By Desiree Homer
The pandemic didn’t just initiate changes on the showroom floor or at the auctions. The F&I office has certainly experienced its fair share of adjustments over the past year. Generated out of necessity, the digital finance office experience is proving to be the new way forward, and dealers nationwide are embracing it.
In a recent Dealer News Today podcast episode, Emil Banga, Associate Vice President of Operations, Dealertrack F&I Solutions, talks about the wave of systems integrations that are transforming how dealers connect third-parties to customer car-buying experiences. The launch of new products has “set the foundation,” Banga says. This year is all about building on that foundation to improve communications and create a robust F&I process that has real impacts to the bottom line.
Cutting the Fat out of the Process
It’s a known fact that most consumers hate the lengthy timeline that comes along with buying a new or used vehicle. In the pre-pandemic environment, F&I managers were essentially masters at performing vendor wrangling duties. Communicating car buyer details to potential lenders alone could take over an hour. And then incorporating additional warranty product vendors, restructuring deals, and shuffling paperwork can tack on even more time to the car-buying process.
Fast-forward to 2020, and the pandemic changed how customers shop and buy everything. In a quick pivot, F&I offices nationwide scrambled to adopt new technology that would allow for digital engagements. And there still presented challenges with connecting and communicating with the third-party vendors. This may have been the point at which the game changed. Emil Banga predicts the F&I landscape won’t be settling anytime soon either, as new digital integration products continue to emerge.
Is the Traditional F&I Office Obsolete?
Automotive News shared a few testimonials and insights from dealers who have abandoned their traditional F&I offices altogether. Avondale Toyota in Arizona, for example, eliminated its finance and insurance office in favor of adopting a fully virtual sales process. Owner, Brian McCafferty, says success lies in training the sales managers to handle the entire car-buying process. The “one big F&I team” approach has worked well, and McCafferty cites that customers appreciate engaging the dealership completely online and with one dedicated contact person.
Some dealer owners shared other benefits of streamlining the F&I office into an extension of sales, including the sheer speed of the finance process altogether. Having one sales manager at the helm of each step shaved valuable time off the finance phase of the sale. Others point out the increased opportunity for relationship building with the customer. And with the car-buying ecosystem remaining virtual for many customers, having online processes can, in many instances, take the place of the need of F&I personnel.
Not all dealer owners and retailers are abandoning their F&I office, though. Instead of dismantling the business segment, more and more dealers are enhancing and changing how they operate. Not all salespeople are skilled or equipped to adequately sell the roster of F&I products. And not all car buyers can move through the digital process seamlessly. Customers who are feeling credit score crunches still require more creative solutions to buying a car. It’s the expertise of the qualified F&I managers who can shepherd these efforts.
Systems Integration Tools and Real F&I Solutions
If your dealership’s core pain points of F&I are time and cross-system vendor communication, there are specific tools to help. Emil Banga talks about systems integration tools available that speak directly to saving time during the finance process. And in another interview with Integrated End Points, an F&I sales manager for a dealership in New York stresses his success has been contingent on getting the best tools in the hands of his teams. He suggests that regardless of your preferred approach, step-sell or menu-based, it’s most critical to still discover the customers’ needs before offering products. The tools your dealership leverages will help your F&I managers stay flexible with each car-buyer they engage.
Your software should be expediting the process, not prolonging it, and having efficient digital platforms that connect your vendors to the process needs to be efficient. If you’re not sure where your F&I strategy could use improvement, start by looking at your data. Then follow up with your F&I personnel and ask them for feedback about their systems. Oftentimes, the best solutions come in the form of ideas from those key members of your teams who need them. Your car buyers can be a great resource for information, as well, in terms of how they might rate their F&I experience. Identifying where you can implement targeted improvements will help you increase your margins immediately.
Your Dealer Management System needs to be able to keep up with the ever-changing digital demands in today’s post-pandemic environment. Tools from providers like Dealertrack can always be a great place to start when it’s time to enhance your system integrations. You’ll likely see a boost in productivity, positive customer experiences, and empowerment with your F&I managers.
Other Innovative Ways F&I Managers Are Profiting
Consumers are re-entering the car buying market in a variety of new ways, with unique needs and preferences. Some dealers are leveraging these new opportunities. Emil Banga and Andy Mayers talk about one trend that has emerged involving consumers looking to refinance their traditional auto loans. With so many Americans experiencing financial hardships, buying a new car may not be doable right now. And with increasingly low interest rates, there is a surge of consumers who are able to now refinance their auto loans. This represents a huge segment of consumers. Refinancing a car loan makes sense for others, too, including anyone whose credit score has improved, anyone with positive equity, and even anyone who has purchased their car within a recent six-month window.
Many successful dealers are capitalizing on the average household finance crunch by marketing their financing options. People may be worried they can’t qualify for a new car loan right now, considering job furloughs and layoffs. The creative F&I solutions are helping to reassure some of those buyers there are ways to get the deal done. And as customers are becoming more frugal with their spending, there is an increased attraction to used and CPO inventory, another segment that F&I can grow into profitably.
Transitioning the F&I process to an online experience has made finalizing a vehicle purchase that much easier for consumers, too. The “digital dealership” is becoming more prominent, including finance options. Video chats and e-signing are the new normal in many finance offices, and the experts predict this is an engagement trend that may be here to stay. NADA’s midyear report for last year demonstrated that F&I market penetration has soared. In 2010, those penetration rates clocked at 54.5%, and in 2020, it grew to 77.8%.
Many of the experts are weighing in on the new F&I landscape, offering predictions for the industry moving forward. The pandemic may have forced innovation, but the continued transformation is still the order of the day. Not every F&I solution will work for every dealer. But the common thread for those who are experiencing growth and profitability demonstrates digital adaptation, system integration, and virtual tools are the most critical components. As you embark on your journey to a prosperous 2021, take a hard look at opportunities to improve your tools and processes. Your dealership’s ROI will thank you for it, and so will your F&I managers and customers.
