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Agent Summit 2014 Recap: Technology Showcase Panel


While most dealers have switched over to eRating, many have not switched over to eContracting all of their paperwork. Johnny Garlich, President, Heart Dealer Financial Services and moderator for the Technology Showcase panel led a discussion that addressed the latest offerings in technology, as well as the roadblocks and predictions for the future in the F&I office. The panel of experts each presented solutions and shared their predictions about what the F&I office of the future will look like.

Brian Reed, president and CEO, F&I Express opened the discussion stating, “Without any doubt in my mind, the industry is going toward electronic processing of all aftermarket product. It’s not ‘if’ it’s going to happen, it’s happening right now and I think everyone really needs to get on board with figuring out exactly what it means and how to make it easiest for the dealer. The key to success is to make it as fast and easy as possible for the dealer. The nature of an F&I manager is to get it done quickly and if there are roadblocks slowing them down, they are not going to like it. The big, big change, and where the market is going to bring this whole process together, is eSignature. Once you have eSignature, it really streamlines things and makes it that much faster for the F&I managers. Consumers expect that today.”

Nowicki, vice president of retail software, IAS, whose company provides single point eRating and eContracting through a menu says most of their users are on their menu. “I think the key for agents, is picking a solution where you can eRate and eContract all of your products in one spot. If they have to go to multiple websites, that is certainly not making things efficient for your dealers at all.”

David Trinder, CEO, F&I Administration Solutions, explained that some years ago, they adopted the strategy of linking their administration solution to as many dealer facing menus and other selling solutions as there are out there. He thought it was surprising to see that there are close to 30 menus and other systems to which they are now connected. “We have customers who are very close to having 100% of their volume being done electronically and we have customers who are now coming up with products that they are only processing electronically. So they are going to the dealer and saying if you want to sell this product, you have to process it electronically. With the extent of our connectivity, this strategy works very successfully.”

By doing this, Trinder says they have made it possible for an agent to walk into a dealership, ask the dealer’s preference in the way they present and sell their products, and easily align themselves with that preference. “Despite the connectivity part, at the end of the day, it still takes some effort to get to 100%. You can put all of the technology you want in front of an F&I manager but often, there still has to be some incentive to get them to use it. However, we have seen that even a little bit of incentive can be quite successful.”

Brent Allen, COO and president, StoneEagle, says StoneEagle is most known for its reporting functionalities. He was asked about how the industry would put eSignature into place. “We generally agree that if the manufacturer started to employ eSignature, and if the bank started to use more eContracting and eSignature, that would force the ‘I’ side to adopt it too, because the dealer would soon be more comfortable with it.” In the last year, Toyota was pushing 65% and Ford was right behind them. Nissan is also pushing the use of eSignature on the finance side. “We have seen a hard push in 2013 and it will get stronger in 2014. As a result, I think we will start to see a lot more acceptance on the ‘I’ side and that flows directly into what this panel is talking about – more acceptance of eContracting and eSignature itself is the key piece.”

So how do we move everything into this seamless process that everyone wants to achieve?

Garlich said that in his experience, the reticence in moving over to eContracting is not because they don’t like it, it’s because of the workflow, which he describes as longer and more convoluted. People simply aren’t going to jump on board when this is the case. “If F&I guys could go ahead and produce the document set and have it ready to go after the customer makes a menu selection – and do it all in one area – then I think you would find a lot of them would do it.”

While everyone has used the traditional key metrics, Garlich commented that StoneEagle is one of the leaders in reporting how that is changing from the traditional spreadsheet general agents have had for years into what we have today.

Reporting Tools

“We have had requests for more graphic presentation tools,” Allen pointed out, “We have been delivering a lot more reports via email – which you have to be careful with – you can’t put any personal and private information in an email but you can put statistics in an email.”

Allen continued, “We built a very specific app for an ipad or a tablet, so that when you sign in, the first thing it does is a pure graphic presentation. It’s bar charts and pie charts, because that was the feedback we got. You walk into a store and really the eye candy is the chart, not so much the data and then we work backwards into the data. So really they see what they want to see – in red, yellow, green – and then you drill down backwards into the actual data.” Oddly enough, Allen reported that despite the original push for this type of presentation, the adoption of it has not been as big as might have been expected.

Nowicki explained how SmartMenu, his reporting tool, can be used to show the results of using a menu versus not using a menu. “With our reporting tool, we do offer a lot of analytics that compare what numbers look like with and without a menu, and with and without certain sales tools on the menu. It gives the agents a way not only to measure those numbers, but to hold F&I managers accountable. If you can go into the dealer and clearly show a PRU difference of $300 per car with a menu in place, versus without, it’s a very easy sale. On the accountability side, you can now go in, look at every single deal and ensure that every single deal gets a menu and follows whatever process you put in place. So if your process is that every customer sees a particular type of menu, and has particular sales tool usage, you can monitor all that very easily from home or your iPad or wherever else.”

Another thing agents are demanding are more analytics that they can control. Nowicki continued, “it’s not a matter of us sending a report that’s in PDF form – that’s kind of locked down. I think what most of our agents expect is, in a perfect world, you would all like to take out your ipad, run reports, slice and dice data and drill down to what you’re looking for. We are working on developing reports that are interactive, give you more analytics, more capability, more filtering on demand, etc., all on your ipad.”

