer’s monthly payment.

GAP, or Guaranteed Auto Protection, provides financial compensation for the customer if an accident occurs that results in the vehicle being deemed a complete loss. It pays the amount that exceeds what the customer receives from their auto insurance policy. If a customer pays $20,000 for a vehicle and the car is totaled in an accident, they could still owe as much as $5,000, even after their insurance pays their finance company. Their auto insurance policy may be written to pay out only the current depreciated value at the time of the accident, rather than paying off the full amount the customer financed. GAP is a must for anyone putting down less than 20% and for all lease and finance customers, if it is not already included as part of their lease. Theft coverage provides the same coverage if their car is stolen.

Credit insurance, also an intangible product, protects the customer in a situation that causes them to be unable to make the payments. It provides coverage if a customer is laid off or if they become ill or injured and can’t work. It also provides coverage if the customer dies.

Before the Presentation and After the Purchase

You never know which type of products a customer will choose. It is not something you can predict, nor do you want to. The process does not work when you start deciding that you know what the customer will buy. It is very important to offer all products to every customer. Some trainers recommend using an interview process to determine the customer’s needs. I, however, disagree with this approach.

Whenever you use a process that decides what products you are going to offer based off the interview, it starts the breakdown of actual use of the menu process itself. I am also of the opinion that often in an interview process, a customer feels “set up.” And causing a customer to have their guard up before you even begin your presentation is never a good way to start!

Every product a dealer offers should have a retention component. Every transaction and product offered through the F&I process must support a customer-to-client commitment. Dealers and F&I producers must be conscious of building their business, instead of buying their business. Ensure that every product sold – whether it is tangible or intangible – possesses the important ingredient of client retention.

At the end of the day, you have to know your customer and focus on their needs. Being very good at both intangible and tangible products, and developing a solid plan to best present them is a sure fire way to increase PVR. Practice your methods of presenting both of these, don’t rely solely on service contracts, or GAP and reserve, and always try to incorporate other best practices in the F&I office. Do all of these things regularly and you will be on your way to becoming a top performer.

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Underdog Independent General Agents Survive and Thrive

Underdog Independent General Agents Survive and Thrive

While you may not consider yourselves underdogs, I assure you, you all have similar qualities and characteristics of great underdogs and have great underdog stories. Both you and your agencies experience victories and possess a relentless competitive nature. The very fabric of your existence comes from your ability to rise up to improbable circumstances. You believe in, and motivate ordinary people around you to reach goals unimagined. You continue to forge through challenges and believe that great moments are born from great opportunity. From the beginning of your agency, to this very moment, you compete against some of the largest companies in our country, many with a self-serving mission of dealer acquisition and product sales. Thankfully, this lack of substance and these self-serving maneuvers are exposed and mostly unappreciated by dealers.

Additionally, you compete against high brand recognition, unlimited financial resources and human capital, and competitors, who in many instances only have control of one facet of a dealers business – may it be a captive finance arm, floor plan provider, vehicle distributor, or necessities like a garage keeper or open lot policies. And the ultimate weapon of all – that off balance sheet loan provider.

You are challenged to compete with these giants of industry every day with very limited human and marketing capitol, little to no brand recognition and no control what so ever of your target audience’s business, the dealer. If someone were to bet on who would win this game – our competitors or us as independent agents – who would be the underdog and what would the odds be?

As independent agencies face these overwhelming odds. With only their weapons of knowledge, their commitments to their skill, their faith in their ability and their belief in their products and their providers, they have started to chart the course for removing one of our competitors from the dealership. They are starting down the path that will lead their dealer to unrealized profits in his organization

One of the greatest underdog stories of all time is the story of David and Goliath. Young David went to battle with only his extraordinary skill and 5 stones for ammunition. An experienced slinger like David could kill his target from 200 yards – 2 football fields! He had only courage and faith in his great ability to take on the giant Goliath. Like David, you take on the giants of our industry every day with only your faith and your belief in your extraordinary skills – your training abilities, income development, and your reinsurance knowledge. Just like David, you go to battle with your stones of ammunition – our product providers.

Like the story of David and Goliath, our story looks like competition between large and small. Ultimately this story teaches us that giants are not what they think they are. The same qualities that give them strength are often the source of their great weakness. This story and every other great under dog story require us to ask a question. What if we, as underdogs, didn’t exist? If the odds are so overwhelming against us, why do we even show up?

