Jeff Jacobs is the CEO of Chicago-based Universal Lenders, home of the Zero Plan for F&I product financing. On the eve of the 2016 P&A Leadership Summit, AE caught up with Jacobs to learn what it’s like to grow up in the business, where agents and dealers can find new revenue, and why competition is always a good thing.
AE: Jeff, I know you’re based in Chicago. Are you from there as well?
Jacobs: Born and bred here in Chicago, in an Italian, blue-collar neighborhood. I grew up in a car family. I was a car dealer for 40 years or so, alongside my dad and uncle and brothers. My dad started out as a Studebaker dealer, and by the time we sold out in 2006, we had Buick, Pontiac, Honda, Mazda, Hyundai and Ford. We were a high-volume group.
AE: Were you an early import adopter?
Jacobs: We added Honda in 1987. It was popular but nowhere near the juggernaut it became. We bought it from a motorcycle dealer. People said we were nuts. But the American factories allowed the imports to come in by not building great product. Anyone who thinks world competition is not a good thing should have been in our service department in the ’70s. We had long lines of GM cars every Monday morning, all overheating. Today, there’s not much difference in the cars. The American manufacturers stepped up.
AE: F&I has come a long way since then as well.
Jacobs: My experience as a dealer taught me about financial products, service contracts and tire and wheel, and now I finance those products for dealers through agents. Considering what I put those agents through as a dealer, I have a real appreciation for all my agents.
AE: Any advice for the agents reading this article?
Jacobs: Don’t give up. You might have to go to the store 20 times. Keep leaving your card. You might get there on a day the dealer is frustrated with their current provider. That’s what happened in my store. I had an agent who wouldn’t stop bugging me, and he happened to come in on a day when a claim wasn’t bought and I felt underappreciated. And he got in and never left.
The other advice I would offer is that there are a lot of ways to increase revenue and incremental sales in the F&I department. You can’t let cash customers go by the wayside. Traditionally, dealers only used payment plans for credit-challenged customers who couldn’t get F&I products on a retail installment plan. And when times were good, they didn’t use payment plans at all.
AE: Did you use them when you were a dealer?
Jacobs: We liked the concept but not the program. We didn’t like waiting 90 days for money and we didn’t like that it could only be used for service contracts. So when we sold our dealerships and I needed something to do, I decided to get into this niche financing business. But I approached it like a dealer. I thought of every objection.
AE: Like not wanting to wait three months for the money.
Jacobs: Right. Instead of waiting 90 to 100 days to get funded, we pay our dealers within seven business days. Instead of offering financing for service contracts only, we’ve made other products eligible, including maintenance programs. Most importantly, our collection efforts reduce chargebacks by half. And the ZERO Plan is not just for credit-challenged buyers but cash buyers, which can be 30% to 50% of your customers.
AE: All the compliance experts say you should treat every customer the same exact way, and that includes offering everyone the same protection.
Jacobs: How can you say how important these products are for finance customers and then not even bring it up to your cash customers? Dealers look at average revenue per retail deal. The true gauge should include separate averages for finance and cash customers. You need to maximize revenue for each subset. And, yes, I would venture to say any governing body that is looking for a lawsuit and sees you’re only beating up on subprime buyers has a pretty good case. And it’s just not payment packing. You need to offer everything to everybody or somebody’s going to sue you.
AE: Why are we seeing all these payment packing headlines 10 years after that practice was supposed to have stopped?
Jacobs: I think it’s greed. Payment packing is easy to do. It’s not easy to sell the benefits. One way is illegal and the other isn’t. If the owner cares about compliance, their employees won’t take advantage of people.
AE: Michael Tuno, the agent and compliance expert, would say that if the dealer’s license were at risk, that would make a big difference.
Jacobs: He’s right about that. But if you have ever read a franchise agreement, you know it allows the manufacturer to take away your franchise. But they won’t do it. When it’s a successful dealer who sells a lot of cars, the manufacturer doesn’t want to get involved. When I was a dealer, I never saw any dealer lose their license or a franchise or even came close.
AE: Did you have any bad actors in the F&I department?
Jacobs: We did, and we tried to clean it up. Bear in mind, there was a time before Regulation Z when we had customers sign blank installment agreements and then mailed them their copy at the maximum allowable rate. But we became less and less tolerant of practices that alienated our customers. The F&I manager is the last person the customer sees. If they leave with a bad taste in their mouth, they don’t come back.
AE: What do you think about putting information and pricing for F&I products online?
Jacobs: Well, like I said, if auto retailers don’t make a push to sell products to everybody, the direct marketers will. Whether it’s a service contract or tires, somebody will. I believe in making it easy for customers to buy these things. The other place I would like to see more emphasis is in the service drive. We’re not going to be able to make any more money on finance customers. You have to look to cash buyers and service customers. That’s how you drive revenue going forward.
The way cars are being built today, with fewer and fewer breakdowns, I’m wondering how the industry is going to keep service contract sales levels up and keep from dropping the price? I don’t know how they do that. It’s a good industry right now, but outside competition is going to drag it down.
AE: Tesla will tell you they can fix your car remotely, if it’s a software issue.
Jacobs: It’s all about competition. When Chrysler, Ford and Chevy owned the market, they sold everything they could build. As much as I’m conservative in my thinking about business and politics, I don’t believe big banks, for example, should gobble up the small ones. I believe there has to be competition. I hope that never happens to our industry. No one company should buy everyone up.
AE: What do you do for fun?
Jacobs: I like to fish. I like to golf. I like to spend time with my grandkids. I have two kids and two grandkids. My son lives in Brooklyn and my daughter is here in Chicago. We go back and forth a lot. I used to play hockey and I get to a Blackhawks game two or three times a year.
AE: It’s a good time to be a Blackhawks fan. When will the Cubs win a pennant?
Jacobs: Well, I have always been a Cubs fan, and I would say that, within the next three years, they’ve got the best chance in my lifetime. I would love to see it.