Tag Archive | "Glen Tuscan"

Agent Summit Advisory Board Announced


LAS VEGAS — Organizers of the annual Agent Summit have released the names of the advisory board for the 2016 event, which is scheduled for May 9–11 at the Venetian Palazzo Las Vegas.

“The board was assembled utilizing the four past Agent Summit Keynoters and two Provider members that are expected to drive some fresh ideas,” said Randy Crisorio, president and CEO of United Development Systems Inc. (UDS), who will serve as advisory board chair for the fourth consecutive year. “When I reflect on what we’ve been able to accomplish in quality and participation, I’m as excited as ever to get Agent Summit VI in the fast lane.”

Crisorio will be joined by John Braganini, principal of Great Lakes Companies; Larry Dorfman, CEO of EasyCare; Eric Fifield, EFG Companies’ vice president of agency services; Joel Kansanback, president of Automotive Development Group (ADG); and Glen Tuscan, president of Dealer Commitment Services Inc.

In the coming weeks, the board will convene to discuss topics of importance to agents and agency heads and craft an agenda for the three-day event.

“In attempting to meet and exceed the quality of agendas past, Randy and his team have their work cut out for them,” said David Gesualdo, show chair and publisher of Agent Entrepreneur and F&I and Showroom magazines. “Luckily for everyone involved, they are perfectly suited to the task.”

Registration for Agent Summit 2016 is open at the event’s website as well as by phone, fax and email. Attendees who register by April 4 will enjoy a $100 discount. To inquire about sponsorship and exhibition opportunities, contact Eric Gesualdo via email hidden; JavaScript is required or call 727-612-8826.

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Agent Summit V Wrap Up


To all who attended – thank you for making Agent Summit V the best yet. Since its inception, the number of attendees has increased with each passing year – and with close to 900 attendees, this year was no exception. Agent Summit was launched in 2010 and was designed to provide Independent Agents, who serve as an extension of F&I product providers, with a forum to come together to network, share and learn. Today, many now regard Agent Summit as the one must-attend industry event of the year. This year’s show highlighted the latest training techniques and addressed the newest trends and most pressing challenges that Agents face as they serve their dealer clients.

Attendees were welcomed to the show’s upscale new location at the Venetian Palazzo. Complete with cobblestone streets, footbridges over canals, blue skies, and gondolas, attendees couldn’t help but feel as if they had just stepped off the plane in Venice, Italy. Jaws dropped as Agents who had taken advantage of the Agent Summit room block entered their stunning suites. Words like “lavish” and “spectacular” were heard describing the Palazzo as Agents arriving on Sunday evening gathered for welcoming cocktails.

Much like the Palazzo’s five star reputation, show sessions featured “five star” industry experts with every detail of the show sessions ultimately spelling “Profit!”

The third annual Reinsurance Symposium once again preceded Agent Summit; this year featuring two expert speakers. Greg Petrowski, senior vice president, GPW and Associates Inc., and a veteran speaker at Agent Summit, returned to the stage, and was followed by Brian Feldman, executive vice president, Spencer Re – a seasoned executive who has been a part of just about every facet of the reinsurance space.

With more than 20 years of industry experience each, Petrowski and Feldman shed light on the often confusing benefits of controlled foreign corporations (CFCs) and non-controlled foreign corporations (NCFCs).

At the conclusion of the half-day Reinsurance Symposium, Randy Crisorio, president and CEO, United Development Systems Inc. (UDS), and returning advisory board chair, got the show underway with the official opening address.

This year’s show focused on four major areas, 1) Selling to dealers; 2) Training; 3) Coaching and development; and 4) Technology. Each topic was explored first in an individual feature presentation, and was then followed by a panel session.

Morning presentations featured strategies for closing more business and practical steps for getting in front of dealers. Jimmy Atkinson, COO, AUL Corp, stated, “You have to look at a dealer’s DNA – ‘Dealership Needs Analysis’ so you can provide them with products and solutions to meet those needs. This requires pre-call planning and a targeted presentation.” His mantra for agents was “Be prepared. Be flexible. Be confident.” AE readers can look forward to Atkinson’s further expansion of this topic in an upcoming issue.

Days one and two closed with a cocktail reception in the Expo Hall. Throughout the show, crowds filled the expansive Expo area as agents took advantage of the buffet of networking opportunities. With more than 75 tabletop exhibitors and just shy of a hundred sponsors, the exhibit hall was full to overflowing. Exquisite breakfasts and lunch were served alongside the Expo Hall, thanks to show sponsors.

