Echopark stores' iPad strategy reaps F&I results

DENVER -- Sonic Automotive Inc.'s three new used- vehicle stores here, which rely on iPads to arrange financing and to sell F&I products, are getting strong results.

The three stores together average nearly $1,000 in per-vehicle F&I revenue, said Jeff Matthews, executive general manager of the EchoPark operation.

That's despite having no dedicated F&I officers and using a one-price, one-salesperson process. "For people who are not specialized in F&I and have to handle everything, it's pretty impressive," Matthews said.

Sonic ranks No. 5 on the Automotive News list of the largest 150 dealership groups based in the U.S., with retail sales of 135,932 new vehicles in 2014.

It launched the three Denver-area EchoPark used-car stores starting in November. The company declined to release EchoPark monthly sales figures, but the stores are profitable, Matthews said.

"We don't negotiate on our cars; we don't negotiate on our finance products," Matthews said. All F&I products are priced with margins below average in order to get penetration up, Matthews said.

Extended service contracts, GAP and interior/exterior protection policies are the top F&I sellers at the EchoPark stores, which call their F&I offerings "lifestyle products." Through mid-May, the stores' combined penetration rate for extended service contracts was 43 percent, and it was 30 percent for each of the other two products, Matthews said. He said his goal is to have a 60 percent penetration on extended service contracts and 40 to 50 percent on GAP and interior/exterior protection policy sales.

Each salesperson, or experience guide, as EchoPark calls them, does the entire vehicle transaction using an iPad. Toward the end of the transaction, the EchoPark lifestyle products that Sonic most highly recommends for the customer pop up on the screen. Sonic created an algorithm that determines, based on previous buyers' purchasing data, which F&I products the current buyer of a particular vehicle might want.

The iPad will bring up the most highly recommended products. Matthews said, for example, the screen might indicate that "68 percent of the people who bought [that vehicle] also purchased a service contract, and 50 percent purchased GAP insurance." Below the most recommended products will be a couple of a la carte items, Matthews said.

The iPad also shows how much each product would add to the customer's monthly payment.

But it's not all just technology, Matthews said. "When we talk to guests throughout the process, we learn information such as how many miles a year they drive, and then we tailor the coverage for what works for them," he said.

The EchoPark iPads also have embedded videos that explain each F&I product. The salesperson can hand over the iPad to customers to let them watch the videos.

Matthews said a GAP policy is one of the toughest to explain, so the video is particularly helpful. GAP pays the difference between a stolen or totaled vehicle's depreciated value and the customer's auto loan balance.

"It's not a hard-sell tactic. We're providing as much information as we can and letting you make a good decision on your own," Matthews said.

He said the process creates a better shopping experience for the customer, which ultimately boosts F&I product sales.

"It isn't where you're just getting handed off to an F&I guy who is just selling F&I products," he said. "We have salary-based employees all over the place. So there's nobody who's paid commission if they sell an extra this or that."