New F&I Initiatives Sprout Up

New initiatives and alliances are sprouting up across the industry to help stimulate prime and subprime sales of dealership finance & insurance products.

Entry into the market of the industry-wide Route One credit network will likely accelerate contract acceptances and marketing programs. Co-owned by Chrysler Group, Ford Credit, GMAC and Toyota Financial Services, Route One could reduce dealer F&I costs substantially and improve efficiencies in the entire process.

More vehicle shoppers are ending up “upside down” in terms of loan balances exceeding market values of their vehicles. But there are less fears that the field of subprime loan players would evaporate.

Orlando-based NetBank has been busy signing up dealers in the Southeast, while all three publicly-owned subprime lenders have enjoyed increased sales and profits throughout the year.

After narrowing their portfolios to higher-risk customers, AmeriCredit, Credit Acceptance and WFS Financial report quarterly increases that reportedly built momentum towards start of the 2004-model year.

The buy-here/pay-here “public” retail network, America's CarMart, raised its revenue 20% and income 27% and opened two new stores in Longview and Tyler, TX — another sign of used-vehicle recovery.

The Route One alliance, uniting four product competitors in a single support entity is one of several F&I blendings this year.

Volkswagen Credit teamed up with JM&A Group in a move to upgrade F&I services and training at VW and Audi dealerships.

BMW Financial Services partnered with Liberty Mutual Group for expanded coverage of both vehicle and home insurance on a “preferred rate” basis where permitted.

Subprime coverage, which a number of banks and national F&I provider Universal Underwriters dropped this year because of losses caused by tanking residual values on offlease vehicles, is being offered on the Route One network through members Triad Financial Services, a subsidiary of Ford Credit; Nuvell, a subsididary of GMAC; and independent Long Beach Acceptance Corp.

American Suzuki forged an agreement with Nuvell for new dealer-financing programs. Rick Suzuki, president of American Suzuki, calls the contract “the first step in development of a private-label finance company tentatively called American Suzuki Financial Services.”

The vehicle insurance initiative thus far has been confined to BMW and Ford, with the latter having organized Ford Insurance Services to facilitate promotional efforts through Ford-brand F&I offices.

The BMW-Liberty Mutual tie-up offers potential “significant savings” and features new-vehicle replacement cost coverage for low-mileage vehicles totaled in the first year.