Digital options add value for dealers as well as customers

Josh Baer, formerly the head of pricing and strategy for Santander Consumer USA, joined digital auto retail and finance platform leader AutoFi in May as its president.

Baer will run AutoFi's lender and enterprise segments. In a press release announcing Baer's hiring, the company said he will focus on speeding growth in those businesses with "transformative retail and financing experiences" that will help clients meet consumer preferences.

AutoFi's software allows consumers to browse dealership inventory and see financing offers tailored to the dealership's preferences.

Baer, 47, sat down with Staff Reporter John Huetter to talk about the growth of digital retailing in automotive lending. Here are edited excerpts.

Q: What is your perspective on where the digitization in the auto industry is right now?

A: I think it's largely talked about and acknowledged that the auto industry is changing. The pace of how quickly digital takes over — I think there are varying viewpoints. Prior to the pandemic, clearly consumers had a preference towards at least doing part of their shopping experience online before going into the dealership. The reticence, if there was one around digitization, prior to the pandemic was more on the dealer side. I think the pandemic changed that perception for dealers. When people weren't able to get into stores, dealers found that having a digital presence was accretive. I think we exit the pandemic with a lot of potential speed bumps removed.

And now it's really just a question of how quickly we get to an intersection between where consumer demand is for digital products and where the ecosystem of the auto environment can get to so you're creating a value stream while at the same time addressing consumer preferences.

How do digital retailing, digital lending and brick-and-mortar dealerships all coexist in the automotive ecosystem?

The reality is we are still in a world where everybody needs one another — dealers, manufacturers, lenders and even these marketplaces. And I think it's about creating solutions that create value to guide each of these players. Ease of transaction, potentially more margin, or an ability to reach whatever target each of the players have. It may be volume, it may be margins, it may be top line, may be bottom line. But I think there's a lot of creativity that can enter into the fray. And what I'm struck about AutoFi, as truly an independent player and on the leading edge of building out digital products, we can be agnostic as to how the relationships between all the players [develop] but build one that can allow for all to have value. I work on the premise that digitization may not end up selling more cars in the industry. But I do believe that what it can do, if done well, [is] create incredible products and experiences for all the players, including consumers. It can redistribute who gets the auto sales and who gets the auto loans. And within even that, how the financial reward distributes.

Do you see things moving to a model where a consumer picks a vehicle, arranges a loan, buys F&I products all online and that is bundled and brought to the dealership with the dealer margin built in?

Dealers have proven time and time again that their business model is extremely strong and viable. And I think there's a lack of desire from the dealer community to give up that control in total. Digital environments can take both a direct and indirect form. It can be on behalf of the dealer so the dealer is controlling the experience before the consumer gets into the dealership. And then the in-dealership experience is just an extension of that. The indirect side of it can be additive to the dealer's sales. What we're building is a solution that can address the way the world works today in a more efficient and, I think, powerful outcome.

I take a different lens. I started on the lender side and obviously have spent a good bit of time now as to where the industry is going. What digital brings beyond just connecting more people to one another, it also brings transparency in a way that probably hasn't been as pronounced in the auto industry in the past. On the front end for consumers, the digital experiences involving features like pre-qualification and soft credit pulls, it helps consumers understand what they can afford and what they'll get approval for from a lender. A more informed consumer is not bad actually. It can lead to a much better outcome.