Are 1-Hour Deals Doable at Car Dealerships?

When Pete MacInnis got into automotive financing in the 1980s, lenders and dealers did customer loans by phone. It took a while.

Technology has sped it up. Still, consumers often complain car buying takes too long. And the financing part often is the biggest culprit.

MacInnis now is CEO of eLend Solutions, the developer of a system that enables the integration of actual credit approvals with near-final payment terms before the customer enters the showroom.

He aims to offer a more streamlined car-buying process by moving the financing to the start, either online or at the dealership.

McInnis has spent 35 years in finance, 20 of them in auto finance.

“I’ve always been an operations junkie,” he says. “I’ve always asked, ‘How do we make the processes more efficient?’ With the spotlight on shortening time buying a car and enhancing the customer experience, the most exciting time for me in my career is right now.”

WardsAuto speaks to him about how to make the process faster. Here’s an edited version of the interview.

WardsAuto: Why is there a need for a faster time at the car dealership?

MacInnis: In that whole three to four hour car-buying process, it’s really the finance piece that’s slowing down most of that transaction time.

Consumers prefer doing more online by getting as much out of the way before they go to the dealership. They’re demanding to know about the finance terms. Think back just five years ago, dealers were still resisting putting pricing online. We got passed that. Today, if you don’t put pricing online, you’re not going to sell the car.

So it’s kind of like déjà vu, with some dealers reluctant to provide finance-term payments online.

WardsAuto: Where’s the reluctance come from? Is it psychological?

MacInnis: Partly. There’s been so much vehicle-pricing transparency. Dealers have given up so much information. It’s probably the only industry where the (retailer) is expected to give up everything. So dealers want to hold on to something, and finance has been that.

Finance can be complex, and dealers haven’t had the technology until now to address that online issue.

WardsAuto: How do you move the finance process to the start of the process?

MacInnis: We built a rules-based decision engine that (integrates) lending programs, guidelines, pricing, advances, stipulations with multiple lenders and for the full credit spectrum. It can be on a dealership website or at the dealership itself. It saves a lot of time desking and financing.

WardsAuto: This avoids customers selecting a car, falling in love with it and then finding out they don’t qualify for the necessary credit to buy it?

MacInnis: Exactly. Online they select a vehicle and click on it. They put in information, and can see what the dealer can offer and at what rate. They can get pre-qualified. We’re bringing the payment portion up front. So when they walk into the dealership, they’ve already picked out the car, know the price they want to pay and know their finance terms. It’s really then about doing the test drive.

WardsAuto: So this is more than a payment calculator on a dealer website?

MacInnis: This ties in to a real loan origination system that’s matched up to lender programs?

WardsAuto: And the customers can do that by themselves?

MacInnis: The dealers control the payments they show the customer. The dealer can embed a markup of, say a percentage point.   

WardsAuto: So there’s no manual back and forth online between the customer and the dealer?

MacInnis: No. On the dealer website, it’s a promise of transparency and information upfront. And the customer is getting the real payments and instant gratification.

There’s also a desking component for use at the dealership. So when dealers structure a deal, they instantly know what the customer qualifies for. You put them in the right vehicle with the right deal structure and quote them payments that can actually happen.

You are bringing finance forward in the negotiation process. They have a fundable deal with a lender. You can move them right into the F&I office to do the paperwork and sell the aftermarket products and make doing that the focus. That’s unlike having a sales manager negotiating terms with a consumer without the involvement of the lender or the finance department.

How to Handle the Credit-Challenged

WardsAuto: How does the system react to customers of limited means selecting an aspirational luxury vehicle that’s way beyond their budget? Does it gently let them down?

Absolutely. Say the minimum criterion is a 600 credit score and the customer comes in with a 550. The dealer controls those parameters. Instead of saying “Congratulations, you’re pre-approved, now give us this information and you can pick your payments,” it will come back with “Thanks for applying. We don’t have a pre-approved offer at this time, however if you give us some more information, we still may be able to get you financing.”

WardsAuto: So it doesn’t shut them down. Presumably a dealer would fear losing that customer if an automated rejection says “Sorry Charlie” without offering the possibility of an alternative deal.

MacInnis: The dealer can set it up to route those directly to a special finance department – however the dealer wants to configure it.

WardsAuto: A survey says 80% of dealers believe the entire sales process should take less than two hours.

MacInnis: There’s a lot of talk about that but hardly anyone is there yet. How do we get there? The AutoNations and Sonics of the world are changing processes. They’re throwing a lot of resources at technology.

WardsAuto: If the customer is doing a lot of the preliminary stuff online before going to the dealership, how long should the store visit take?

MacInnis: Under 60 minutes. Most of that is going to be paperwork and forms. But you aren’t spending a lot of time figuring out deal structures. All that can be done before the customer completes the test drive.

WardsAuto: How have things changed over the years? What would an example be of technology then and now?

MacInnis: Oh my gosh. We were taking credit apps over the phone from dealers in the 1980s. In the 1990s, we were faxing back and forth. Around 2000, DealerTrack came out and created that fantastic connectivity between dealer and lender.

But then for several years nothing significantly happened. Now, with us having this rules-based decision engine at the front of the sales process, this is the next big thing for automotive finance.

WardsAuto: Demographically, who’s most likely to use an online credit function?

MacInnis: Historically, the perception was that only credit-challenged customers would use it. But customers want to do more online. The notion that only credit-challenged people do it is out the window. You’ve got customers across the credit spectrum doing it.

If you are promising a faster process, you are done with people spending four hours in the dealership saying, “Let me see what you have.”

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