Known as the “World Greatest Closer,” keynote George Dans jump-started day two out with a bang. Dans was a whirlwind of energy, as he crossed the stage, leaving a flurry of excitement and emotion in his wake. He shared personal stories of both success and failure. In his fast paced, energetic address, Dans got the audience pumped up with a revitalized enthusiasm for closing every single deal. He encouraged attendees to be at the top of their game, “We become what we think about all day. You need to say to yourself, ‘I’m good. I’m gifted. I’m talented. Fear, doubt and worry are behind me.’” Dans urged attendees to step out of their comfort zone and to change their way of thinking so they could come out not just ahead, but at the front of the pack. After his presentation, Dans signed hundreds of copies of his book, Just Close It… Ask and You Shall Receive, which were available to all attendees.

Day two also featured two sessions on training, which emphasized the foundational importance of establishing good relationships in order to get buy in from all parties. The sessions covered themes, frequency, and the needs of retail personnel in service, sales, desking and F&I management.

“As an agency,” stated Ron Reahard, president, Reahard & Associates Inc., “you have to help your F&I managers address the challenges they face on a daily basis, and give them the skills, the knowledge, and the confidence to be successful… Performance doesn’t improve because you or a dealer demands it, it gets better because you put a plan in place to ensure it happens.”

A panelist urged, “Make sure the dealer and GM see you as a partner, and know that you are there to make them better.”

Joe St. John, director of training, Innovative Aftermarket Systems (IAS), and seasoned academic, delivered the feature presentation on coaching and development titled, “Xs and Os – Brain Science for Better Coaching.” This dynamic presentation was definitely an audience favorite. St. John’s unconventional yet proven approach focused on the “why” that drives a customer’s decision to make a purchase. He used a lively combination of humor, experience, and science to demonstrate how to reframe common scenarios for success and forge a unique roadmap for the road to the sale.

The coaching and development panel session explored topics ranging from dealing with underperforming veteran F&I managers, strategies for facilitating collaboration between the sales department and F&I, and how agents can ensure their efforts are recognized by dealers. ”Communication,” urged panelists, “is key.”

After a lunch that rivaled any Vegas hot spot, names were drawn for two $500 gift cards, courtesy of Old Republic Insured Automotive Services, and two weeklong deep-sea fishing trips, thanks to Performance Automotive Management. The lucky recipients of the gift cards were Glen Tuscan, president, Dealer Commitment Services, and Greg Liverett, vice president of marketing, SGI Services. William Kelly, partner, Automotive Development Group, and Anna McMillan, president, The Milby Group, were thrilled to win the fishing trip prizes.

Jim Maxim Jr., president, MaximTrak, showed agents how to use cutting edge technology to set themselves apart from the competition, increase profits and operate more easily and efficiently. In addition to examining today’s technology landscape in industries across the board, he presented innovative technology solutions for agents and explained how they could be integrated into everyday business.

The technology panel session dissected topics ranging from the impact of compliance on menu usage, to data analytics, and the increasingly popular move towards customer driven presentations in F&I. Panel members were in agreement that in any type of business, you can’t manage what you can’t measure.

The day concluded with a drawing for a Surface Pro 3 sponsored by Endurance Dealer Services. Tom Clark, the owner of Prosperity Dealer Services, was named the prizewinner.

Day three of Agent Summit ushered in the second annual agent principal only session, featuring round table discussions during a sponsored breakfast. The new format was informative and engaging with top agents brainstorming solutions for common issues agents face in their day-to-day business operation. Agents entered the room on high alert as they scanned topics by table to decide which one was most relevant to them. After thoughtful collaboration, each table captain shared their group’s recommendations for making the most of the given challenges. Discussion topics included selling in the service drive, provider relations, dealer expectations, effectively managing a remote sales force, staffing, competition and more. As one table captain took the podium, he pointed out the vast amount of wisdom and experience in the room, stating that his table alone represented more than 81 years of collective industry experience.

Show sponsor, ECP, ended the third day by sending several attendees home with new timepieces. Tension filled the room when names were drawn for the recipients of a Tissot Sailing Touch watch, a Luminox Deep Dive watch, and a Rolex Explorer II. Derek Doberstein, account executive, Back End Builders, took home the Tissot; Brian LoBaugh, partner, Auto Group Services pocketed the Luminox; and Mark Swannie, president, Karbiz took home the grand prize Rolex.

