Senior Vice President of Sales and Marketing, Matt Fitzgerald explains the CitiFinancial Auto Acquisition and what it means for dealers.
Santander Auto Finance for Chrysler Products
Deborah Malinowski shares how you can get the most out of our ZEROFee Chrysler new car program.
Driving Under the Speed Limit: Dealers and Lenders Slowly Embrace E-Contracting
By Bridget McCrea
For years, car dealers and lenders have been playing a chicken-and-egg game with e-contracting, a process of fulfilling car sales and funding electronically, instead of via fax and courier.
Dealers have said they are in favor of the technology, which lessens waiting times for loan fundings and streamlines the loan-application process, and are looking to lenders to push the process. Lenders have said they are in favor of the technology, but are waiting for dealers to ask for it.
The main sticking point to mass acceptance of e-contracting in the auto finance industry is dealer comfort with automating what has always been a paper-intensive process. For those that have embraced the change, there is no looking back.
FUNDING IN HOURS, NOT DAYS
It’s been about a year since Lia Infiniti of Latham, N.Y., purchased and installed its e-contracting system. During that time, John Greenhut, the dealership’s finance director, says the dealership has been able to streamline the application process, eliminate duplicate entries, and achieve quicker funding for customers. The learning curve was easy, says Greenhut, who now “gets funded in a few hours, instead of five days.”
Currently using the system for Infiniti purchases and leases, and for loans made through a national bank’s indirect auto finance unit, Greenhut says he wishes more lenders would get on board with e-contracting.
To streamline at least some of its auto loan processing, Lia Infiniti relies on a computer-driven delivery system that uses Electronic Retail Installment Sales Contracts (ERISCs) in place of paper-based Retail Installment Sales Contracts (RISCs). The former contain the same disclosures and are formatted like their paper cousins, but are looked upon as more “secure”since they cannot be altered once car buyers sign their names using a signature pad.
With e-contracting, those long contracts and fax machines become a thing of the past as the “application” is distributed to multiple lenders who, in turn, send back their financing offers. Developed by companies like DealerTrack and RouteOne, e-contracting is being slowly adopted by dealers and lenders nationwide.
But for every dealership that’s willing to forgo the paper and take the electronic route, there are many more that have steered clear of this new approach to financing. “I think dealers are scared of it,” says Greenhut. “It’s like someone coming in and saying that they’re going to install computers in an office where they’re still using adding machines.”
CUSTOMERS CAN’T TELL THE DIFFERENCE
Yet customers hardly notice the difference between electronic and traditional contracts, except for the fact that they’re signing a little electronic box, says Greenhut. “I present a review copy to them, and once they agree to all the figures and terms, they simply sign the box.”
Bill Seidle’s Nissan in Miami was an early adopter of e-contracting back in 2004. Spurred by F&I Manager Andrea Forteleoni, who was on a mission to streamline the application process and reduce paperwork, the dealership saw the emerging technology as the “wave of the future,” despite the fact that many other dealers were wary of it at the time.
“People look at new things suspiciously, and the seasoned professionals who are used to doing things their own way don’t always welcome new technology with open arms,” says Forteleoni, who admits that e-contracting has both upsides and downsides. On a positive note, it speeds lender-approvals, enabling customers to receive their first statements in plenty of time for payment.
On the other hand, human input errors can bungle the sys- tem and create problems. “On my wish list for e-contracting is some type of computer check that ensures that the parameters, rates, and rate spreads” are inputted correctly, says Forteleoni.
As the business world strives to go paperless, expect to see even more dealers and lenders using e-contracting. “Once manufacturers like Toyota and Honda go into it in a major way, the dealers will be more apt to join in,” says Forteleoni. He adds that the overall consensus is that e-contracting will be fully developed in five years, although he predicts a shorter timeline. “The technology is there, it’s a just a matter of training and expanding the possibilities.”
Smooth Sailing – A Clean Contract Package Benefits Everyone
By Laurie Kight
When it comes to the funding in auto finance, speed is still the name of the game. While dealers, lenders and consumers consistently list “fast funding” as a key driver of customer satisfaction, kicked contracts still hamper the deal process. Submitting a “clean” contract package is the number one thing dealers can do to lessen the time it takes to receive their funds from a lender.
Drive® dealers primarily submit applications for sub-prime consumers, which translates into multiple stips as part of the funding requirements. No doubt, stips are a hassle to gather, but they are an important part of the underwriting process because they help Drive better understand the risk of each applicant, and help predict future performance of the loan. Packages sent with missed or incomplete stips result in a funding delay. Understanding Drive’s requirements and reviewing a checklist prior to sending funding packages ensures that contracts can be funded as quickly as possible.
