We're No.1! No, We Are!!

Dealerships duel for subprime bragging rights

Subprime financing's growth is reaching serious numbers in northwest Ohio.

Taylor Automotive's Kia store, west of Toledo, is averaging 1,500 subprime deliveries a month, says finance director Jake Bernard — thanks to increased sales of new Kia models.

Special promotions with Kia's subprime loan providers are responsible for the step-up, says Bernard.

He disputes a Ward's Dealer Business story that Brown Pontiac-Hyundai's dedicated subprime lot in Toledo is the region's No. 1 seller of special-finance vehicles.

“I used to work at Brown's, when they led all dealers in subprime,” says Bernard. “But Taylor has become a subprime destination now. Our providers include AmeriCredit, AutoTrakk, Credit Acceptance and Nuvell Credit.”

A spokesman for Brown Pontiac's lot concedes Taylor Kia is the new leader.

“They've been advertising hard on subprime Kias, and it's been working,” he says, noting how dealerships in general are increasing their subprime activities. “The Ward's article about subprime growth was right on.”

Taylor also has a Cadillac store in Toledo but “few, if any, Cadillacs go out subprime,” says Bernard.

Meanwhile, owner Stephen Taylor is opening a new Hyundai store south of Toledo in Perrysburg, OH.

Prospective Dealership Buyers Should Consider F&I, CSI

Guidelines for buying another dealership have changed because of new technologies and expanded product lines affecting customer satisfaction scores and finance and insurance revenues.

Dealers seeking to expand by acquiring other stores should take these factors into account, says Auto Team America in a newsletter distributed by its 12-member CPA firms.

It found that F&I departments often lag behind competitors if they fail to offer credit life and disability insurance, paint sealant, GAP coverage, tires, maintenance policies and etching.

Another red flag is a dealership with outdated technology.

“In order for each employee to be as productive as possible, the use of technology must be maximized,” says Auto Team. “The industry demands it, and the dealership's very survival depends on it.”

In checking out prospective targets for purchase, the consortium says buyers should request at least two years of customer satisfaction index scores.

RouteOne and DealerTrack Are Taking Different Courses

They are in the same race but seem to be taking different courses when it comes to RouteOne and DealerTrack, firms with online credit-application management systems.

DealerTrack jumped to an early lead (with a year head start) and now has more than 350 financial institutions signed onto its platform. DealerTrack also has expanded into other areas, essentially becoming one of the larger application vendors in automotive retail.

RouteOne just rolls along. It now has more than 175 financial institutions, and says it will have many more soon. It says business is up as the share of credit applications run through its system in 2006 increased 14% over 2005. So far in 2007, the firm has increased its share by 10%.

Because RouteOne was a joint creation by several auto makers, it has something DealerTrack does not have nor likely will in the near future: captive financing arms of the four largest OEMs, General Motors Corp.; Ford Motor Co.; Toyota Motor Co.; and the Chrysler Group.

RouteOne officials also believe DealerTrack's recent acquisition of dealer-management system vendor Arkona is good news and a competitive advantage.

“Our open integration strategy is key to our defensive position in the industry,” says RouteOne CEO Mike Jurecki. “The other DMS platforms don't look at RouteOne as a threat.”

Because of that, RouteOne in theory should have an easier time than DealerTrack integrating into the various DMS platforms. Ironically, it was the lack of industry integration with the DMS vendors that forced Mark O'Neil, DealerTrack's CEO, to acquire Arkona. (See p. 32).

“That may broaden and deepen our relationships with other DMS vendors,” says one RouteOne official. The company can finally claim it is competitive and is narrowing the gap between the two at a faster rate. And it also is starting to launch more applications, some of which are supporting used-vehicle sales and financing.

Still, DealerTrack is the biggest and baddest player in the space and likely will be out in front for the foreseeable future.