At the end of the show, Crisorio shared his thoughts on Agent Summit V with AE, “The feedback I’ve received is scary. We’ve set the bar so high that future Summit planning will be challenging. Nonetheless, I was told over and over again that Agent Summit V was the best industry event EVER! That says it all and is a credit to the industry professionals that left their knowledge and talent on stage.”

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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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Product Offering – The Key to Achieving a Robust PVR


While there are many factors that can impact per vehicle retail (PVR); top agents agree that having a well-rounded array of products and presenting them appropriately is the foundation to achieving a desirable PVR. In the last issue of Agent Entrepreneur, we asked successful agents about their methods for achieving a healthy PVR. They discussed the importance of managing the process through detailed reporting, using data collection, how to develop a working relationship between sales and F&I, and the impact of quality training. They also pointed out a necessary prerequisite to a healthy PVR – offering a wide array of products and being an expert on all of them. They cautioned F&I managers never to view any deal as a throw away deal – even cash and lease purchases now bring the opportunity for profit with all the quality ancillary products that are on the market today. In fact, these agents had so much to say about the impact of product offering on PVR that we decided to make it the sole focus of this article.

Everyone agrees that product offerings should be catered to fit the needs of the customer, but do customers’ needs vary dramatically among dealerships and manufacturers? If so, should PVR results be correlated with the price or type of vehicle? Do savvy agents expect that more products will be sold at some dealerships than others, or is there a basic expectation for what PVR ought to be regardless of other factors? These are some of the questions that we asked top agents to address. Read on and learn their tips for selecting the right product array for high-end, low-end, lease and cash customers – how the products, and presentations differ to best meet the needs of the customer and achieve a most desirable PVR.

Education as a Motivator

Educating the consumer on the coverage that comes with their vehicle, whether new or used, regardless of the manufacturer, can be the perfect segue for the F&I manager to step into the role of a problem solver rather than a sales person. This is a great place to start. “When customers really understand any loss or risks that they may have with their vehicle purchase,” notes Michael Tuno, president, World Class Dealer Services, Inc., “their motivation to ‘buy’ always trumps the F&I managers motivation to ‘sell.’”  Tuno refers to this approach as “loss aversion” and uses it in his menu construct and word tracks when training F&I managers.

Tuno sites paint as the perfect example of a feature, that when fully explained to the buyer, becomes an area where the customer often wants protection. “Every single car today is painted with a water-based paint instead of oil-based paint in manufacturers’ attempt to be environmentally friendly. It’s a softer paint that damages easier. Saltwater and sun both damage paint. There is a whole market segment for that – especially within those high-end buyers. No one I know of wants to drive a Mercedes that’s all pitted and washed out.” Once the customer understands what the paint protection offers, and recognizes the value of the protection, it can be an easy sell.

Menu Selling

The introduction of menu selling has opened the door for many ancillary products that are a key part of achieving a healthy PVR. Mike Conley, CEO, Conley Insurance Group, says that by using a menu to present products, many more products can be offered than if they were to be presented separately. “Lost key coverage, paint and fabric, maintenance contracts, windshield coverage, dent protection, theft protection – the list goes on and on.” Another advantage to menu selling is it gives the ability to bundle products chosen to appeal to a particular buyer’s needs.

Customer satisfaction is another critical element that can be achieved through the F&I product presentation. “Back it down to 1-2 points of reserve, and limit the service contract to a fair and reasonable level,” says Conley, “The additional income can come from selling other products presented with the menu, that will not only increase PVR, but will also provide customers with additional products and protections, and not just a higher payment.”

Cash Deals

Regardless of the type of vehicle or dealership, experienced agents report that they typically expect greater profitability on a finance deal than on a cash deal. While it may seem logical to think that if people have money, they are more apt to buy something (i.e. cash buyers), Randy Crisorio, president and CEO, United Development Systems, Inc. (UDS), reports that 85% of F&I products are sold in a controlled transaction, which would be lease or finance – not cash. “It is easy to say, ‘Would you like your payments to be $385, or $401 with protection?’ But if a guy comes in with cash for a $28,000 vehicle, you’ve got to get him to write another check for $1800 (or whatever the amount is) for a service contract.”