Mobile reporting has been around a while and has developed a lot in the past year. According to Trinder, mobile is the way to go. He thinks the industry will be fully on board with mobile reporting by the end of the year. He pointed out that the most important aspect of mobile reporting and tablets is the immediacy of data. “In my view, one of the real values of mobile and tablets is giving agents data on the road in real time. If you are looking for something that’s going to change your life in the coming year, as much as the technology within the dealerships might change, I think your expectations about how much data you’re getting and what you are going to understand from it is where you should be looking. Just before you walk in the dealership you should be able to see what kind of transactions they have done and how many there are. With these statistics, you can go and have the right kind of conversation with the dealer – right then and there.”

Is the F&I Office Going Online?

Garlich asked the panel how processes could be adapted to take into account the change in how people are buying cars and doing transactions. Millennials, especially, are wanting to do business away from the dealership.

Reed predicted we will see a lot more of the F&I office online in the future. “With the way that people are evolving in how they use the Internet and what they are demanding, I think that they are ultimately going to demand that the industry move the F&I office out of the office and move it more online. That’s going to be a big change for the industry. The goal here is not to lose F&I income; it’s to be able to give the customers what they want online and still maintain the profitability that you have today. I would say that in the next 5 years this is going to be a significant challenge to everyone in this room. And there’s not a magic answer. People who are trying to do some of this online today aren’t real good at it. I haven’t seen a really good result around this, or a very good process, but I think people have to start trying it, thinking about it and talking about how everyone is going to work together to make that happen as an industry, as consumers are going to be demanding that in the future.”

Others in the panel disagreed, including the moderator, whose immediate response, “that’s a bummer!” brought laughter from the audience.

Garlich said he sees the problem with selling remotely being that for many, they don’t have a process – their process is just a telephone call. “I can tell you we are not going to run 50-60% service contract penetrations trying to sell stuff over the phone, but I do think the consumer is going to call the shots on this. If they decide they want us to come to them in some way, shape or form, we need to start thinking about what that looks like and thinking about how what we do in a face to face environment can be translated into a remote environment. I think that what that means for us as general agents is that we change our selling style and our training processes to take into account these changes in the consumer preference.”

Trinder said he was not convinced that even in five years, most sales won’t still be happening in the dealership. He described a huge gap between the provider and the customer, with the agent and the dealership in between. “When the customer goes to look online, they are going to be on the dealership’s website more than likely. And the dealership isn’t exactly selling products from one provider. So the dealership has got to present products that aren’t theirs and which also may be from many providers. It’s a very interesting challenge we face and I am not sure how easily we’re going to solve it.”

From the perspective of selling, rather than consumer demand, Reed pointed out that more consumers are going to want self-selection and transparency of the process; so for a certain segment of the market, its going to be less about how you are going to sell, versus, how you are going to present. That involves a different skill set and a different approach. He brought to light an interesting comparison from his own experience as a consumer. “I go into an electronic store to buy a computer today and I know what’s going to happen once I say ‘I’ll take it.’ They are going to start hitting me up to buy a warranty for that computer. They grind me, grind me, grind me, but I say no, no, no. But if I go online and I buy my computer, configure my computer and then they say, ‘how about an extended warranty?’ and all these other add on products, I am more likely to buy in the self-selection process like they have online, than in the store when I am hounded by a salesperson.”

Norwicki countered Reed’s scenario and agreed with Garlich. “I don’t think that in five years we are going to have this ‘amazon.com’ approach to buying cars where you get online, complete the transaction online and the car just shows up in your driveway. That might come in time, and maybe in some urban areas, but I don’t think that’s going to happen anytime soon.” However, he noted that we are already seeing customers who have done their research on the vehicle they want to purchase, and they come to the dealership expecting a short transaction. And they don’t expect to be sold in the F&I office. “[The focus] is not so much on the sales of your products, but on the education of our customer. They can find out anything they want about a vehicle online, but they would be hard pressed to go to a dealer’s website and find out anything about F&I products . . . that information just isn’t there!”

Norwicki described the view held by some trainers, that pre-exposure to products is not advisable, as a “dinosaur philosophy.” He went on to say, “I think customers today demand and expect education and that’s really what our focus should be on – educating customers on these products, not necessarily conducting the whole sale online.”

At the end of the day, some of it just boils down to customer preference and personality. Allen commented that as a hands-on person himself, he would always want to go into a dealership, see and touch the actual car and talk to a person.

In conclusion, Nowicki summed it up with his final comments, “I think that the holy grail for eContracting is what we are striving for today. EContracting of all the ancillary products, all the service contracts, and eSignatures on all those documents, but there are obviously pieces missing – the lender funding packet, the odometer statement, the title, apps, all that stuff. So clearly we are not there yet. We don’t have 100% of that documentation done electronically, but don’t take that to mean there’s not value in using what’s already there.”

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The Trends for 2014


There is no such thing as a crystal ball that allows people to see into the future, but that does not mean we are completely in the dark about what could, and probably will happen, especially in the business world. We talked to 17 of the industry’s top executives to get an idea of where they see the automotive industry as a whole, and F&I in particular, heading in 2014. They gave us their top issues, the technologies and products they are watching, and what their predictions are for the next 12 months. It might not be a crystal ball, but it is certainly the next best thing.

The Economy
Our executives had similar thoughts about where the economy would go – in a positive direction. For the most part, our group was optimistic – although some of them cautiously so – about the fact that the economy will grow in 2014. No one expects significant growth, but they do agree that profits and the number of units sold will continue the year-over-year increases they have enjoyed the last several years.