In 1980, why did the US Hockey team even show up to take on the all-star level Russian hockey team, only to defeat them, and a few days later go on to win the gold medal? And this past year, why did Auburn even show up to take on Alabama, only to result in the greatest last play in college sports history as the under dogs defeated Alabama Crimson Tide.

We all know about rejection. After being rejected by publishers 14 times, what motivated writer J.K. Rowling to forge through her challenges and rejection to ultimately become the most successful and revered writer of our time with her Harry Potter series?

Let’s imagine automotive dealers without us. What if the independent agent model didn’t exist? Think about the treatment of our dealers by the manufacturers in the past. Not too long ago, a Ford dealer would sell a F-150 pick up truck and at the time, they had the opportunity to sell accessories – step bumpers, sliding rear windows, aluminum wheels, bedliners, and so on. Today, these type of up-front profit opportunities have been converted from our dealers, to a revenue and profit opportunity for the factory. And this manufacturer over reach didn’t stop with accessories.

When our industry stumbled due to troubled underwriters in the past, they went in for the kill. They aggressively raised service contract rates in another self-serving attempt to add revenue to their bottom line. The manufacturers are still in an embryonic stage of reinsurance. Only recently have they become more aggressive with this opportunity for our dealers. This is for obvious reasons – a loss of market share. Otherwise, they were the ones realizing underwriting profits and investment income – not the dealer.

Today our dealers are faced with constant factory intervention and demands adding increased pressure and deteriorating profit to their bottom lines. More than ever, in this post-bankruptcy era of the automotive industry, your dealers are relying on the deliverables of your agency. It is you and your providers that provide the financial strength, the wealth building opportunities, income development and product opportunity. All of this results in profitability to your dealerships’ financial statement and their reinsurance positions. Our message is clear – the automotive industry without independent agents and our committed providers would be all about the factory. But the industry with independent general agents is all about the dealer.

Not only are you and your agency a great underdog story in the largest industry in America today, but you are also a great survival story. You have survived an industry not without its challenges. In the early 90’s, manufacturers advertised to dealers that doing business with an independent service contract provider was a high risk arena to play in.

I have been an independent general agent for going on 20 years now and I still catch myself apologizing for the great marketers of independent providers of the past – names like General, American, ESP. Characters like The Delta Group, Omni and even names like: Shafiq, Yamagada, Joe, Barry, Jay, Sandra, Susan. The first thing I learned in the car business is, the more you apologize, the more it costs you.

The greatest survival story of all was in Las Vegas, Nevada in April 2008. This was my first glimpse of the economic meltdown ahead. I was fortunate to do business with one of the largest dealerships in town.. They did 600 plus new and used units a month, and had 4500 – 5000 repair orders going through service. Usually when walking into this dealership, it was like walking onto the floor of the New York Stock Exchange – intensity and activity would have been an understatement. But on this particular visit, it was absolutely dead. All the energy was completely taken out of this organization. It had begun. Depression set in with my F&I producers. Two of the five were not even showing up for work at all. This was ground zero for the economic disaster that was shortly to unveil itself to the rest of the country. Months prior, everybody in this town was a real estate expert. On the dealer level, mechanics, service providers, office personnel, F&I producers, sales people – everybody was flipping real estate. Then it all started to unravel.

I remember this particular visit because I went from being an agent when I walked in the door that morning, to being a psychiatrist by the end of the day. It was the beginning of the timeline that we are all familiar with. Initially there was a statement made by 1 of the big 3 executives, that the troubled auto industry was only due to the troubled economic turmoil and the housing bubble, while they remained oblivious to the storm forming ahead.

What we learned was that the bigger issues were about to be unveiled. Mismanagement was at the forefront of the automotive crisis and was no different than what happened with Bernie Madoff – it took a financial crisis to expose it. Everyone was hearing names like Paulson, Geitner, Gardelli, Mulally, Gettlefinger, and words like bailout, merger, bankruptcy, and collapse. Everyone was talking about things like pension funds, union ownership, private jets, and turn-around plans. Headlines read “The Worst Third Quarter Sales Results.” NYSE closed below 9000 and was on its way to 8000 on the DOW. Quotes like, “Research showed that the consumer would not feel comfortable buying a vehicle from a bankrupt manufacturer” became commonplace. And then we were challenged to survive the elimination of 2000 dealers, creating a red sea of opportunity.