To achieve the target PVR, Glen Tuscan, president, Dealer Commitment Services, emphasizes a consistent focus on those cash customers. He says cash customers are strictly a matter of the F&I person’s attitude. “The approach is no different than a captive finance customer. If the F&I manager stays focused on his offerings consistently with that cash customer, the solid PVR results will come.”

Clearly, appearance and “peace of mind” products such as paint and fabric or roadside assistance offer viable avenues for approaching all cash customers. Older vehicles merit a focus on service contracts while purchasers of new vehicles can be shown the value in an array of appearance products. John Braganini, principal of Great Lakes Companies, pointed out that deductible amounts, length of coverage terms, and the level of coverage can all be adjusted to best meet individual customer needs.

An array of appearance and peace of mind products, similarly to the products often valued by lease customers, are most recommended for cash customers. Among the top of the list for those peace of mind products are identity theft, and credit insurance. Other products with strong appeal to cash customers are theft recovery products and planned maintenance – both of which are also excellent tools for promoting customer retention. Appearance products such as tire and wheel protection, paintless dent removal and paint and fabric protection also are products with strong appeal to cash customers.

Lease Deals

Historically, finance deals may have proven to be the most profitable, but the rapidly growing number of leases has had a big effect on product offerings at higher-end dealerships. According to Crisorio, 2/3 of new vehicles are now leased in high end stores, rather than purchased. And dealerships are feeling the effect this has on PVR. “If one dealership sells 100 vehicles and leased 40, and another dealership sells 100 and leased five, their PVR is not going to line up because of the lease income. You can’t compare the two. The guy who delivered 40 leases would be in trouble – he is going to look terrible.”

Many agents agree; the recent surge in leasing has everyone reevaluating how lease deals are approached in the F&I office. However, today more than ever, they are beginning to be viewed as a ripe opportunity for profit. The days of viewing lease and cash transactions as “throw-away” deals are quickly becoming a thing of the past.

When asked to compare the PVR on a lease versus finance deal, John Peterson, former president, The Oak Group, pointed out that it might be more difficult to attain higher PVR on lease vehicles, but with today’s offering of ancillary products, he says it is becoming easier now than it ever was in the past.

When you are in tune with the customers’ needs and buying style, agents agree that you can have a very productive conversation with them about products – even on a lease. Since PVR is an average, the higher numbers achieved on other vehicle sales can even out the lower PVR from leased vehicles. Tuno says he looks at aligning lease vehicles with products such as lease wear and tear, key replacement, chemicals, tire and wheel, and theft. “The lease customer is the payment buyer of yester-year. We are sensitive to that and we don’t expect that the PVR on a lease vehicle is going to be 50%. Remember, PVR is an average. If it’s a big leasing store, we like to try to make sure they stay at a floor of $750 per vehicle lease, and make up the difference with new non-leases and used cars.”

Since most leases are for three years, service contracts can be a tough sale. Many agents mentioned aligning lease customers with products such as lease wear and tear, chemicals, and key replacement. It is wise to point out to customers that appearance products can often prevent them from having to pay for damages at the end of their lease by protecting the vehicle through the term of the lease.

A lease deal can be impacted by the allowances of the lease institution – therefore, the target for lease deals may vary by manufacturer. Crisorio says that while a common target for lease and fleet deals is $1000, he says the potential impact of a lease institution could be as significant as, “Mercedes might be $2200 and Nissan could be $350.”

From Luxury to Low-End

Braganini, says the only difference between a buy-here-pay-here customer and a Bentley purchaser is the customer’s needs awareness. “The people in that higher income bracket, driving upscale cars, are no different than anyone else. They buy the same way – they buy things they see value in . . . You have to carefully look at the composition of your customer base and build an F&I department around that. If you try to sell the same products to Ford buyers as you do to Mercedes buyers, you just aren’t going to get the same results.”

However, Glen Tuscan pointed out that European imports do have a real effect on PVR. He says a penetration rate of 30% for service contracts can be expected if you include what he refers to as “the high-end European lines” – BMWs, Audis, and Mercedes. “But if you are talking strictly domestic and Asian imports, 40-50% is a very reasonable number to expect for F&I service contract acceptance rates.”

Lower-end dealerships have a much higher penetration of service contracts overall than higher-end dealerships. “In lower end dealerships, VSCs are very important, without a doubt, ” says Peterson. He says that the average number of VSCs that are sold should be 50% or better if a store is operating effectively.