“I think the auto industry is part of the reason the economy is doing better,” said Bob Corbin, president and CEO, IAS. “I don’t think the economy is driving automotive as much as automotive is helping the economy. Our industry affects one in five Americans in some way, shape or form, and we think everything is very positive. Cars were are up about 8.5% for 2013 year-over-year, and we see that trend continuing, to somewhere north of 16 million new car units sold in 2014.”

“The economy still has some bumps in it,” said Charlie Robinson, president and COO, Resource Automotive Group. “We all read the papers and get mixed signals. But the automotive industry is robust, and the general feeling is optimistic for 2014; and the general feeling is that it will continue in that direction. I believe we will continue at the same pace as the preceding few years. If you listen to the pundits, we will see a 4% increase in SAAR for 2014, versus 6-7% increase for 2013. So everyone is expecting another two or three solid years in the auto industry before we look for a downturn.”

“From my perspective, I am cautiously optimistic,” said David Pryor, CMO, Safe-Guard Products International LLC. “We had that government shutdown in 2013 which caused a blip in the automotive industry, and we did see some softness in the last few months. However, all of the indications we’ve had are that we’re getting back to a slow rate of growth. The automotive industry is forecast to come in at about 15.5 million or so once the final 2013 numbers come in. How much further can we go in 2014? We think there’s room to grow – we think we could get close to 16 million next year. There are still many factors in our favor, such as the fact that the average age of vehicles on the road is still the highest seen in a long time. There is pent up demand there. “

“I guess I’m fairly optimistic about the economy,” said Jimmy Atkinson, COO, AUL Corp. “All the signs are that new and used car sales will be strong next year, and there is nothing really on the horizon that could damage that too much, although you never know for sure. But on the whole, I’m pretty optimistic. The biggest thing that drives car sales is lending and credit, and in the last couple of years, subprime credit has been very strong; we’re seeing that more prime lenders are dipping a little deeper as well. So there is a lot of competition and a lot of money out there to loan for cars, which bodes well for next year.”

“I would expect that the first half of 2014 will look a little like 2013,” noted Joel Kansanback, president, Automotive Development Group. “In our market, car sales have been strong, credit has been loose and dealers have been profitable, but I would expect the results for lenders will deteriorate at some point, in probably the second quarter, and we’ll begin to see tighter credit in dealerships in the third quarter. Dealerships will have difficulty getting their customers loans, and there will be a big impact on special finance departments. In concert with that, the theme for 2014 will be that the sales will continue to be strong, and F&I will continue to be strong. The wild card, however, is if the major lenders follow direction of CFPB and put restrictions on finance reserve; if that happens, we could have a major shift fast, and that could happen as early as the first quarter.”

“There are certainly plenty of differing opinions about the U.S. economy going into 2014, but when you look at most of the major economic indicators, continued, modest growth for the U.S. economy as a whole seems likely,” said Scott Karchunas, president, Protective Life Asset Protection Division. “The consensus appears to be between 2-3% real GDP growth for the US. In terms of the automotive industry, 2014 looks like it will continue its upward trend, although at a slower pace. We are expecting new car sales to be above 16 million, which is essentially on par with sales dating back to 2006. However, it’s important for all of us to keep in mind we’re looking at the lowest year-over-year new car sales growth since 2009. Much of the rebound in the automotive industry that we have seen over the past few years can be attributed to two main factors: pent-up demand and credit availability. Dealers have done a great job of meeting this demand; yet we still have younger buyers, lower income segments and small businesses that are not reentering the market as consistently as other demographic segments. It will be important for the automotive industry to find ways to better engage these segments with products and technology that meet their needs.”

“It’s a great time to be in our industry,” said Steve Amos, president and CEO, GSFS Group. “We’re going through changes that are occurring once in 15 years, so it is pretty neat out there I think. Obviously the economy directly influences consumer behavior and confidence, that’s critical to buying cars. And, certainly, buying cars is motivated by desire, but also by need, and as we’ve seen the last four years, consumers who are keeping their cars longer, have pushed the need back. The economy has everything to do with that. As they gain more confidence, they’ll start replacing those cars. OEMs haven’t necessarily built better automobiles, they are just hitting home runs with what they’re doing right now and consumer confidence is there – so it is a very good time for our industry. I think, barring some unforeseen disaster, the economy will continue to improve. I feel good about what’s going to happen.”

“I really don’t see the economy changing a whole lot either way, up or down; I think it’s stabilized as much as it can right now,” said Tim Brugh, president, American Auto Guardian Inc. “Car sales are going to grow, however. Dealerships, especially in the F&I and sales departments, should be in a good position in 2014. I am anticipating another growth year for us, and the automotive industry as a whole.”

“I think it looks like everything has stabilized to a large degree,” noted Tony Wanderon, CEO, NAC and Family First Dealer Services. “Lending has opened up, and customers can come into the dealership and buy cars and we have seen the increase in volume to prove it. I believe we will get into normalized purchase times; there were a lot of customers in 2013 who needed vehicles and that helped us out, but I believe 2014 will be more of a normalized year than the past several. I don’t’ see a lot of things that will jump up and catch us – no major elections, no financial crisis at this point, and everyone has strong balance sheets. I think the economy looks pretty good.”

“I have to say that I would think the economy will stay pretty level,” said Brent Allen, president, StoneEagle. “There is some interesting legislation coming out that could impact it, but for the automotive industry, it is not so heavy. My personal perspective is that it should stay pretty steady, and be a pretty good year. We’ll see continued good sales of cars, and good product sales – investment capital companies are banking on that. They are buying up pieces of this business as fast as they can, and I do see that continuing as well.”

