Dealerships' finance and insurance departments have felt the jolt of major changes in regulations and product offerings, the collapse and rebound of leasing and the arrival and departure of lenders.
But nothing has been as unrelenting lately as the technology revolution.
Within the last decade, especially the past five years, financial technology startups have thrust themselves into the auto retail industry in droves.
They were drawn by the twin lures of potential scale and hefty profits. U.S. new light-vehicle sales have topped 17 million for the last three years. Retailers on Automotive News' list of the top 150 dealership groups based in the U.S. posted an average $1,412 in F&I revenue per vehicle last year. The fintechs latched onto a lucrative industry.
Experts agree that an auto retail transformation, driven by technology, is inevitable. Exactly what that transformation will look like, and how the industry will get there, is less predictable.
Most dealerships won't rely on technology alone to lift F&I results. However sophisticated a given technology may be, it lacks the often decades of experience, rapport with customers and legal acumen of well-trained F&I managers — traits that make a well-run F&I department a key profit center for a dealership.
Still, dealerships can benefit from the influx of fintech companies. Dealerships need effective technology to stay relevant and compete with their dealership peers, not to mention the need to provide consumers with an experience that matches what they find elsewhere, such as with Amazon and Apple.
But for a fintech company to claim its spot in auto retail, it must have the patience, and the internal expertise, to understand dealership operations. A startup's commitment to hire employees with a range of backgrounds, from dealership experience to finance chops to tech savvy, is a crucial predictor of a company's staying power.
"When I built the operating team, I wanted to see a combination of dealership expertise because I recognized that's what I lacked," said Aaron Krane, CEO of Drive Motors, which provides a car-shopping and financing tool for dealership websites. "If I was to avoid the mistakes previously made in this vertical by tech companies, I would need to truly align with dealerships."
In this special section, Automotive News examines how technology continuously shapes the F&I landscape and the key players that have positioned themselves to support dealerships as the F&I process evolves.