Better online quotes would improve F&I, dealers say

Finance-and-insurance product sales penetration would increase, and F&I time would be saved if dealerships offered accurate payment calculations online — something that often isn't happening right now, according to a survey of auto dealers polled online in December 2022 by eLEND Solutions.

Sixty-nine percent of dealerships agreed online payment estimator tools give the customer an inaccurate or unrealistic perspective more than half the time. Eighty-three percent of them agreed 60 percent of their online quotes don't match the final monthly payment found in the ultimate sales contract.

If payments displayed to the consumers online matched what lenders would fund — including the dealership's own margin — F&I penetration would grow by 10 percent or more, according to 88 percent of dealerships. More than one-third of dealers, 37 percent, anticipated penetration gains of 15 percent or more.

Payments quoted with that degree of accuracy would cut at least 15 minutes out of the time spent by the customer in the F&I office, according to 85 percent of dealerships. Nearly one-third of dealers, 32 percent, estimated 30 to 45 minutes or more could be saved. Any time saved here could be a win for the retailer — 80 percent of dealers told eLEND delays in the F&I office were a significant profit and customer satisfaction barrier.

Another set of responses demonstrates where this time might be spent under the status quo. More than 60 percent of dealers say a quarter of the payment terms generated through digital retail channels need to be reworked at the dealership. For 37 percent of dealerships, half or more of the digital retail-generated terms needed to be reworked.

The survey clearly demonstrates dealers think more accuracy would benefit their business. Yet it also found a majority still set the bar for that accuracy too low, according to eLEND CEO Pete MacInnis.

Fifty-two percent of dealerships felt that a more accurate calculator should come within $50 of the final contracted monthly payment.

"It's like, 'You do realize that the average term's 72 months?'" MacInnis said in January. That's an error of $3,600 over the life of the loan, he said.

"Over half the dealers," he said. "This is insanity."

The customer still might buy the vehicle if the final payment wound up $40 to $50 above the quote, but the dealership won't sell that customer any F&I products, MacInnis argued.

Nearly half of dealers, 46 percent, called monthly payments more important to a customer than a vehicle's price. Thirty-one percent called vehicle price more important and 23 percent thought both concepts were equally important to the customer. MacInnis said.

He said dealers conclude, "'They want a payment? Give them one.' " But the dealer doesn't care if the quote is right.

This fosters customer distrust, MacInnis said.

"Online calculators are among the biggest of today's digital retailing traps, offering up monthly payment estimates disconnected from real lender terms and consumer credit profiles that, more often than not, are an illusion as this survey confirms," MacInnis said in a statement.

According to MacInnis, so-called "penny perfect" online payment calculators can be using the term loosely. They calculate local taxes and fees correctly but tie them to an arbitrary loan term and interest rate to produce the quote.

"That is penny perfect to a hypothetical customer," MacInnis said. But there's no consideration for the customer's credit, he said.

In addition, each lender used by the dealer has its own set of policies. MacInnis gave the example of a lender who knocks 0.5 percentage points off the interest rates for customers in the top two credit tiers who are buying a specific vehicle model.

If the customer is borrowing less than 90 percent of what the vehicle's worth, the lender will reduce the rate by another 0.4 points.

"None of those tools consider any of that," he said.

For a customer who wants to find their price, payment and terms remotely, the trip to the dealership is just about "confirmation of expectations," MacInnis said.

But that's not what occurs at the store if the online quote was incorrect.

"Now you've got to rewind that customer," he said. "That's not the promise."

MacInnis' company has developed a means of producing a more accurate quote by factoring in numerous individual lenders' rate policies and additional pricing and dealer advance nuances. According to MacInnis, such an effort is complicated by the shift among lenders from issuing traditional generic "rate sheets" and underwriting principles to using artificial intelligence for a unique assessment of each individual applicant. But he said eLEND is able to manage this by letting the lender run its AI assessment and assign the consumer to a particular credit tier first, then quote based upon the lender's rules for that group.

"We just need to establish their black box tier," he said.

The kind of accurate online pricing MacInnis is advocating requires a "hard" credit pull and credit application under eLEND's system. A "soft" credit pull is used for a ballpark sense of a borrower's loan prospects. But MacInnis said customers are "absolutely" open to the idea of those hard pulls, which appear on credit reports. There's not a major decline between the number of online dealership shoppers conducting soft pulls and the number approving hard pulls, he said.

And with a hard pull, "you got 100 percent serious people," MacInnis said. When eLEND's dealers are alerted that a customer has undergone a hard credit pull online, "they're pouncing."