Crisorio says a high-end customer might be more prone to buy tire and wheel because the cost of replacement is so high, but so is the cost of the protection. The lower-end customer might not be as concerned about this type of coverage. Crisorio says tire and wheel is his biggest selling product at high-end dealerships and service contracts dominate at the lower-end dealerships.

John Braganini believes the demographics and franchise of the dealership should drive the menu. “A franchised dealership selling both new and used vehicles will need to select products and coverage formats that match both the mechanical, functionality, and operating conditions of the vehicles they sell. Trucks and SUVs call for different coverage than sedans and smaller vehicles. The income, trade cycle, driving habits, and lender metrics will then drive the pricing and selection of the products that are selected for the menu.”

Braganini included the following list of products recommended specifically for truck buyers, as opposed to car buyers:

  1. Commercial use surcharged products
  2. Rips, tears, and burns coverage on interior protection
  3. Electronic corrosion module
  4. Consequential damage coverage for the extended service agreement
  5. Hydrophobic windshield protection
  6. Curb & cosmetic coverage on tire & wheel

Tuno says the marketplace is rich with great products that offer all customers real value, regardless of their vehicle type or if it is new or used. “Typically in the ‘luxury’ marketplace, with longer factory warranties and shorter ownership cycles, appearance and convenience-type products are more valuable to the customer.” This is particularly true when a manufacturer, such as BMW, includes the cost of maintenance as part of their lease. When this is the case, Tuno says that there is nothing left to offer except for those appearance and convenience type products. He suggests: cosmetic wheel repair, windshield protection, key replacement, paint protection, paintless dent repair, pre-paid maintenance, tire and wheel, and even biweekly payments.

Braganini says drilling into the demographics of a store’s customer base allows him to put together a product portfolio that makes sense to those customers. “You can pull 500 dealer files from a dealership. You can’t use the information specifically, but you can look at where they live, where they work and their credit application profiles. I want to see where they put their car at night, what kind of weather they are driving in, what kind of roads they are on, how far they are driving to work, and what the prime rate is in any particular area. The information is all there. You can look at the density and location of the car washes and various detailing opportunities people have. When you are done, you can put together a pretty good story for the consumer.”

More traditional products such as VSC, GAP, and anti-theft do have their place at “luxury” stores, added Tuno, but he pointed out that they often fit better in a “non-luxury” store – where the demographics of the franchise better support those products. Buyers at “non-luxury” stores typically do not have the financial resources of luxury car buyers, and a costly mechanical problem could be a major financial burden. For this reason, these customers often find the peace of mind coverage of a service contract to be especially attractive.

The bottom line in adapting your product offering is to understand the customer and cater products to their unique needs. Higher-end customers with more economic or buying power will see value in high quality appearance products. Tuno noted that, “no one wants to drive an $80,000 Mercedes that’s dented, scratched and has beat up wheels or tires.” He says the “bling factor” has to be accounted for, as does the customer’s buying style. “You have to recognize when a customer really wants to have that arrival factor – ‘I’ve made it, I am successful, and now I’m getting my Mercedes.’ People don’t buy Mercedes because they don’t want you to know they’ve arrived.”

Braganini emphasizes the importance of finding the right products. He says a lot of agents either don’t take the time to do that, or they don’t have the capability. Instead, they end up trying to fit the customer into their plan instead of creating a plan designed to best meet the customer’s needs. And for dealers who are doing business with a large national company, those options to customize product offerings often do not even exist. Customizing the product offering is key. “By taking out a clean sheet of paper and designing a program specifically for that store based on its demographics and types of vehicles, we are able to offer a product mix with specific appeal for that group of customer’s needs.” The result? Achieving the PVR that all agents strive for, a happy customer, and at the end of the day, the satisfaction of a job well done.

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Top Agents Talk About PVR


Per vehicle retail (PVR) has long been the measuring stick of F&I success.  While it is a useful tool, it clearly does not tell the whole story. In the simplest terms, PVR – also referred to as per retail unit (PRU) – consists of two components: finance or lease reserve and the profit from F&I products. Randy Crisorio, president and CEO, United Development Systems, Inc. (UDS), describes it this way, “The most common formula for PVR is to take all the vehicles and all the income divided by the number of vehicles that were delivered and come up with an average. One of the most common averages is $1000 PVR/PRU.”