Unlike the manufacturers, when our industry had challenging times, we as general agents supported dealerships and were cheering them on. We have all gone through the pain of troubled providers and know that when any company in the industry experiences tough times, it affects us all. These companies advertised in the early 90’s that they would be there for the long haul. How ironic! But when asked by a dealer why he should do business with my agency and not the factory or a direct provider, my answer was, “ I really will be there for the long haul.” You see, the success of our agencies is only measured by our dealers’ success. It is not dictated by a nameplate or comingled necessities. Employees of our competitors will come and go but we WILL be there for the long haul. I am blessed to say that I still do business with dealers who have been with me since I founded my agency. And I am sure a lot of you can say the same thing.

There is one particular dealer that I am extremely fortunate to do business with. He is not only a genius, but is an extraordinary man of honor and integrity. Should you ever be fortunate enough to sit in front of this dealer, you will see a quote that he keeps on his desk. It is a very simple quote that says, “Do the right thing.”

I believe agents have survived these challenging times because they have not abandoned their principles. You have stayed true to your beliefs and you are the protectors of “the right thing.” You are here today because you and your agency have survived the largest economic crisis in this industry ever. After taking on this challenge, we as agents have worked smarter and leaner. We have embraced creativity and technology, all of which have resulted in a thriving business. Despite the challenges of the past with our symbiotic relationship with the dealers and the actual vehicle itself, we both have experienced some prosperous times these past few years. But I believe your agency is thriving because you have all the ingredients of being a pro.

There are four ingredients of being a pro. The first is focus. Anytime you ever view a professional at work, he is totally focused on his goals and objectives and the people around him. The second ingredient is consistency. A professional is not only consistent at performance, but is consistent in his benchmarks. He is consistent with his interaction with others. The third is education; the day you feel as if you know everything in your profession or field, your luster as a professional fades away.

The last ingredient is commitment and it is truly a necessary ingredient in being a pro. You not only need to be committed to all 3 of the other ingredients, you need to be committed to what you do for a living, and be proud of it.

So how do these 4 ingredients relate to being an agent? It’s pretty easy. You are focused on your dealers’ and your clients’ profitability and you never lose focus on the needs of his or her business.

When the industry acknowledges dealers’ choice awards, for trainers, service contract providers, and insurance providers, or the Bobit organization recognizes F&I dealers of the year, it is consistently the independent agents and our independent providers who rise to the top. If you are here today, then it is a testament to the fact that you continue to educate yourself and your dealers about the best solutions for their business and you are committed to being the best at all aspects of your profession. I commend you all. You possess all 4 of the key ingredients and you practice them daily without even trying. There is one other thing that all professionals have in common. They make whatever they do look easy. It’s like they aren’t even trying.

I believe that when your business is thriving, it is because when you were going through tough times, you went on offense. It would have been easy for you to go on defense, but you didn’t. All of this resulted in a thriving agency.

It would be narcissistic, egotistical and just plain rude if I didn’t take time to recognize these product providers and their employees. Without them, our businesses would not have survived and our businesses would not be thriving. They entered rough waters right along with us. They unfortunately experienced the loss of revenue, and no relief of their expenses. The companies who have survived the great downturn should be rewarded by us, as general agents, with a solid commitment and a spirit to grow their business as well as their own. They are our weapons of strength in taking on our largest competitors in the automotive industry. Without them, we would not be thriving; and we would not survive.

With our businesses now thriving, we must always learn from the past and identify the challenges on the horizon so we can prepare for them, instead of reacting to them. There are some headwinds coming on that are potential challenges for agents and our dealers.

Without taking a “the sky is falling” approach, I believe that one of the challenges we will face in the not-so-distant future is the unavoidable increase of interest rates. History has a way of repeating itself and I am a product of the car business in the eighties. It was hard selling cars at 18% and 19% and financing them. Although we may not see the rise in rates to these levels in the near future, we almost know with certainty, that even moderate rate adjustments will have an effect on the industry’s growth. With the low interest rates of the past decade, our products have been more affordable to the consumer than ever before. With loan rates at zero percent, 1.9%, or even 3 or 4% over terms of 60 – 72 months, this provided our F&I providers attractive payment real estate and gave the consumers product affordability.

