Not long ago, some auto shoppers only vaguely knew what credit scores were. Now, customers not only know what they are, most know what theirs is before they step foot into a dealership.

It’s part of the new age of auto financing that includes better-informed customers as well as more efficient dealership finance and insurance operations.

F&I remains a pivotal automotive profit center, as evidenced by the latest Ward’s Dealer F&I 150, an annual list of outstanding performers. Collectively, their F&I revenues totaled $711.9 million.

Dealer F & I 150 List

Despite a more enlightened clientele, some consumers remain woefully uninformed when it comes to auto financing. They may fail to realize the full impact of a long-term loan on a pricey car they bought with little money down.

Drawn by low monthly payments, they are unmindful of the fact that the longer the loan terms, the more the ultimate payout.

“The lowest payment attracts them,” says Ann Bybee, corporate manager-planning and communications for Toyota Financial Services. “They don't understand that it may cost them $10,000 more in the end.”

Several auto makers and the National Automobile Dealers Assn. run assorted programs to address financial illiteracy among car buyers.

Such initiatives may be making headway, because a growing number of car consumers better understand the finer points of financing a car.

Also aiding that cause is the Internet and its vast information offerings that have helped make many customers smarter car buyers. The recent economic downturn has taught them some painful lessons, too.

The recession made many people more aware of their finances and their credit status at a time when credit was frozen and many consumers began facing problems securing auto loans unless they were prime-rated customers.

Many one-time prime customers dropped to nonprime and subprime levels because of financial setbacks such as job losses.

A cycle of financial life is that people who suffer a job loss often default on loans. That, in turn, mars their credit scores. But it has also heightened their credit awareness.

Technology has helped make credit scoring more refined and able to sort out true deadbeats from good people who had bad financial things happen to them.

Fair Isaac, creators of the FICO scores, has developed new metrics that now distinguish “between habitual offenders and those in tough circumstances suddenly,” says Randy Crisorio, president and CEO of United Development Systems, a dealership F&I training firm.

As the economy haltingly recovers, credit is becoming more available and car shoppers returning to dealerships are displaying a greater knowledge of auto financing.

“We are seeing a more educated consumer base,” says Gary Allgeier, director-financial services for the Suburban Collection, a dealership group with stores in Michigan and Florida. “One big consumer change is that a lot of people now know their credit score.”

Many car shoppers, who have done their homework, buy a car that fits their budget, not exceeds it.

Today’s car buyers are different, says Tim Blochowiak, a vice president at South Protective, an F&I provider. “They are more educated and less likely to make impulsive purchases.”

Seeing that trend in her customers is Cindy Kanellis, finance director at Freemont Chevrolet in San Francisco. “They are trying to buy a reasonably priced car that they will be able to pay off.”

When today’s customers don’t know something, they want the dealership to provide F&I information quickly and early on.

“Sometimes, they want information before they enter the dealership,” says Marguerite Watanabe, president of Connection Insights, an F&I consultancy.

“We have to look at it differently, and enable the customer to buy and finance vehicles on their terms,” she says.

Accordingly, Black Book Online offers a new online application on subscribing dealers’ websites. It lets car shoppers get an estimate of their credit scores without coughing up sensitive information.

“Eighty-five percent of car shoppers want credit information, and 75% think credit scores are important, but only 21% are willing to give their social security number online,” says Black Book Online President Mike McFall, citing a Harris Interactive poll.

He urged his firm to develop a credit-score estimator that does not require a bureau check, dates of birth or the like.

Online car shoppers fill out a form that, among other things, asks how many times they have applied for a loan or credit card in the last year, how many of their credit cards have outstanding balances, when they first got a loan and how much they owe on their current car.

The estimator then gives them a credit-score range and shows where that falls within the general population, with a 670 score considered average and 81% of scores above 630.

“We don’t say a 600 score is ‘bad,’ but show where it is percentage-wise on a bar chart,” McFall says. “A lot went into not sending a negative message that a credit score might be bad.”

It’s also important for customers to understand the scores are estimates, he says. “It is a starting point to getting credit.”