But while the overall economy looks to improve in 2014, a few of our executives did note that political or regulatory issues that started last year – such as the ongoing issues with the Consumer Financial Protection Bureau (CFPB) – could impact the automotive industry, although no one is positive about what those impacts will be, or how they will, ultimately, play out.

“I think the economy will continue to grow, but slowly,” noted Michael Tuno, president, World Class Dealer Services Inc. “It won’t be much different from 2013 – we will still have the same challenges. The only major difference in 2014 from 2013 is a certain political event in November that will certainly have some bearing on the macro environment we all live in. Everyone will still be looking to keep his or her turf safe, and I say that because the automotive industry is cyclical insofar as affordability issues impact it. I still see us having to wrestle with issues such as the debt ceiling, healthcare, etc., so there will be a robust election environment in the fall. So I believe we will have slow growth, and I believe the automotive industry will closely mirror the national U.S. economy. The only footnote is that 2013 has been a pretty robust volume year, but that has been done at great pains for the future of retailers, such as longer loan terms – it speaks to what people can afford, and what can they afford for other major items such as healthcare, etc. The mass market that buys cars, in that 16 million number, will still face those same challenges, and we’ll eventually have to deal with the issue, but I don’t think it will be in 2014.”

“The economy could be unpredictable because of the impact government legislation will have on individuals and companies with the Affordable Care Act,” said John Vecchioni, director of business development, United Car Care Inc. “The industry has benefitted from the down market only because of the limited sales production of the past. People have had to come out and replace vehicles as a result of the 2008 economic calamity. Leasing should become more predominate in 2014 as a result of economics.”

“I see some stress in the economy,” said Glen Tuscan, president, Dealer Commitment Services Inc. “And I see those pressures coming from a variety of different areas. The political environment is stressful on consumers right now, and although the stock exchange is hitting record levels, I believe it’s falsely inflated due to the Federal Reserve. As a result, I think the economic outlook will really show it’s face in the last quarter of 2014. I don’t think there will be a lot of movement – I look at it as an ice cube in Washington – there is some dripping, but no thawing. The elections are affecting a lot of stalemates and because of that there is slow growth. The consumer is under pressure, and we’ll see more of it once those elections are done. I do see a change in interest rates and a change in the economic environment, but for the first half, and even into the third quarter, I don’t see it thawing as much.”

“I think it is going to be an interesting year,” said Kelly Price, president, National Automotive Experts. “I would be surprised if we continue to see the growth that we have seen in auto sales, however. With the CFPB possibly affecting reserves and pricing of products, as well as marketing, it will be interesting to see how this will impact dealers.”

Products and Technology in 2014
Perhaps unsurprisingly, there is more than one product and technology our executives are watching.

eContracting and eSignatures
By far, this was the product category most of our executives touched on, even just in passing. While the rise of the technology for eContracting and eSignatures has been happening for the past several years, many of them believe 2014 is going to see a surge in their adoption. Providers are pushing for the technology, lenders are starting to take a closer look at it, and dealers are beginning to make plans as to how it could fit into their operations.

It will not happen overnight, but this is a product category that all agents should be taking a hard look at. It is also the time to educate dealers on all the benefits; some will be harder to convince than others, and it will take time, but those who start integrating technologies into their dealerships will be in a much better position for growth in the years to come.

“The consolidation of ancillary products (combo products) has grown in acceptance and should continue to grow in popularity in 2014,” said Matt Croak, president, Wise F&I. “Expanded financing options will continue to make loan and lease centered products valuable to the consumer. eContracting of F&I products as a percentage of overall contracts written will also continue its upward surge, as experienced over the past two years. Utilization of third party F&I product platforms, as well as provider integrated solutions will aid in this effort.”

“eContracting is one topic a lot of people will talk about,” said Allen. “And there are all kinds of perspectives on that. A lot of people say it’s stagnant, and some are successful and some are not, but OEMs are pushing it very hard. They are getting the loans in that format, so they are successfully moving that needle forward; I know of one that is pushing 80% eSignatures on the finance side. What we’re seeing is, because of that, the finance side is starting to reach out to get a seamless deal jacket. We have, however, seen a lot more success on eContracting than on eSignatures. There is quite a bit of success on the data, but the signature is the hook. It is the one piece that, for the most part, is not electronic today. Once you can capture that properly, the whole deal can be electronic. It is the lynchpin, and I think that will grow a lot in 2014. There are still things to overcome – how many signatures do you need for example. Can you do it once and apply to all documents? Probably not today; step one would be great if we could figure out how to get all the forms together so they can be delivered from there, so it is a single experience.”

“I see the product offerings as more evolution than revolution,” said Atkinson. “The way products are presented will change more than the products themselves. Customers will be able to interact with products through tablets or enhanced software at the dealership. I certainly think things on that front are getting faster, but there are still some challenges there. For example, I recently bought a car, and it was going to be a paperless transaction – and it was in that I signed a touchpad. But then there was the biggest printer I’d ever seen, and they printed out reams of paper, so I am laughing at the idea of paperless. We really do still have a ways to go on disclosures and legalities to where it’s truly paperless. But I do see the trend to move in that direction accelerating.”