In the last few decades, PVR numbers have seen a great change. Today, numbers are significantly higher than they were in the past. Mike Conley, CEO, Conley Insurance Group, says things are much different now than when he got started 25 years ago. “Stores that were producing $500 per vehicle were considered to be well performing. In the last decade, this number snuck up to $1000 per vehicle. Now the new normal seems to be a goal of $1500 per retail.”

Other top agents we spoke with stated similar ranges for today’s typical PVR. Michael Tuno, president, World Class Dealer Services, Inc., says they do not like to see anything under $1,000 for PVR, regardless of the manufacturer. Glen Tuscan, president, Dealer Commitment Services describes a solid number for his stores as $1,200 PVR with a maximum of 40% of reserve in that number.

Depending upon the area and the dealership, John Peterson, president, The Oak Group, lists a typical range of PVR from $1,000 – $1,800 or even as high as 1,900. He believes the most important thing in attaining the maximum PVR is doing things properly – in a compliant fashion and having the accountability that allows for tracking using electronic reports.

Data Tracking Systems – Invaluable Tool or Unnecessary Expense?

Many agents take advantage of tracking or reporting software that is readily available through a variety of industry sources. The software allows data to be broken down in many ways, providing detailed information about everything from the individual performance of F&I and sales managers to specifics on each F&I product sold and PVR excluding lease and fleet vehicles. The data is mainly taken from DMS and menu systems and broken down into specific categories – all of which can be viewed in real time by the agent.

Some agents, such as Crisorio, say the reporting software is worth every penny. If you can’t show exactly how each F&I manager is performing and gather information about each product sale, you can’t use the information to improve things. He also views the real time availability of data as vital. “We don’t want to get to the end of the month and it be an autopsy. If performance died three weeks ago and you don’t find out until the end of the month, you are dead in the water. Once the month is gone, you can’t recover the money. In my opinion, awareness is the biggest piece of PVR. Setting expectations and having ready awareness is one of the pathways to success in F&I.” UDS has used tracking software for over 12 years and before that Crisorio did it manually. In the old days, calculations were done manually by the F&I manager and given to the agent. Crisorio says he would then actually draw graphs by hand and Xerox and distribute them each month.

Peterson too, feels electronic reporting is absolutely necessary. “You can’t improve something you can’t measure. Having the processes and taking accurate measurements is very important. If a dealer is not achieving the desired PVR, there is great value in being able to determine the reason why – is it the lack of sales of a particular product or perhaps it is a particular person who is underperforming.”

Other agents view reporting software or tracking systems as beneficial, but not essential. To fully realize the benefits of the system, complete dealer buy-in is a must and not all dealers want to use the systems. Some dealers fail to use it consistently and others use it improperly. In some cases, an agent may view a smaller dealership as not being worth the cost of utilizing such software.

Conley says he has dealerships that are just as successful without utilizing tracking software as other dealerships that do use the tracking software. “It is a great tool but is an awfully expensive way to get information that should be provided as a part of the DMS. The information it provides is readily available on the DMS but it is not as easy to access. The benefit of the software is that it is an automated process. The data from each day is emailed to agents nightly, allowing them to keep a close watch on everything that is going on inside the dealership. They get addicted to having that up to the minute reporting emailed to them daily. It is a beneficial tool but a good F&I manager is going to be a good F&I manager regardless.”

Another potential downside with the reporting software is the time the agent must devote in order to take full advantage of the software’s numerous capabilities. Conley says some dealers who are particularly computer savvy produce their own reports, obtaining the data directly from the DMS. Is the answer simply taking the time to teach dealers how to extract data from the DMS and put it into a report? Would that make the need for costly software unnecessary? Conley thinks that is at least part of the problem. He says agents can be lazy in helping dealers to effectively write a report. Perhaps if they devoted the time to do this, the reporting software would not be an issue.

Analyzing PVR

There are additional ways PVR can be broken down. The first is to look at products per retail unit (PPRU). This is described as a good measure of where the metric PVR ultimately needs to be – and whether or not it is healthy. The numbers we heard for achieving a solid PPRU were two to three products per vehicle. Another is profit per financed retail unit (PFRU). This is a good indicator of whether a dealership is relying too heavily on reserve – or not enough.