After months of testing, Black Book is making the service available to dealers for a $429 a month flat fee.

An early user, Butch Watson, general manager of Chuck Fairbanks Chevrolet in Desoto, TX, initially worried the questionnaire would allow people to misrepresent themselves, eventually putting the dealership in an awkward position.

That was not the case, he says. “Ranges are not too far from actual scores.”

As customers become smarter car buyers, dealers are becoming more forthright and open with information.

The need for F&I transparency is greater than ever, says Heather Haynes, an F&I training manager for JM&A Group.

“The problem is that for years there has been a history of not answering customers’ questions.”

Then there is the element of time, and how much of it consumers want to devote to car buying, financing and hearing presentations on F&I products.

The dealership F&I office has never been a place where people like to linger, but today’s customers are more time sensitive, says Dave Duncan, senior vice president of Safe-Guard Products International, an F&I provider. “They are more impatient. They expect more efficiencies.”

Generation Y buyers in particular “want to come in and within 15 minutes buy the car they picked out,” says dealer Michelle Primm, managing partner at Cascade Auto Group in Cuyahoga Falls, OH. “We have to let them know we must take it slower and dot the ‘i’s and cross the ‘t’s.”

But it’s not just young customers who can start tapping their feet early on, says Freemont Chevrolet’s Kanellis. “Everyone is in a hurry.”

Respecting people’s time is important because customers who start feeling like captives can retaliate by giving dealerships poor marks on customer-satisfaction surveys and online dealer-rating sites.

Yet, F&I managers can use certain tricks of the trade while playing beat the clock.

One is to meet customers, ask qualifying questions and take care of preliminaries on the showroom floor. It cuts time spent in the F&I office where the clock is ticking, says Glenn Roberts, national training and business-development manager for Zurich Insurance.

If 30 minutes in the F&I office is about right before the customer starts clock watching, why spend 5-10 minutes of that time on introductions and rapport building that could be done elsewhere. “You’re shooting your selling time,” says Roberts, a former F&I manager. “You are using up precious minutes.”

He calls it a front-end F&I system. He stresses keeping it short while initially with the customer at the car salesperson’s desk or workstation. Gather information and resist the temptation of selling then and there.

Showroom sales people are in the business of selling cars, but they need to do a better job qualifying customers and guiding them to vehicles they can realistically afford, Roberts says. Otherwise, it creates trouble for finance managers, who get stuck with flawed deals.

“It’s bad if a deal gets to the F&I office and doesn’t belong there,” he says.

Problems are avoided if car sales people are up to speed on how F&I works, says Richard Ackman, director-variable operations for the Germain Motor, an Ohio-based dealership group with 25 F&I managers. “We educate car sales people, and make sure they understand F&I.”

For unenlightened shoppers who show less self-restraint, sales people should steer them to cars that fit their needs and budgets, and ones that stand a chance at getting financed, Roberts says. “Switching cars is a lot easier to do on the showroom floor than in the F&I office.”

It’s easier to work with informed customers, says John Luckett, a vice president at Resource Automotive, an F&I service and training firm.

“You need a dialogue early to find out about credit challenges,” he says. “It’s important to slow down and interview customers, then disclose to them the process of financing. That way, you can explain, ‘Here’s where you qualify.’ It becomes a much easier sales process if they understand why an interest rate is 5%, not 0%.”

Many dealerships now make it a point to gather customer information and resist pitching cars someone can’t afford.

“We concentrate on getting the right people, not only on the right bus, but on the right seat on the bus,” Ackman says at an F&I Management and Technology Conference.

Dealerships are doing that “because it’s the right thing and it is smart for business, especially long-term business,” says Andrew Koblenz, vice president and general counsel for NADA. “The average lifetime-customer will spend $350,000 at a dealership.”

Some industry experts aren’t convinced today’s customers differ that much.

“People want more information, but car buying of the past is much the same as it is today,” says David Engelman, president of Smart Payment Plan, a financial firm that automatically deducts car payments from people’s paychecks.

“Consumers want a respectful and easy process and sensible payments,” he says. “It is human nature.”

sfinlay@wardsauto.com