Outside Financing is Threatening F&I

How Dealers Can Fix It

Selling ancillary products is paramount to dealership profitability. Driving results in the F&I department has become central to the modern dealership strategy.

The importance of F&I earnings increases as front-end margins compress, interest rates rise, and SAAR cools. With the adoption of digital retail, F&I is moving upstream in the customer buying process.

The Outside Financing Threat

The real threat to F&I profitably is outside financing.

According to FICO’s excerpts from their 2019 Survey: Consumer Perceptions in Automotive Finance, only 40% of US consumers said dealership financing would be their first choice for their next automotive loan.

Even more ominous is the shift in customer perceptions.

The study noted the following:

  • 78% of US consumers are initiating automotive loan discussions (versus responding to offers).
  • 95% said they only considered between 1 to 3 lenders before making their loan selection.
  • 91% of US consumers would accept (or at least consider) an instant vehicle loan offer if it meant avoiding dealing with a bank or doing extra paperwork.

There’s a direct correlation between F&I profitability and indirect financing. It’s essential that customers finance their car through the dealership. It’s dangerous to leave back-end profits up to chance while only addressing it during the last stage of the F&I sales process.

For example, when a customer arrives at the dealership with outside financing (OSF) the F&I best practice is to convert them to a dealer finance customer before trying to cross-sell products.

However, it’s too late.

The F&I manager loses valuable time gaining customer rapport. Sure you get a shot at selling F&I products, but it erodes customer satisfaction, burns up critical sales capital, and slows down deal momentum.

Everyone wins when the dealer sharply focuses on attracting customers to internal financing. Make it a goal to take back control of the financing process.

Remove Barriers

It’s not surprising that customer sentiment in CSI surveys indicates that the single worst part of vehicle purchasing is the time it takes to transact.

We live in a world of instant gratification. The companies that win are those that remove every barrier between a customer and their purchase.

Let’s consider Amazon for a moment. Some would say they trained generations of online shoppers. One-click checkout became a game changer.   

How do we take that example and bring it to auto?

A growing number of customers speed up the purchase process by locking in financing before they arrive at the dealership. When customers come in with pre-arranged funding the opportunity to sell them value-added protection and F&I products diminishes.

The Solution – Give Customers an Online Finance Channel

Financing a car is not a one-time transaction. It’s a pivotal moment in the sales process where dealers can start or seamlessly continue a longer term, mutually beneficial relationship.

Fueled by the Amazon-shopper mind-set the trend towards online ‘everything’ continues. The same holds true for cars. A recent study from Cox Automotive showed that 83% of customers want to do one or more steps of the purchasing process online.

Customers want a one-stop online shopping experience where they can evaluate lending options and customize based on their objectives. They want the flexibility to include a down payment, pick their loan term, and determine options before entering a showroom. They want to shop at their pace.

The same Cox study said 85% of customers are more likely to buy from a particular dealership that allows them to start or complete nearly all of the vehicle purchase online.

Therefore, more and more dealers are leaning into digital retailing.

However, here’s the catch: To complete a digital showroom experience, dealers must enable and promote online credit decisions.

There’s only one solution that solved the financing side of digital retailing. Read on to discover who solved it.

How to Boost F&I Profits

Keep customers on your website!

With the right end-to-end digital retail solution, customers no longer have to seek outside financing. They receive an instant credit decision in a seamless path to purchase.

Nick Waddel from Peterson Toyota of Sarasota feels a digital retail solution primes the customer for F&I sales. Options are laid out, and customers are less wary of the process.

You want a partner who has already done the heavy lifting. The key is a digital retail solution provider that solved the complexity of building the security and integration that powers a multi-lender online credit engine. The solution needs to live where customers are shopping: on your dealership’s website.

Digital retail converts online shoppers to dealer finance customers and neutralizes the risk of them going to OSF.

Three Ways AutoFi Helps

The growing risks associated with shifting consumer expectations and the necessity to have an online solution with lender integration leads dealers to AutoFi. Here’s why:

  1. It’s a consumer-led and initiated F&I process.
    • Include your financing partners and products in our online solution.
  1. The AutoFi platform presents up to three competitive lender offers.
    • Customers with choices are less likely to seek outside financing.
  1. AutoFi presents instant, automated approvals.
    • Instant credit decisions mean customers stay in your ecosystem.

AutoFi is the only provider that works with lenders to present customers with alternative deal structures. The AutoFi experience makes it easy to evaluate trade-offs between term, down payment and APR. Credit decisions are firm offers – not pre-approvals.

The best part? All you aftermarket prices are easily included in a seamless path to purchase. Customers love it. Dealers love it.

Learn more about giving your customers real-time lender offers.