“With the numerous recalls and quality issues of many manufacturers, I believe that we will continue to see growth in the VSC arena,” said Price. “It is getting harder and harder for people to say ‘It’s a Honda/Toyota/etc. and it won’t break’ – especially with all of the electronics comprised in a car these days. But I do see eBusiness solutions as definitely taking hold. We are seeing more and more of our business processed electronically. eSignatures are going to be more of an issue with each state, and whether they are an acceptable form of signature; we will be ready when they are.”

“All of our customers are eContracting at one level or another,” said David Trinder, CEO, F&I Administration Solutions LLC. “Some are receiving well above 90% of their contracts electronically, while others are still at the 30% level. It has all been a matter of effort. The more providers push agents to push dealers to eContract, the more successful they have been. It is also interesting that the providers pushing eContracting the most have also seen the greatest sales volume growth. What I am certain of is that in 2014 most providers will feel more push from the other side – the dealers and agents will be insisting on eContracting, so the percentage of eContracting should show a healthy increase in 2014. eSignature is another matter. The requests for it have increased significantly in the past few months, but the demand is not there yet. I expect use of eSignature will grow in 2014, but it will not be mainstream for a year or two at least.”

Appearance Protection
Appearance protection products have been around for years now, and in 2013, we started to see a real increase in consumer interest for these types of products. Our executives see that trend continuing. In fact, after the product mainstays (VSC and GAP), the appearance protection category is the one our executives predict will be the next biggest seller in the F&I office.

“The big three products are always vehicle service contracts (VSC), then GAP, then tire and wheel. I see appearance protection products being resurgent in 2014 however,” said Corbin. “They are a great value for a consumer – consumers don’t go to Best Buy to take pictures of their new fridge, but they do take pictures of their new car. They love their cars, depend on them, and want to have a good-looking car, and that is what providers who provide protection are giving them. I see a resurgence in that product in dealerships in terms of penetration.”

Mobile Technologies
Another big trend our experts see continuing is the push toward mobile technology in a wide variety of ways. From the technology found in the cars themselves to the way F&I is presented and sold, mobile is still in the “early days”. While there are dealerships that have embraced it and had a great deal of success, those stories are in the minority. There are far more that either have not seen the success they had hoped for, or who have not looked at the technology at all. Our executives believe that, as with appearance protection products, this will not be a new trend, but it will be one that will continue well into 2014 and beyond. And agents need to make sure they are educating themselves and their dealers so that it does not catch them by surprise.

“It is too early in the game with tablets and mobile devices, but I strongly believe that they will be the trend over the next three years,” said Kaizer Siraj, CIO, Safe-Guard Products International LLC. “You can think in terms of point-of-sale – how do you make products more visible? Mobile would allow consumers to evaluate the products, and there is very neat opportunity across the board for that. The second area mobile will impact is the service drive. Take a step back and think about it: the customer comes in with a problem, and we want to make the experience compelling and smooth. Mobile devices and tablets integrate with other back office systems to make that happen. Mobile will play a key role in the future, but the enablers will be about integrating with multiple lenders and multiple partners. So the mobile tablet is in the early stages, but I see that as the direction the industry will ultimately head in.”

End-to-End Solutions, Pricing Options and Lease Products
These three trends are also continuing from 2013, but fewer of our executives see them as being major ones to watch – although they are important.

End-to-end solutions refers to the software technologies that track a customer from when they drive onto the lot until they take delivery. These systems tie together every process in the dealership for a seamless customer experience. They have been around for a while now, but as with mobile technologies, they are still maturing; however, our executives do believe they have started to hit a point where there are solid, reliable solutions that will start to take hold. This is probably not going to be a major trend to watch in 2014, but smart agents will be keeping abreast of the providers and the technologies they are working on for the years ahead.

“I think we’ll see the emergence of more desking tools in 2014,” said Robinson. “They are out there now, but I believe they will continue to gain popularity. They will put F&I and the front sales team more in concert; the dealership wants to watch how deals are negotiated, to make sure they’re done correctly. Some of them will print out reports that will show managers the deals, so desking tools that track the way sales are negotiated will become more popular as time goes on. This is all part of an end-to-end solution. Everyone has been promising products for 10-15 years that allow the CRM to feed into a desking tool, to feed into the back office, etc. I think the industry has been struggling for those seamless systems to evolve and work as they should, and I think we’re finally starting to see them take center stage.”

The emergence of pricing options such as bi-weekly payments was a major trend when the economy and industry were down. Now that things are picking back up, consumers are more easily able to afford traditional payment methods, but while the economy has improved and continues to do so, there are still many consumers with cash or credit problems who still need to purchase vehicles. Our executives believe that the trend for dealerships to have those options available will continue to grow. This is a category agents should be looking to add to every dealership portfolio. It gives the dealers more options to get into cars, and lets them be heroes, which in turn increases customer retention.

“I think you’re going to see increased interest in biweekly products,” said Tuno. “It means the buyer is able to take those longer loan terms and afford a purchase, but be able to pay it off and get back into the trade cycle in a shorter period of time. There is a growing awareness of that product; the seven-year loans rampant in our industry are detrimental to the dealer in getting the customer able to trade their vehicle and get them into another car in a reasonable period of time. Biweekly products both ensure the dealers’ and consumers’ interests are best served.”

Leasing is another product category that many of our executives touched on. Leasing tends to occur in cycles, and we are well into an “up” cycle at the moment and providers have risen to the challenge with more products designed specifically for lease customers. This is where appearance protection will also see a surge, since it is, by far, the biggest product category for lease customers. Wear and tear is the second biggest, giving consumers piece of mind for when they turn in their lease, and if dealerships are not pushing F&I products to every lease customer, then they should be trained on how to sell to that segment.