Using their reporting software, Crisorio says the first value they use is lease and fleet excluded. He refers to this as true retail. The next is lease per retail unit. On a lease transaction, the customer is usually sold on a monthly payment before entering the F&I office. Historically, finance managers have pushed lease deals away because they could not make the big finance reserve. With leases at an all time high – currently making up nearly 30% of sales – lease deals are now more important than ever.

Another reason to use tracking software is that it provides the ability to determine when a system is followed and when it is not – thus letting the agent identify exactly where a problem is, so it can be targeted and corrected. “Being able to track it is critically important,” says John Braganini, principal of Great Lakes Companies, “The ultimate goal is to identify situations and issues within the dealership that can be corrected in order to bring the PRU back up to where the dealership wants it to be.”

The results from the tracking software provide a good picture of what an F&I manager is doing and not doing. For example, if all the products are being presented on a menu, they are kept in the deal folders. The reports will show if a menu was properly presented. Crisorio explained, “The menu is presented in three pieces and there is a date and time stamp on each piece. First, there is the presentation piece and then the final piece shows what they bought and didn’t buy. If the final piece is run 13 seconds after the first part, then all of this was done without a menu. The audits prove invaluable in looking for individuals who undermine or distort the selling system.”

If someone is underperforming then the answer may be to enroll him or her in the next training school. This is the standard recourse according to Crisorio, “We want to make sure we are supporting them in every way, because we don’t make a dime until something gets sold. They don’t send us checks every month because they like us. If they don’t sell any products, we don’t make any money.” They offer regular live training as well as webinars, UDS TV, a partner portal and F&I tip of the week – all to provide constant support and keep F&I managers performing at their best. As a rule, Crisorio says their objective is to make a star out of the F&I manager. By doing this, they will earn more; stay in that role longer and the dealer will be more profitable. This, of course will result in a long-term relationship with the agent – who will ultimately be rewarded for the performance of the F&I manager.

Braganini has F&I managers utilize a self-reporting tool as part of their data management system. On the deals where all the subprocesses were conducted properly, he reports a significantly greater PRU.

Training

All agents agreed that training is extremely important – and even more beneficial when it can be used after targeting those who most need it and utilizing the data provided about the breakdown of PVR. “Training, whether online, in-store or in classroom is essential,” says Conley, “For most of our clients, the products we sell are not as important as the training we offer.  Our clients rely on us to help them maximize profit, but to do so in a consumer friendly and legally compliant way.  Without ongoing training and continuous commitment to improvement, the ‘new normal’ cannot be realized.”

Tuscan says when it comes to PVR, his focus is strictly on F&I type products and he is cautious when he sees PVR numbers listed in the $1,300 – $1500 range. “I have seen people boast of record numbers out there and as I see those numbers, I question if they are real F&I products or if they include aftermarket, accessory-type products. I don’t focus on after market type accessories that would be added into F&I numbers – accessories being window tint, clear mask and those types of items, which simply are not F&I products. Those are accessories.”

Braganini referred to another management approach known as throughput analysis – looking at only how many units were sold and how many dollars were generated at the end of the month, without managing the process or breaking down the data. “You have to basically guess at what to do to change it the next month or you have to live with it. I have never been a fan of this because you are going to guess wrong most of the time. I would rather track each step in the sales process.”

Maximizing Profits and Working with the Sales Department

To truly maximize profits, the F&I office and the sales team need to share common goals and work together to achieve them. This relationship is very important in maximizing PVR. Customers tend to be very guarded about committing additional time in a dealership, once they have decided to purchase a vehicle. For this reason, it is imperative that the sales department breaks the ice by properly setting customers up, educating them about all the features and benefits of their new vehicle and pointing out the areas that are not protected. This way, they allow for a seamless handover to the F&I office. “To maximize F&I income,” says Braganini, “you have to have both departments working together and often, they just don’t do a very good job of it because they have different objectives.”

Explaining the features of a vehicle’s smart key and it’s replacement cost to a consumer who’s trade in had a key that could be copied cheaply at a hardware store, is an important part of making the consumer aware of the potential cost of replacing that new $600 key with a computer chip. By doing this, the sales person provides a perfect set up for F&I to offer key replacement and for the customer to see its value. It is the same with other products. As the sales department educates consumers of the features and benefits of their new car and the customer sees what is not covered, the F&I department can then come to the rescue by offering products to completely wrap the new vehicle in protection.

