Can dealer margins survive transparency? Sonic says yes

Jim Henry is a special correspondent for Automotive News.

Will greater transparency in car deals, driven by the Internet, eventually bear down on F&I?

Online transparency in vehicle transaction pricing is already on the way, one public retailer says.

“Five years from now, it’s going to be an app,” said Jeff Dyke, executive vice president of operations at Sonic Automotive Inc. “The consumer is going to walk up and say, ‘The last 15 Volkswagen Passats that were sold in this market, in this ZIP code, sold for an average of $23,500, and I’m not paying a penny more than that,’ “Dyke said in a July 23 conference call.

Dyke didn’t say so, but maybe someday the same thing could happen in auto loans and F&I products.

True, there are a lot of moving parts to an auto purchase -- trade-in, interest rate, term, down payment and monthly payment -- all against a background of the customer’s credit history. Those factors together determine the best deal, and they make it hard to compare apples to apples.

But imagine if consumers could compare the data from finance contracts to see whether they got the best interest rate or dealer reserve rate or F&I markup on products such as extended-service contracts.

Dyke said last week that in the emerging era of transparency, dealerships don’t have to have the lowest price, but they must have fair prices and they must offer a good customer experience. “A great experience allows for a higher margin,” he said.

But it better be a really, really great experience.

You can reach Jim Henry at autonews@crain.com

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