“Lease products are going to keep increasing penetration,” noted Brugh. “Things like ding and dent, or excess wear and tear. We have seen some nice maintenance programs with a little service contract tied to them. I really think the lease products have seen a lot of growth over the last two years through both OEMs and dealerships. They give the customer a lot of good coverage, so I believe those products will surge forward in the leasing market.”

Customer Retention and Data
Customer retention was a big topic in 2013, as many started to realize that the age-old idea that it is easier to keep a customer than earn a new one applies to the automotive industry as much as any other. That, our executives firmly believe, will continue well into 2014 and beyond. This is where F&I plays a huge roll – products such as pre-paid maintenance are tools to help get consumers back in the dealership, and keep that dealership at the top of their mind, so when it is time to purchase a new car, they are far more likely to return.

Related to that, selling products in the service drive started to see more dealers showing interest toward the end of 2013, and that will continue into 2014. There is still a great deal of resistance by service managers to selling products, but this is where a good agent comes in. Agents can help the sales and service departments, as well as F&I, because they uniquely understand the importance of the products and how they impact everyone.

“We’ve had conversations with many partners, and one of the trends they are all seeing is the idea of customer retention,” said Pryor. “It is becoming an increasing focus in terms of products in the marketplace. Dealers are looking at providers with higher frequency and opportunity to use F&I products to build relationships with their customers. Thinking about that, it kind of sets it up for things like prepaid maintenance, tire and wheel and service contracts. Things that keep that customer coming back – the ultimate goal is selling them another vehicle when they’re ready to trade it in.”

“I think there’s an evolution of products right now,” noted Tuscan. “But any dealer not doing their own maintenance plan is missing an opportunity. They are designed for dealers to bring customers back, and then to take that customer and turn them into a client. If dealers are not using something like this, they will always be buying customer business instead of earning it, and planned maintenance is truly one of the best products for building that relationship. And that will help the dealer through the coming year, because now he’s got customers committed to his business instead of defecting elsewhere. That, to me, is the number one staple product. That is, essentially, building two departments: the dealer is capturing business in F&I, and then turning them into a customer in the service department. That will reap benefits years down the road.”

“I think dealers have to accept that the second the customer leaves their dealership after purchasing a new car, the dealer is immediately competing for their maintenance business with at least 40 or 50 other businesses,” said Kansanback. “So anything they can do to try to control the customer coming back for the maintenance at the time of sale will be critical. When I’m here and buying a car, you can sell me a package, set appointments, do all kinds of things, but the second I leave with the car, you’re just mailing me coupons, and that won’t drive my behavior because consumers today still perceive the dealer to be expensive and slow.”

“Dealers are reaching out to get customers back in the dealership with maintenance agreements,” said Wanderon. “Service agreements are still the number one product in our marketplace but it can be any product that keeps the customer both dealer and brand committed. And the dealer/provider is giving the customer something to minimize their risk of some catastrophe that might affect them such as theft, loss or loss of value, so it’s a win for everyone. I see those products maintaining their continued increase.”

Broader Offerings
Finally, many of our executives touched on the fact that while the top selling products will remain the same, that doesn’t mean there are not other ways to approach them. Combo products – or bundling several products together – are a hot topic, and our executives believe this trend will continue to gain steam in 2014. The practice of bundling multiple products together has gotten scrutiny from many of the top providers, and agents should expect to see more of those bundles coming out in the coming months. Not only does it allow the dealer to get more products on the menu without making it overwhelming, but it also streamlines the process for the consumer, and often comes with a slight discount, making it even more attractive.

“The menu is pretty full right now,” noted Amos. “all of the insurers out there are looking for the next new product we can put in play and gain a lot of revenue, but right now we have to consider menu – it can’t get too big. I think a lot of the jostling for positions is really falling into place; VSC and GAP are big, and the big riser for us in 2013 was prepaid maintenance. I see tire and wheel as a solid product, continuing to increase year after year, and I believe we will see more bundled products next year a well – bundles will be combined with windshield, paintless dent or tire and wheel, all sold in one package at a reduced price. I think in 2014 we will see that become more prevalent, as it has really become mainstream now. Ancillary products have also become more acceptable, with providers more comfortable with their risk, but as far as what’s new, nothing will go on the menu unless it’s a product that will replace something already there.”

“The type of F&I products the average car buyer responds to look, on the surface, much the same as what has been offered in the past,” said Karchunas. “Service contracts and GAP will remain cornerstones of the F&I product offering, but consumers are better informed than ever before and expect greater value from a simplified product. The typical car buyer wants a protection plan that is both easy to understand and reliable. The cars that both domestic and foreign manufacturers are producing now and into the future are being driven for much longer time periods. These same vehicles are also utilizing more technology than ever before. The consumer is often open to purchasing F&I products that provide the reassurance that they are protected against potential problems with the technology as well as the mechanical components. This is why it’s more important than ever to rise up to the challenge of providing a protection plan that is easy to understand, yet provides coverage for increasingly complex vehicles.”

Predicting the Future
What do our executives see for F&I and the automotive industry in the coming months? They let us know their predictions about what will be important, what will change and what will stay the course.

Continued consolidation – both of providers and dealers – was a major issue many of them touched on. They see the trend continuing, and it will get harder for smaller providers and dealers to compete. That trend also applies to agents – the trend is toward agencies with multiple agents. Not to say the independent agent cannot continue to compete, but it will only get more difficult as time goes on, and will require, our executives said, those agents to focus on more than just products. Training, being involved in the staffing of the entire dealership and finding new ways to increase revenue, such as service drive sales, will all be crucial skills agents will need in the years to come.