Top Five Ways to Improve Funding Time:
- Review your Drive callback. Stips vary by program, so be sure you check the callback carefully and gather all stips.
- Ensure all the required documents are in the package. This sounds simple, but it’s a frequent cause of delays. Documents that are often left out, but required include: the contract, odometer statement, Title documentation and insurance documentation.
- List a valid employment verification number. Drive verifies employment on 100 percent of its deals. If the customer is contacted by Drive, it is important that they return the phone call immediately. Employment verifications are a leading cause of funding delays.
- Provide a valid contact number for the applicant. Drive often conducts customer interviews prior to funding.
- Send the correct number of references. Check your call-back for the number of references requested, as they vary by program level. It is also important to send in a deal as soon as it can be packaged. Drive, like most lenders, has an approval expiration date. After the approval window has closed, the deal process must start again from the beginning.
To Review the Status of Your Deals, Visit:
http://dealer.drivefinancial.com
Contact your Area Sales Manager for your username/password.
Send all Funding Packages to:
Overnight
Drive Financial Services
ECP Program Dept. 2039
284 State Route 72N
Reesville, OH 45166
Regular U.S. Postal Service
Drive Financial Services
Suite 2039
3268 State Route 73
South-Building 12
Wilmington, OH 45177
Call Your Funding Team With Questions
Team 1
800.417.0905
(GA, HI, IA, ID, KY, ME, NC, VA)
Team 2
800.417.0925
(AR, CT, IL, MD, MI, NH, PA, WA, WI)
Team 3
800.417.0929 (ALL STATES)
Team 5
800.417.0933 (TX)
Team 7
800.417.1055
(AK, CA, CO, KS, MA, MO, ND, NE,
NM, NV, OK, SD, TN, WY)
Team 8
866.552.4520
(FL, IN, MN, MS, NY, OH, OR)
Dealers Find Ways to Make Money
By Andrew Brown
When it comes to boosting profits at the dealership, it’s all in the presentation.
“We offer customers a menu of packages, so they can pick and choose whatever they want,” says Alla Tripolsky, finance director at Osborn Automotive. The Lakewood, Colo., dealership starts by enticing car buyers with maintenance products. “If the customer prepays for oil changes, they get a discount. It certainly helps with customer retention,” she says, because customers who return for maintenance establish a relationship with the dealership. 
Last November, the dealership sold 108 cars, 68% of which were tied to maintenance products. “We guarantee ourselves that 74 of those 108 customers will come back,” she says.
“If we can get them in for an oil change, at some point theyhave to change that air filter,” she says. “They’ll have to change those tires.”
SELLING SERVICE
The maintenance offerings often have a trickle-down effect. If a customer has a particularly large bill or needs a new car, the salesperson can educate the customer about the dealership’s financing programs. Plus, the maintenance coverage is financed into the loan and has an added benefit of facilitating warranty sales. “We usually couple the maintenance products with extended service contracts, which help sell the service product,” Tripolsky says.
Osborn Automotive’s integrated sales and service process has paid off: half of the dealership’s business comes from repeat customers and referrals, she says.
ORDERING OFF THE MENU
Saturn of Lancaster uses the menu approach, too. Rather than just quoting a payment, the Lancaster, Pa., dealership relies on its salespeople to present finance and insurance options. “If you have a menu in front of [customers], you can talk them through it,” says John Anastos, the dealership’s F&I manager. “When a customer sees a description of what they get, the process is easier.”
The dealership, which sells about 90 cars per month, utilizes technology provider DealerTrack to create personalized menus for each customer. “You can show four options, you can show three options, multiple terms, and multiple interest rates,” Anastos says. “You can make it exactly what the customer is looking for.”
Since implementing the system in 2005, profits from ancillary sales have shot up 60%, he says.
Meanwhile, Osborn Automotive uses a similar software solution called MenuVantage. “It’s customizable, and it allows us to present 100% of the products to 100% of the customers,” Tripolsky says.
MINDING THE GAP
Among specific products, guaranteed asset protection (GAP) is one of the most profitable for dealers, especially as loan terms lengthen.
“I’m seeing more 72-month as opposed to 60-month loans, so due to that, GAP insurance is becoming more popular,” says Orlando Cadiz, finance manager at Phoenix Motor Co. The longer terms increase chances that cars may be totaled.
“It has a huge value to customers, and it’s a very easy sell,” Anastos says. “It’s not an expensive policy. Selling someone a $400 investment on a $30,000 loan is not too difficult.”
Plus, the longer the loan term, the higher the price for GAP coverage.
Some states restrict the amount that dealers can mark up the GAP coverage they sell, but not Pennsylvania, Anastos says. The average markup could be anywhere from 50% to 100%.