Increased rates will have a big impact on our dealers’ cost of doing business. Anytime dealers experience this increased cost, history tells us they do one of two things: they either cut expenses or find other areas of revenue. You as independent agents should be watching these rates diligently and maintain open dialogue with your dealers. Prepare now to help them find revenue opportunities to soften the impact when this occurs.

Another factor that is occurring already is the ascent of leasing and the resurgence of subprime. While we approach the peak of pent up demand in the marketplace, again, we can reflect on our past to predict our future. Once inventory levels increase over 90 days and then close in on 120 days supply, increased incentives and subvented rates always seem to be the predictable solution for manufacturers to maintain market share.

According to JD Power, lease penetration levels are at the highest penetration level on the record. They represent 26.5% of retail sales for February 2014. The previous record was set back in May 2000, at 26%. Based off of new vehicle sales – which are predicted to be over 16 million units this year – leases will represent over 4 million of the vehicle transactions for the year. Our challenge will be to deliver to our dealers products that are specific to the lease transaction.

How about subprime? It seems like a daily occurrence to read about a new lender entering into this special section of the financing arena. Peter Turek, automotive vice president, Transunion said, “We expect the share of nonprime, high risk loan originators to continue upwards due to growth of creditors in this segment.” The resurgence of subprime financing will present challenges for the general agent community, either through the captive finance arm, promoting private label products, or the practice of limiting back end opportunities for our F&I departments, due to risk measures instituted by these lenders. This will continue to be a challenge.

According to Equifax, approximately 30% of all auto financing that originated in November fell into the subprime category. This area also creates challenges for our business and if not addressed, will continue to chip away at the growth of our agencies.

Finally, there is the restriction of trade – from lending institution to manufacturer coercion. While lenders have come under increased scrutiny due to alleged discriminatory lending practices in the indirect auto loan segment, I believe that the application of the over-advanced policy for private label products, and captive finance are issues that need to be openly discussed and addressed. Tactics used by captive lending institutions, by allowing additional over-advance of their private label products, results in the consumer paying millions more annually on installment loans, absent of the additional value of their competitors – us.

Obviously, recent probes into the lending institution practices did not dig deep enough to discover the restriction of trade practice by manufacturers and others. The time is now, for us and our product providers, to work together in eliminating this unfair industry trade practice. As independent agencies, we enjoy competing with large institutions daily – as long as we are competing on a level playing field. With the focus of profitability of your agencies, these challenges have a direct effect on the per-unit generated by your business to thrive in the future. I am well aware of the regulatory and compliance issues, and I believe that our agencies have continually put the protection of our dealers at the forefront of our business. Unfortunately, the lack of transparency and the wafer thin explanation of the intended goals by the governmental agencies and the far reaching legal descriptions, such as disparate impact, has not provided the lenders and our dealers a true opportunity to put corrective measures in place. As general agents we need to stay diligent and keep providing our dealers with solid solutions in compliance. We must stay focused on what we know and can control in this area for our dealers.

I believe your attitude is what sets you apart and makes you and your agency part of the greatest underdog story as well as great survivors of the automotive industry. With most of you also being professional trainers, we know there are things we cannot teach. We cannot teach passion – you either have it or you don’t. We cannot teach drive – you are either driven to be successful or you aren’t. We cannot teach character – you are either of good character or bad. And, we cannot teach attitude – you either have a great attitude or you don’t. But I do believe we can change attitudes and I am a believer in the power of words. Consider the words “have” and “get.” When you work for big companies, like the factories or the direct provider, you have to get up at 4 am to make that dealer appointment across the state at 9 am. But when you are an independent agent, you get to get up at 4 am to make that dealer appointment across the state.

In closing, I leave you with one final underdog story. If you lived in Denver for the recent Super Bowl, you would have wondered why the underdog Seahawks even showed up. They showed up all right, and it resulted in one of the most lopsided victories in Super Bowl history. The 5’11 quarter back, Russell Wilson had doubters at every stage of his career, but he always kept the faith. He asked his teammates, early on in the season, to believe the Super Bowl was within their reach and he repeated a profound statement his father had said years earlier in his career, “Why not me? Why not us?”

So next time you pull up to that dealer prospect who is selling the competitor, you need to ask yourself “Why not me? Why not us?”

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