To say a new car has “bumper-to-bumper” warranty, simply is not true. Tuno says using this term is just plain lazy. “Cars typically come with six to eight different warranties on the battery, tires, paint, etc. and that needs to be clearly explained to the customer. Then we can explain the value and the convenience of what we call a warranty-guarantee program – which is really prepaid maintenance – because if you don’t change your oil and maintain that vehicle, the manufacturer will not cover you for any of that warranty. If two wheels can cost a thousand dollars each to replace and the customer is under the impression that they have a three year, bumper to bumper warranty, their mindset is ‘Great, I don’t have to worry about anything.’ It’s not a question of worrying, it’s ‘these are your driving habits and these are your driving needs – what’s going to be important to you over the course of your ownership?’ And there’s no shortage of products to take care of their needs.”

Other factors that come into play involving the sales department are desking compliance, how the customer is handed over to F&I and the delivery conditions of the vehicle. Some agents pointed out the importance of not using the F&I department to close too many deals. This responsibility requires a realistic sales manager. If he isn’t, the dealer has to make the decision to let the practice continue or not. If a customer wants unreasonable financial terms, a decision must be made as to what percentage of sales are acceptable being turned over to the F&I office to close the deal. A reasonable estimate might be that 90% of people coming into a dealership to buy a car have a pretty good idea of what they can buy on a monthly budget or on a pricing schedule. Therefore, using the F&I office to close deals probably should not occur in more than 10% of deals.

The turnover – how the customer is introduced and greeted, and the time it takes to get into the F&I office, affect a customer’s mood and attitude. Also, the delivery conditions are significant. Having everything ready to go when the customer comes in to pick up the vehicle and handling the exit interview professionally are both key factors that require a good working relationship and common goals between F&I and the sales department. Braganini noted, “You have a better chance to increase PVR if the customer does not come in and have to wait for a long time. It puts the customer in a sour mood if paperwork is not completed after two hours and their car is not ready.”

The sales manager can take the lead by establishing a process for how customers are turned over to F&I. By making it clear when hiring sales people that they are expected to introduce customers to the finance manager at the point of sale – without exception – they can lay a foundation that will prevent this from becoming an issue at all.

Tuno says the people who are really good at it manage the process, train their people, have talent and have consistent pay plans that push both sales and F&I departments in the right direction. “Pay plans ultimately are job descriptions. The one that is the killer is if we just give them 10% of the whole department. What is forcing F&I departments to sell F&I products in that environment, when the desk is giving them 70% of their income from reserve? The answer is nothing. It’s just human nature.”

Peterson says that having a good pay plan along with goal setting clearly lets people know what is expected of them. He lists the four keys to success in F&I and pointed out that they carry over to all professions: goal setting, accountability, education and compliance.

Having a well rounded offering of products and being very good with all your products is also a foundational part of ensuring a top performance according to the top agents we spoke with. To maximize PVR, an agent must be able to present the products that best fit the customer’s needs – whether it is a cash, lease or finance deal – both at high-end and lower-end dealerships. We will analyze the importance of product offerings, and all the dynamics involved, in detail in a follow up article.

Advice for the Future

As F&I becomes an increasingly critical piece of a dealership’s profitability, the challenge is not only maintaining a healthy PRU, but also for the F&I office to take steps to ensure they are not on the slippery slope that regulators are sure to focus on. Just as caution needs to be taken in pricing interest rates, consistent pricing of F&I products may be the next shoe to fall. Tuno says the abusive practices of charging a customer $1995 for a product that actually costs $100 are gone. He says the footnote to making sure you are achieving a good PVR and doing a robust amount of product sales is to price consistently. “This will keep you out of harm’s way and ensure that you have not abused or intentionally caused protected classes to have to pay more for a product. You can go to any number of regulatory workshops and learn that pricing products consistently is a best practice. But dealers are their own worst enemy.”

Peterson also emphasizes the importance of accountability. He says with all the regulations out there now – CFPB, Dodd Frank, etc. – being able to measure performance becomes imperative in maintaining accountability.

Clearly, the advice from these top agents can be summed up as: be aware, manage the process through detailed reporting, ensure a good working relationship between sales and F&I, train your people well, offer a wide array of products and know them all, and don’t view any deal as a throw away deal. Tuscan concludes, “You have to have total focus and the same commitment to each different type of buyer as well as a solid, well rounded product offering. That, to me is how you will achieve a solid number for PVR.”

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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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