Hook, Sales & Sinker: Selling in tough times
By Geoff Williams
Attracting car buyers has never been more difficult, or more important. This dynamic has placed an increased emphasis on marketing, as dealers try to achieve higher returns on
shrinking budgets.
Regardless of the economic climate, the key to marketing cars remains constant. As Kevin Gallagher, who owns Utah Auto Sales in Lindon, Utah, says, “I call it the BSD factor. You have to give your customers Benefits, you have to have a little bit of Sizzle, and you have to be Different. If you don’t have the BSD factor, you’re not going to attract people.”
Marketing strategies don’t have to be all three things at once, but they better have at least one of these attributes. Some examples:
Look after your current customers
According to OneCommand.com, a marketing firm for auto dealerships, 89 percent of buyers will never return to your parking lot—not even for maintenance. Of those remaining 11 percent, 72 percent will eventually repurchase a car from that same dealership. The message: stay in touch. Whether the economy is up or down, failure to market to your existing customers is a mistake.
Be a resource
To your own customers, absolutely, but even to the general public, if possible. Eight years ago, Gallagher started publishing “The Used Car Buying Guide,” a 30-page magazine with articles and information about beating depreciation. He has printed 10,000 copies over the years, occasionally modifying the text, and he has built relationships with credit unions around the state, offering educational seminars on the premises to the institution’s customers.
Consider newer ways to get out your message
Six months ago, Mike Sage, owner of University City Nissan in Los Angeles, gravitated to Gumiyo, a specialist in automotive mobile marketing. Gumiyo, whose prices ranges from zero to approximately $150 to $200 per month, places a dealership’s inventory, vehicle photos and condition reports on mobile phone screens. Photos on a mobile phone aren’t for every dealership. “If we were another company, aimed at Generation X and Y, I would say that would be a focus that we would need to concentrate on,” says Paul Nogrady, new car sales manager at Porsche of The Main Line in Newtown Square, Penn.
Partner with organizations to attract new customers
Dan Quirk is the owner of eight dealerships in Massachusetts and recently set up a partnership with a nonprofit called Moore Center Services, which helps people with developmental disabilities. Quirk paid for a 1950s-style diner to be built on the premises of his Quirk Chevrolet Buick dealership. Moore Center Services staffs the eatery and keeps the profits.
Remember your community
Gallagher’s dealership has an annual complimentary barbecue that feeds approximately 1,500 people. It’s always a success because he joins forces with a local parade, which has a built-in crowd that is grateful for the food. “People need some benefit when they’re going to do business with you,” says Gallagher. “You’ve got to change with the times and give people something that they want or need.”
As guerrilla marketing guru Orvel Ray Wilson once said, “Customers buy for their reasons, not yours.”
Of course, that’s how it has always been, which should be comforting. The times and technology may be frequently changing, but the actual marketing in many ways doesn’t. “History repeats itself,” says Nogrady of Porsche of the Mainline in Newtown Sq., Pa. “When it comes to marketing a car dealership, you often have to stick to the tried-and-true to bring in customers. It’s how you handle those tried-and-true events, and where you’re spending your money in general — that’s what’s important.”
Take the Long View with CPOV Loans
By Andy Brown
Since their introduction several years ago, many manufacturers have adopted certified pre-owned vehicle (CPOV) programs as a means of boosting customer acquisition and retention. The loans feature lower interest rates than other pre-owned auto loans.
CPOV programs “get people through the door for entry-level cars, because they offer an attractive way to own a pre-owned car that customers might not have been able to afford as new cars,” says Melissa Cape, director of financial services at Leith Audi, in Cary, N.C. “Once they’ve enjoyed driving it for a while, it helps get them through the door for the next one. In two or three years, they’re going to be in a better financial situation. If you treated them well, they’ll be good to you.” She estimates that 45 percent of those who purchase certified pre-owned vehicles upgrade the next time around.
CPOV loans also allow finance and sales departments to coordinate marketing efforts. Manufacturers and dealers can track how much equity customers have and target 
them with special offers timed to their buying cycles. When Audi introduces a new vehicle, for example, dealerships can determine which customers will be more responsive to advertising based on their previous purchases and the status of their current loans, Cape says. The manufacturer and financial services companies will alert dealerships when loans are about to expire and encourage them to contact the owners. In another example, Leith Audi held a party to introduce a new car model. The manufacturers and dealers worked together to create a mailing list that identified potential customers based on their purchasing information.
Furthermore, the service department benefits: Even though CPOV loans offer warranties, customers who buy certified pre-owned cars often bring their vehicles to the dealership for routine maintenance. “CPOV loans tie you into the customer all the way around,” Cape says. “You buy the car and finance it through the dealers, and most of them will service it.”
