Take Stock of Your Dealership’s Transparency

Recently the Federal Trade Commission announced a planned study on the auto buying and financing experience.

Since 2011, the organization has brought more than 25 cases challenging illegal practices in the area of dealership business. It is likely taking steps to look even closer into the industry due to increased Consumer Financial Protection Bureau activities.

While the FTC is in the exploratory phase of the study, it is important to note it does have jurisdiction over automotive retail, unlike the CFPB. And it’s time to provide more transparency into the auto buying process.

The FTC wants to find out how complicated the automotive-financing process can be at the dealership level. The organization is soliciting public comments and feedback from consumers’ actual experience purchasing or financing a car.

What can you do in light of the increased scrutiny? You can start by assessing your dealership’s transparency and asking yourself a few key questions:

How competitive is financing and aftermarket pricing at your dealership?

Today, consumers can easily research prices to negotiate the best deal. But when it comes to financing, VSCs and other aftermarket products, most consumers don’t know what they qualify for or if they are competitively priced.

But the tide is shifting. Consumers and entities such as the CFPB are stepping in. They are demanding transparency in every industry and are much savvier when making purchasing decisions on both high-end and lower-end items.

As you look to increase transparency, consider an easy step toward that end: make more information available online. Provide an online credit application and make aftermarket information accessible on the web. Be up front and allow consumers to educate themselves about your offerings when they are doing research to purchase a car.

You should also work with your product provider to understand the consumer benefits of the products you offer. Compare the benefits with the retail price and question the value to consumers based on the price. Are they getting a good deal? Is there a good balance between dealer profit and consumer value?

How big a priority is customer satisfaction for your sales and F&I teams?

Take a look at your performance metrics and your CSI score, customer reviews and chargebacks to measure customer satisfaction and ensure they are aligned. For example, high F&I product penetration should reflect F&I managers putting customer needs first by taking time to learn about personal driving habits to tailor presentations and increase customer satisfaction.

Remind your teams that the customer experience is crucial to a successful dealership. Ask yourself if you would be comfortable sending your friends and family through the sales and finance process at your dealership.

Do you have compliance procedures in place and are they being followed?

One way to ensure procedures are being upheld at your dealership is to implement recurring, random audits to check that your team is complying with local, state and federal laws. You won’t know unless you audit.

Another suggestion is to put your finance managers through the Association of Finance and Industry Professionals certification. This process ensures your team knows and understands regulations at the state, federal and local level, and empowers them to take responsibility for your dealership’s compliance.

Dealers who take steps toward transparency will be better positioned to tie profitability increases to compliance initiatives as scrutiny from the FTC and CPFB continues. In addition, those dealers will cultivate long-term relationships with customers that will generate increased sales and future growth.

John Stephens is senior vice president of Dealer Services at EFG Companies. He can be reached at 972-445-8910 and [email protected]