Focus Turns to Digitizing F&I as Need for Speed Increases

The F&I business appears perched on the precipice of change, and while there’s still some reticence from auto dealers, industry insiders say the trends are clear and resistance, ultimately, is futile.

Besides some return-on-investment upside for retailers, the main driver in the coming revolution is the growing number of tech-savvy car buyers who are losing patience with the time it can take to close the deal.

“The consumer doesn’t want a 4-hour buying process,” says Bob Carter, senior vice president-Automotive Operations for Toyota Motor Sales U.S.A.

John P. Stephens, senior vice president-dealer services for F&I product provider EFG Companies, sums it up this way: “People are thinking, ‛Root canal or buy a car? Which way do I want to go?’”

But much of the time needed to select the right vehicle already has been squeezed out of the process by a consumer base increasingly adept at researching models and negotiating price online.

That has refocused the time-shaving target squarely on the F&I department, where the more mundane task of securing a loan and sitting through a blow-by-blow presentation of vehicle-protection plans has today’s car buyer impatiently checking his watch.

Service providers are responding, with new online features that allow consumers to secure a trade-in price for their existing vehicles, select add-on warranty plans and all but wrap up loan agreements before they event set foot in a new-car dealership.

Dealertrack, for example, has rolled out a new online financing program that enable buyers to enter their credit scores, get back specific lending offers from their dealer and use that information to calculate more precise monthly payments. Dealers can offer loans from single or multiple credit providers and paperwork can be submitted right online for processing.

Once the buyer arrives at the dealership, sales staff can access all the credit and vehicle information on their tablets in order to seal the deal right on the sales floor. Dealertrack says it already has processed more than 3 million e-contracts for loans, and the new ability to finalize the process with an iPad presentation promises to improve the overall customer experience.

Dealertrack’s Jason Barrie, senior director-F&I, says the new digital-retailing tools help sell cars, because the process builds trust between the consumer and dealer.

“We’re seeing a 13% increase in leads in the first 30 days when digital retailing is installed,” he says. “(And) we’re seeing a 30% lead-to-sale close rate from these leads as well.”

Dealertrack works with 22,000 dealerships in the U.S. and has 1,500 lenders patched in through its credit network.

“Our strategy is taking a lot of the activity that traditionally goes on in the F&I department – calculating the payment, being able to understand what the options are for the consumer – and driving that down to the website experience for the consumer,” Barrie says.

Warranty Plans Latest Facet to Move Online

Dealertrack is moving ahead with online marketing of extended warranties, as well. Dealers can post specifics on long-term maintenance options or protection plans for tires, wheels and other components.

EFG also is simplifying the F&I process and making it faster by reducing the complexity of routine-maintenance programs it offers through retailers. Its new plans eliminate provisions requiring owners to service their vehicles within a specific time period and instead are written around the customer’s long-term mileage expectations.

Stephens says the switch makes it easier for F&I managers to match the right program to the buyer’s life-of-ownership needs. Customer satisfaction is increased, because consumers don’t have to worry about missing a service interval they’ve paid for in advance.

“When you talk about…the efficiency of F&I, the digital aspect is one piece of that,” he says of the movement to post more information and process transactions online.

“(But) the structuring of the products is the other piece. How easy are they for the consumer to understand? And how can we structure them so that they’re very individual, (but) much easier for the F&I director to act as that consultant and talk about the lifestyle (of the buyer), instead of trying to push and sell something?”

Spearheading the drive into digital retailing are Millennials, the roughly 22- to 34-year-old group that is among the most comfortable with online shopping. That segment of the population is expected to account for 40% of new-vehicle purchases annually in the U.S. by 2020.

New-car shoppers today are coming into showrooms ready to deal. Where they visited five dealerships before buying a vehicle just a few years ago, they now average less than two stops, says Dealertrack’s Barrie.

“Consumers are getting better information online, and it is really driving their decision as to where they’re going to consummate that vehicle purchase,” he says.

eBay Motors, which connects some 30,000 car dealers to 155 million buyers around the world, says it already is seeing 48% of its transactions “touched by mobile,” meaning consumers at some point use their smartphones or tablets as they hunt down the right vehicle.

“There’s been a lot of conversation around: ‛Millennials don’t buy cars,’” eBay Motors General Manager Bryan Murphy says. “I don’t think that’s true. I think they buy cars very differently, just like they buy everything else very differently.”

Despite those trends, some resistance remains among dealers to the overall digitization movement. Many are reluctant to put financing terms online or to detail specific warranty and maintenance program costs before a customer sits down with an F&I manager.

“Any time there’s change there’s concern,” Barrie notes.

But the resistance is no different than the hesitation dealers once had about putting vehicle inventory on line or negotiating price through emails. Ultimately, they’ll jump onboard this trend too, the Dealertrack executive believes.

“Now the next step is, ‛Should I be putting payments on my website, trade-in offers, F&I options?’” Barrie says. “So we’re seeing a progression. The consumers don’t want to spend four hours in the dealership. They don’t want to go to five dealers.

“They want to walk into the dealership, get their test drive, understand their options and have a very transparent experience.”

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