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After decades of store confinement, the F&I office is inching digital

Photo credit: AUTOMOTIVE NEWS ILLUSTRATION

Published in Automotive News Dec. 8, 2014

Lou Bregou, a director of operations at Driver's Village in Cicero, N.Y., says he has embraced putting financing tools on the dealership group's e-commerce website. 

Why not? The features that enable online car shoppers to get firm financing quotes, monthly payment calculations and trade-in values are helping the 16-dealership, 20-franchise group sell vehicles.

Bregou, who oversees 10 of the stores, said about 50 of the 900 monthly new and used vehicle his stores sell are coming via the finance and insurance buttons prominently displayed on the Driver's Village site. The company started promoting the features only about a year ago.

"These tools didn't even exist two years ago," Bregou said.

Over the decades, the F&I office has arranged financing and sold products almost exclusively as an in-store activity. Unlike vehicle pricing information, it has been very slow to move online.

Dealers and experts cite several reasons. They include complicated transaction regulations, limited technological options for online F&I and traditional dealership processes that insist F&I happen after vehicle selection.

Red tape, habit

Jeff Dyke, executive vice president of operations for Sonic Automotive Inc., said regulatory red tape hamstrings banks from sharing information online with consumers, and each state has its own labyrinth of consumer-protection regulations.

Sonic is the nation's fourth-largest dealership group. In 2013, its 100 or so stores sold 132,363 new vehicles.

Jeff Dyke likens the complicated paperwork required to complete a car deal to "a train wreck."

"It's a train wreck what we have to go through so it doesn't take three hours for someone to buy a car," Dyke said of the paperwork required to complete a vehicle transaction.

Terry O’Loughlin, director of compliance for the documents unit of dealer software giant Reynolds and Reynolds, said some states require car buyers to be present at a dealership to sign transaction documents to reduce the likelihood of identity fraud.

The rationale is that F&I staffers can go through a checklist to ascertain whether signatures are the same on driver's licenses and vehicle documents and that the buyers aren't "agitated and nervous" -- signs that something untoward is afoot, O’Loughlin said.

"Brick-and-mortar law has not kept up with the electronic consumer," he said.

Alex Vetter, CEO of vehicle shopping site Cars.com, said habit is behind some of the resistance to putting F&I tools online. Traditionally, the process has been that shoppers select a car, get all transactional quotes, then head to the F&I office to complete the deal if the quotes are agreeable, Vetter said.

Mitch Golub, the longtime president of Cars.com who is retiring from the company in February, said consumers eventually will drive F&I to the Internet as they have vehicle pricing. "People are choosing to do everything online," he said.

Mimicking shoppers

Bregou said it's counterintuitive that dealerships make it so hard for car shoppers to find financing information online.

In the showroom, Bregou said, most shoppers want to know what their monthly payments are, how much they can get on a trade and what their financing rate will be before they decide on a specific vehicle.

Yet, the historic online shopping model is the opposite, he said. Dealership websites and that of the third-party shopping sites tend to stress inventory to shoppers, expecting them to pick a car first, then use tools to figure out what they can afford.

"Traditionally, we've been starting them on inventory when we know from our showroom experience that people come in wanting to do their trade first and their financing first," Bregou said.

Driver's Village has adapted its online presence to better mimic the way today's car buyers shop, he said. Along with its retail websites, the company has established a commercial website, dvoffers.com, where shoppers are sent specifically from TV, radio and online advertising, Bregou said.

When shoppers arrive at the site, they're met with four large, red buttons: Finance First, Vehicle Exchange, Test Drive and DVUsed. com.

Those options let shoppers decide how they want to start the buying process, Bregou said.

But it's the software behind the buttons that helps land shoppers, Bregou said. The features are part of Dealertrack Technologies' suite of online retailing tools. Behind the finance button is Dealertrack's FinanceDriver, which enables a shopper to fill out a credit application and get an approved interest rate and financing from a participating lender within 48 hours.

TradeDriver gets a shopper an accurate trade-in value online through a detailed, four-page checklist on the condition of the vehicle, Bregou said.

When any of those features are used, his 10 stores sell vehicles to 26 percent of the people who fill out the forms vs. 15 percent of leads sent from the factory and 5 to 10 percent of third-party leads, he said.

Traditionally, online finance tools have been stand-alone and not well integrated with dealership websites, Dealertrack spokesman Mike DeMeo said in a statement. The company's suite was launched at the National Automobile Dealers Association annual conference in 2012, he said.

Accelerating sales

General Motors reports that its dealers are seeing sales from GM's online retailing suite called Shop-Click-Drive.

In November, GM announced that more than 13,000 new vehicles were sold in the past year via the shopping tool that debuted a year ago for use on dealership websites.

While that's 0.5 percent of GM's total 2.4 million U.S. new-vehicle sales through October, GM Program Manager Jim Bement said in the announcement that sales through Shop-Click-Drive have been accelerating throughout the year.

The program enables customers to choose a specific vehicle, get a price estimate, review incentives, fill out a credit application, learn about F&I products, receive trade-in information and schedule a delivery at the dealership or another location.

Currently, 1,670 dealerships participate. There are 4,300 Chevrolet, Buick, GMC and Cadillac dealers nationwide.

Even if shoppers drop off before completing a vehicle purchase online, they are leaving contact information for dealers. GM dealers received more than 85,000 sales leads for new and used vehicles in the first year, with leads resulting in sales on average 30 percent of the time, according to the company.

Legal concerns

Real or perceived regulatory issues, though, can be a threat to online F&I sales efforts.

Until 18 months ago, Acton Toyota of Littleton in Massachusetts was selling monthly as many as 180 Toyota-sponsored extended service contracts over the Internet to customers nationwide, said store e-commerce Director Justin Brun.

In many cases, Acton Toyota was selling the contracts, which could retail above $2,000, for $1,000 less than many dealerships were selling them in-store, Brun said.

Eventually, those dealers complained to Toyota Financial Services, which formally prohibited Acton Toyota from selling the contracts beyond Massachusetts because of concerns that the sales could run afoul of other state regulations.

Acton Toyota is still selling them online, but only in-state, Brun said. As such, it is getting about 12 contract sales a month online, he said.

Still, Acton Toyota, with the help of vendor Dominion Dealer Solutions, through email is targeting Acton customers without extended service contracts when their vehicles get to 30 months or 30,000 miles, Brun said. And those promotions, Brun said, are resulting in leads.

Hannah Lutz contributed to this report.

You can reach David Barkholz at dbarkholz@crain.com -- Follow David on Twitter: @barkholzatan

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