Toyota Financial Services is taking a more aggressive marketing stance this year to improve customer retention.
And its e-contracting efforts, launched two years ago, are in full swing.
CEO Mike Groff, 59, spoke with Staff Reporter Jamie LaReau about these topics and more.
Q: Where does Toyota Financial's lineup of branded F&I products stand?
A: The two we felt were missing we just launched. One is our tire and wheel insurance product and the other, our Excess Wear & Use, which is tied to our leasing. Both of those have been launched in the last two years. That's really where our energy has been -- developing those, implementing them and then working with the dealers on the benefits.
The other we've expanded our interest and our energy on is prepaid maintenance.
Our strategy is very focused on customer retention. Insurance products -- we're a big fan of insurance products -- are very focused on customer retention.
So there is no plan for a new product in 2015, but our energy is going on the ones that we just launched.
Is Toyota Financial planning to increase product marketing or dealer training?
Both. We're increasing our marketing efforts because when you launch a new product, there's a pilot period to make sure the bugs are worked out and we're past that phase so we'll increase our marketing.
And we're beefing up our training through our field organization to really go out and show the benefits to dealers and customers.
How many auto loans did Toyota Financial write last year?
We did 1.466 million loan volume. That's all retail contracts: new and used and leasing. That is the third year in a row we're the largest full-service lender and leasing company. Sometimes you hear about banks being No. 1, but that's because they don't include leasing. It's not about being No. 1. We don't chase No. 1. But why it matters to us is because it gives us the opportunity to have those customers in our portfolio and service those customers, provide the customer experience that we would like them to have and then encourage customer retention activity because they're in our portfolio.
What is Toyota Financial's lease penetration rate, and what are its plans for leasing?
Leasing as a percentage of sales runs about 24 percent. That's up by about 3 points from the previous year. I would say we're in the sweet spot of where we'd like to be. I don't know that we'll see it go above 25 percent.
Does Toyota Financial work with the manufacturer to develop incentive programs?
Absolutely. We have a very close relationship with the car divisions. It's virtually a daily discussion. We're constantly evaluating the marketplace and looking at what's working and what we need to do. Some of it is national level. Some of it is regional level because the markets have differences between the states.
Projections for 2015 show continued industrywide sales growth. How will Toyota Financial finish this year?
First of all, 2013 was a good year, 2014 was a better year and we think 2015 will be even better. Our latest projection that we published was 16.7 million for calendar year 2015.
In our business, product matters. We had big product launches in 2014. When a new vehicle launches, typically the availability is slow because it's a new product. But then as it builds, it's the next year when you start to see the numbers. Well, last year we launched our new Camry, we launched Highlander, our sport-utility, which is doing really well in the marketplace. At the end of the year, Lexus launched the NX small sport-utility vehicle, which is off to a great start and also the RC coupe.
We've got additional launches this year. We've got some Scion products coming. The Tacoma is coming, which is very strong.
What you've got is a very strong environment. The economic marketplace is better in the United States, and we're matching it with really good product that customers want.
Does Toyota Financial do special marketing for product launches?
The comment earlier about being No. 1 and why that matters is for that very reason. The fact that a customer is in our portfolio gives us all those customer contacts, whether it's when they call us or we call them through their billing statements. We have a very comprehensive mobile application they can make their payments on, etc. We use all those tools for marketing purposes in addition to our normal customer communication.
We also have what we call a customer loyalty group, which is focused on our lease portfolio. Why we're big fans of leasing is because that gives you a good opportunity to contact those customers as they approach lease maturity and start talking to them about what are they thinking about doing, what kind of vehicle are they thinking of getting, and then discussing any opportunities and offers that we have.
Does Toyota Financial offer subprime lending? How deep does it write loans?
Everyone's definition of subprime is a little different, but regardless of what the definition of subprime is, we have a very small percentage of what would be considered subprime. I would say it's less than 5 percent.
We think there's a market for subprime, but it's not our specialty. It is a specialty business that requires different handling of the credit investigation process and the servicing side of it from collections and so forth, and it's just not our specialty.
Toyota Financial introduced e-contracting in January 2013. How many contracts have been done?
We've been running 71 or 72 percent. We booked our 1 millionth contract last October. So it's probably about 1.2 million by now. It's really important -- not just for us but for the industry -- because it's not just more efficient, it's improving customer satisfaction because deals are processed faster.
It's better for compliance because we have a lot of features built into it. It makes sure contracts are done correctly. So we think it's a really important step forward. Five years from now, we're going to look back and we won't even be talking about it e-contracting because the industry will have moved there.
As the discussion about dealer finance reserves accelerates, is Toyota Financial talking with dealers about what a flat fee might look like?
We have not had any conversations specifically about flat fees because we don't have a plan to move to flat fees. What we do encourage our dealers to do, and we provide training for them and tools, is really to do a better job in F&I and make sure that the customer experience is as positive as it can be.