The increasing influence of the Internet is another major trend our executives are watching closely. The younger generations that grew up in a connected world are beginning to reach an age where they are purchasing cars. The experience they are looking for is vastly different from that of their parents – and dealers need to be adapting. Again, this is where agents can and should be stepping in – educate your dealers on what the new generations are looking for, from mobile apps to a more complete online buying experience, and then help them find and implement the right solutions to reach those buyers. This is another trend that won’t happen overnight, but savvy dealers and agents are trying different solutions to work out the bugs while the percentage of the buying population looking for this type of experience is still fairly low. It will only get more critical as the years go by.

Our executives also called out the increasing emergence of hybrid and electric vehicles. They have been on the market for a number of years now, but as the technology has improved and the cost has come down, more consumers are seriously looking at these vehicles as an option. And F&I will need to adapt. There are many products out there that apply equally to these types of vehicles as traditional cars, but there is an opportunity, both for providers and agents, to create or find products or packages geared specifically for these vehicles.

“The trend I see for the automotive industry as a whole is really continued consolidation,” said Wanderon. “Increased technology will allow providers to offer more of a solution, so you can price your products based on each customer’s driving habits and risk, rather than on vehicle models. It is difficult to price products based solely on a particular vehicle, so you end up with more of a blended rate – I think it is going to get more granular in 2014 and beyond. So someone who drives better and who maintains their car at a higher level will be provided something at a lower cost than someone who drives harder and doesn’t maintain as diligently. For F&I, really the only trend that’s out there right now is focused on the regulatory side and where that’s heading. There doesn’t seem to be anything on the horizon that’s game changing other than that, although there has been a lot of consolidation in our business. A lot of the major players have either been acquired or purchased others, and dealerships are doing the same thing, so I see that leading to a continuing process of centralizing the F&I office.”

“I don’t know if it’s a trend or not, but while we’ve had technology forever, it’s been rough getting everyone acclimated to using it,” said Brugh. “The younger generations are used to not touching a piece of paper, they either have everything on computer, or on their phone or iPad. But my generation still likes to touch the paper. We’re still trying to get people to accept that change, but once you get dealers and providers past that, we will see them doing everything online. It will get there, it’s just a slow process. One of the problems is that a lot of dealerships still don’t even have the infrastructure to house the technology in the first place. They don’t have fast enough lines, or computers with memory or hard drives to get them where they need to go. It is all part of an education process – it is already changing, and we will see more changes coming, but at the end of the day, it all depends on how much a dealership wants to embrace the change.”

“I don’t think F&I has changed much in the last 25 years to be honest,” said Amos. “The trends we look for are more from the compliance and disclosure perspective of the transaction the dealers are doing when selling our products. That is something we constantly are watching, and we are very proactive in our relationships with our dealers. But at the end of the day, F&I is very basic when it comes to offering products: price them correctly and the consumer wants to buy them. Transparency and disclosure are the dealer’s friend. Once they do that, then it is just a matter of watching the processes. For the greater automotive industry, I think hybrid technology will take off big time. We insure a lot of Toyota business, and I think they are going to be making hybrids out of everything. It is solid technology and very effective – other brands like GM and Ford also have hybrids, and we even see hybrid trucks coming out. That is one thing we’re going to see surge in 2014. ”

“At Protective, we are keeping an eye on similar trends that we have been monitoring for the past few years, such as the steady growth of alternative power systems (like hybrids), technology and connectivity,” said Karchunas. “Consumers are bombarded with new forms of technology and their desire for more efficient vehicles is growing at a steady rate. We are working hard to stay ahead of these trends to develop F&I products that meet these evolving needs both today and well into the future. For F&I specifically, for the past year and a half, we have been keeping an eye on the developments with the CFPB. Even though most auto dealers are not directly subject to CFPB regulation, this has obviously become a hot topic for the auto industry. Over the course of the next year it will be interesting to see how the industry adjusts processes to meet the potential impact of CFPB guidance. At the end of the day, the need to support F&I operations with reliable products, training and administration remains intact, regardless of whether the CFPB takes further action affecting auto sales and financing. Dealers and their F&I staff need products that provide value to their customers and they need to know these products are backed by a financially stable organization that is interested in helping protect their reputation. “

“I think menus will continue to be critical part of the transaction in F&I, and that F&I managers will be much more engaged in the sales process, not just focused on what is happening in F&I,” noted Tuno. “It is siloed right now, but I think there will be more integration between the consumer buying the vehicle and everything that happens up until they get it delivered. All that technology is there today, it just isn’t too far along in its maturity, but I think there will be a push for an end-to-end solution. The technology will drive a more lean and efficient process, and retailers that have it down are the ones that can eke out the margins. The most efficient might see 5% return as a percentage of gross revenues, but most are going to operate at 2-3%; the 5% are the ones who have the process down from the front door to delivery of the vehicle. Technology will create a much more conducive solution, especially for the younger generation, which is used to communicating less with people in face-to-face environments. There is the whole idea of Internet, and millennials, gen x and ys – they all use it. Even baby boomers like me use the Internet a number of ways when purchasing a vehicle. This generation wants to show up at the dealership much further along in the transaction than in the past, and they don’t want to spend more time than necessary in the dealership itself. We already have the groundwork for that kind of business model, and I think we will see more of it in 2014.”

