Retail Front

Let’s Rewrite This Movie’s Script


Auto dealers, the industry and car buyers rely on a form of auto financing. So, why does the government want to kill it?

In the movie “Jaws,” it was Roy Scheider and Richard Dreyfus running around warning the citizens that the shark was still out there. Unfortunately, the town mayor dismissed them as alarmists and kept the beaches open until more of his tourists became shark food.

Pierce Brosnan and Linda Hamilton tried desperately to evacuate the town in “Dante’s Peak,” but Brosnan’s boss (ironically named Dreyfus) overruled him. Then the volcano erupted. Oh well.

In “Volcano,” Tommy Lee Jones and Anne Heche couldn’t convince the city fathers that a volcano was forming in the sewers under Los Angles until they were ankle deep in lava flowing in the streets.

William Holden and Jacqueline Bisset didn’t have any luck convincing the Hotel owners the entire island was going to blow up. Guess what happened in “When Time Ran Out”?

The titles, characters and the settings are different but the storylines follow the same pattern. I can relate to it all.

Through the years, I’ve gotten the reputation for being the car-guy Paul Revere riding through the streets screaming about impending disasters in the industry. Usually my stuff goes against the grain of what everyone else is saying. I’m often ridiculed and scoffed at. I’ve been called a crackpot. Why am I still here, you may ask? Because history has vindicated me so many times.

“Party on Garth”! (“Wayne’s World”)

Right now, dealers enjoy record sales and profits. Life is good. Every learned statistician in the industry is projecting that that we’re going to the moon and everything is good into the future.

“To infinity and beyond!” (“Toy Story.”)

Nobody wants this party to crash but, there are clouds on the horizon that could derail everything and send car sales into a spiral as bad as anything we’ve ever seen in this industry.

Go with me on this for a moment before you shake it off and return to the party. First, would you agree with me that vehicle financing is the No.1 factor driving the car business?

If you disagree, maybe you weren’t around in 1982 or 2008. Do you honestly believe automakers can magically control the market?

Without financing, retail sales will die. It’s a delicate balance to be sure. In 2008, it was the subprime lending implosion in real estate that brought the country to its knees and crushed the financial fabric of our economy.

Today, more than a third of retail car loans are going to customers with credit scores below 600. Estimates have it that more than 63% of the adult population has severely distressed credit below 600 into the low 400s and the non-financeable levels.

The industry could blow if the pressure increases, such as the Consumer Financial Protection Bureau, other government agencies and political forces attacking dealer indirect lending

What they don’t realize is that dealer-assisted financing is the only way many of these consumers could ever hope to own a car. If CFPB prevails and over-regulates and tears down the Dodd-Frank exemption for car dealers, it will do an incredible disservice to the very consumers it claims to be protecting.

Interest rates and loan markup are predicated on rate-to-risk lending. It’s not discrimination. If it were not for dealers leveraging banking relationships and the bulk and volume of our business, many of these customers could never get approved for any loans. On their behalf, the dealers work with lenders.

If they force out indirect lending or heavily limit profitability of the system and of aftermarket sales, I predict we’ll see many lenders withdraw from the riskier credit segments altogether. It wouldn’t be worth staying.  

Although the dealer associations are fighting the fight, I am not seeing dealers joining in on the battle to actively support them.

If we don’t get involved with our associations, this whole damn party is going to come crashing down.

It’s time to take a serious look at our processes and be sure our people are maintaining the highest ethics and that our house is completely in order. If you as a dealer are heavily involved in subprime, take a harder look at which lenders you’re using and what they are requiring of your customers. There are several lenders with bad reputations that will turn the regulators’ eyes on your dealership.

That said, we as an industry need to mobilize, organize and fight the forces on different fronts that attack our indirect-lending business.

Jim Ziegler president of Ziegler Supersystems based in metro Atlanta, is a trainer, commentator and public speaker on dealership issues. He can be reached at WardsAuto readers also may comment on this article by logging in or registering below.

Discuss this Blog Entry 3

on May 10, 2015

That's why you are seeing several of the subprime lenders going full spectrum in hopes they can catch enough of the prime business to offset the loses on riskier loans until it hits. Westlake Financial has rates under 3% now. We are in crazy times, but you are 100% correct. If the government begins to regulate, and they will eventually, the automotive finance industry it will be the beginning of dark times for the retail automotive sales industry. The internet tricked everyone into giving up all of their front end profit by allowing companies like Edmunds, CarFax, KBB, TrueCar, CarGuru and all the rest to not only exist, but to thrive. We spoke about all of that years ago and it has happened, and now the government wants to take the rest. We all can't be wrong, and unfortunately we aren't. And this time when they step in and regulate things... It's probably Forever! We can't get that back in 3 or 4 years like last time.

You can cover up a lot of weaknesses in your staff, your process and even your inventory during the high times of record sales, but it will end and remember how you felt watching the notices come across the fax machine saying they are no longer accepting new business in 2008-09. It is coming again and sooner than you think so be ready.

Thanks Jim, good article!

on May 11, 2015

According to Experian, the level of dollars outstanding at the low end of the credit scale is about what it has been for decades. However, the mix might be skewed toward the BHPH end of it because the Great Recession destroyed a lot of credit scores. Many are rebuilding their credit through the BHPH/Sub Prime channel. Some have always lived there and always will.

Elizabeth Warren was correct when she screamed at the Republicans for lobbing into the spending bill that funds the government measure that rolled back part of Dodd Frank that allows banks to gamble with YOUR MONEY AND MY MONEY, thereby privatizing their profits while socializing their risk. BUT she is dead wrong about dealer financing. And when she's wrong, she's REALLY wrong. That makes her dangerous, IMHO.

on May 12, 2015

The sky is falling! Or perhaps it isn't. It's unfortunate the the pursuit of profit has potential to induce the worst in all of us. At times it seems that those who play fair, lose, or are punished as much as those who don't. All in all, in this case, I believe that those who are currently doing the right thing don't have much to fear in what is mostly rhetoric concerning the CFPB.

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What's Retail Front?

Blogs about automotive retailing, commenting on news impacting the business of selling vehicles.


Steve Finlay

Steve Finlay is the editor of WardsAuto Dealer Business magazine and a senior editor for His journalism career started 42 years ago as a crime reporter. A Michigan native, he likes...

Jim Ziegler

Jim Ziegler, president of Ziegler Supersystems, is a trainer, commentator and public speaker on dealership issues.
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