“It is imperative that lenders, providers and dealers alike focus on compliance not just on the state level, but also on the federal level,” said Croak. “This is evident by the growth in membership of such F&I-related trade associations as GAPA, SCIC and MVAPA. I also think that changes in the vehicles themselves may require a thoughtful look at the benefit coverage options in the F&I products so that they align more closely with the underlying vehicle.”

“We are watching how consumers will feel about and utilize the online buying choices being offered by manufacturer’s like GM,” said Price. “I also believe this coming year will be an interesting one with how banks handle the compensation of financing reserve. It’s a ‘hold your breath, close your eyes and hope for the best’ situation. The only suggestion we are making to dealers is they better learn to rely on product sales! For those dealers earning more than 30% of their income from reserve, they will be taking the biggest hit. Product sales should encompass at least 70% of the profits in F&I.”

“For the automotive industry, I think the IPO offering from Chrysler will reveal how strong their production in North America and abroad is, and that is something we are watching,” said Vecchioni. “The retirement intention of the Ford CEO Allen Mullaly and the future of Ford abroad are also major issues that could impact the industry. I think that leasing with amicable numbers that make sense can and will drive new sales, as well as replenish the pre-owned inventory, and the Affordable Care Act will dictate manufacturing levels throughout the United States. If the employment numbers, with good wages, goes up, the industry will also see more sales. I think the mid-term elections will determine quite a lot in the minds and comfort of most Americans, and that will impact our industry either up or down.”

“I think expectations will continue to go up,” said Kansanback. “The margins are still compressed on the sale of vehicles, and dealers are not going to tolerate underperforming F&I departments. It is not always going to be us, but dealers need to partner with someone who has the resources to help them – it is not practical for them to be an expert in every department. Another macro trend is that dealers are having trouble hiring people with good experience; training is always important, but when you’re having to go with the less experienced, incomplete resume candidate, training is that much more important. I think that if interest rates stay low, unemployment should go down, and if we had trouble in the depths of recession hiring good people, as that number goes down, it will just get harder.”

“I believe the key thing for the industry is where vehicle sales ended up in 2013 and what they are projected to be for 2014,” said Atkinson. “The credit environment for lending and the CFPB and what they’re bringing to the table is going to be crucial. We are seeing the government getting more active in the regulatory sense, and a lot of companies like AUL are members of organizations that are becoming very active federally, and more active in state legislatures as well. We have got to get more informed across the country; groups like NADA are getting much more aggressive working to educate people on what’s going on, and educate the CFPB on what goes on in a dealership, to show them the domino effect from their decisions. But there has to be more advocacy and industry awareness – we can’t sit back, we have to be proactive, and that means getting dealers, agents and providers involved in the conversation.”

“I see a change in consumer interaction in a couple areas,” noted Tuscan. “I think internet sales are going to change – that is slowly changing now. The customer wants to be more involved before he or she enters the dealership; they want to have almost everything done before they even walk in the door. There is a race for gen y and millennial customers right now, and they are totally different from you and I. This 21/22/23 year old buyer doesn’t want to enter the brick and mortar atmosphere, they want to do a lot more buying before they walk in. I believe that is a major trend happening right now. The challenge for F&I is that we need to be part of that conversation. We need to find a way to communicate our products and opportunities to those consumers. It is all about time to them – they are so used to the smart phone atmosphere and instant responses, that it feels too slow to move the traditional way. I’m not saying every transaction will happen that way, it will take some time to get to that point, but I see that trend happening now. I don’t, however, ever see us removing F&I out of the process completely, it will just be a more interactive process.”

“I think the big question on a lot of minds is the impact of CFPB, and I think we’re all watching to see where that goes,” said Pryor. “I know there is a lot of debate on Capital Hill, and among the OEMs and retailers as to what this will mean; I think as we get more clarity, you’ll see some shifts in how the F&I office is going to market, in both the product mix and in greater transparency for consumers, as well as more education as to value of the products. That is the overriding goal – to make sure consumers are receiving a fair value for what they’re paying. As long as we as an industry can justify that, it will put us in a better position moving forward.”

“I don’t think we’ll see much of a change overall in 2014,” noted Robinson. “VSC will still be number one, GAP will be number two and some combo that includes tire and wheel will be number three in the F&I department. Those will be the big three, and I don’t see that changing. The thing we really watch is the manufacturer’s underlying warranties, and how they change their coverages. The trend has been for the factory to go with longer underlying warranties, so we are watching that closely. Other than that, I think it will be emergence of electric cars and their impact on our market that will have an effect, but even then, there is nothing earthshattering, other than CFPB and the impact they’ll have on lenders. We will be watching that very closely.”

“I think everyone is watching CFPB in 2014,” noted Corbin. “Are they going to try to extend reach past lenders and lending practices and into automotive dealer F&I department operations? We are all watching that, the trade associations are monitoring that, and as an industry we need to take some leadership roles with the CFPB. We need to educate them as to what the benefits of a fair market process in the F&I department are to consumers. That’s one that could be potentially negative that we’re watching. We also continue to have dealers who want to partner with us to experience the use of menus on mobile devices; to untether themselves from the F&I desk. They want to be out in the showroom and more interactive with consumers, putting them more at ease about finance, protection and payment options. We will continue to use tablet technology in our SmartDealerProducts division and to partner with dealers on new techniques, all of which will result in higher consumer satisfaction scores and higher results.”

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