The approval process is also expedited by favorable conditions for customers. “With certified pre-owned vehicle loans, sometimes you get more carry. For instance, let’s say someone has negative equity — they owe more on their car than it’s worth. On certified cars, you’ll get more approvals in that scenario than you would otherwise,” says Melissa Gautreaux, business manager at Boardwalk Audi, in Plano, Texas.
One disadvantage of CPOV loans is that they can affect short-term profits. Rates are set by the manufacturers and nationally advertised, so customers know what to expect, leaving finance managers with less opportunity to build in a higher margin. “The advantage of CPOV loans to the dealer is that they help move inventory,” says Ryan Meegan, finance manager at The Audi Exchange, in Highland Park, Ill., “but they can potentially affect the profit in a negative way. You can still make money, but for the most part they cap how much you can make.” Certified pre-owned cars typically come with warranties, so dealers find it challenging to sell customers on more protection. “If someone buys a certified car, it is almost impossible to sell them an extended service agreement,” Gautreaux says.
How to make sure your Lenders will be there when you need Them
By Bridget McCrea
The credit crisis is pressuring car dealers on a number of fronts, as they sell into an economic headwind while also facing concerns from customers related to escalating fuel prices. Many lenders, meanwhile, have cut back on their loan programs or tightened conditions for customers to qualify for loans, exacerbating what is already a perilous time for car dealers. It’s a far cry from just a few years ago, when lenders were much more lenient when it came to doling out cash for just about any type of large purchase.
The changes made by lenders have redrawn the map for dealer-lender relationships, forcing dealers to examine their current funding rosters and to send them looking for new sources. Borrowers with less-than-perfect credit have become particularly difficult to finance in recent months, thanks to fallout from the subprime mortgage market meltdown.
Take the auto dealer who, in searching for a lender, was recently told that the lender would only originate loans if the balance was under $8,000. “From the dealer’s perspective, that wasn’t something he could even build a business on,” says Payam Zamani, CEO and chairman of San Ramon, Calif.-based online financing marketplace Reply.com, and founder of Autoweb.com. Zamani expects more dealers to steer clear of subprime deals over the coming months — a trend that could present an opportunity for those dealers with solid, existing relationships with lenders that specialize in the subprime market.
Layoff Uncertainty
At Bill Gray Volvo in Pittsburgh, finance manager Lisa Schaum is concerned about a number of subprime lenders that have laid off thousands of dealer reps — a sign, she says, that fewer deals are being closed. And while her firm does much of its business with Volvo Finance, she says dealers in her area are reporting 25 or more application turndowns per month right now.
“I have people who are making $200,000 to $300,000 a year, and I can’t get them approved,” says Schaum. “Even income doesn’t seem to be able to balance out those credit challenges.” For now, she plans to stick with her current group of lenders, while keeping a close eye on those firms’ willingness and ability to finance deals. “No one has a crystal ball,” says Schaum, “but going forward, I think we’re all going to have to re-evaluate our lenders.”
That means going back to the drawing board and figuring out which lenders will be most likely to approve applications. Jeff Bennett, a former owner of Chevrolet and Toyota dealerships, and currently an assistant professor at Northwood University in Midland, Mich., says dealers need to go beyond the traditional “What is the lender going to do for me?” question, and instead consider what the lender should do for individual applicants.
So whereas approvals appeared to rain down from the heavens in the past, especially when using long-time lender-partners, these days lenders are looking more closely at the individual applicants, rather than the dealers. Mike Sheridan, president and founder of Los Angeles-based auto loan exchange Global Debt Network, says this shift warrants dealers to take a more diverse approach to lender evaluation, and to consider numerous options that can accommodate a wider range of buyers.
When assessing those lenders, Sheridan says dealers should look at how each has reacted in the past during both good and bad times. “Put lenders to the fire a bit,” he says. “Find out how good they are at supporting their customers and/or helping them find other relationships within their own organizations, or at outside entities.”
Lender due Diligence
Dealers must also talk to one another to figure out which lenders are most apt to approve applicants, Sheridan says. “Lenders complete due diligence on the individual dealers,” he says, “and I think dealers need to start doing the same with their lenders.” key points to discuss include the lender’s turndown record, application requirements, record of approving subprime loans, and record for deactivating dealers.
“Deactivation has become a very common practice during the past year, particularly for dealers that aren’t sending enough business to the lender,” says Sheridan. Deactivated dealers should immediately call the financing company to find out the reasons behind the decision, and then work to rectify the situation. If, for example, a lender pulls the plug because it feels a dealer isn’t meeting expected deal levels, then it may be time for the latter to reassess just how important that lender is for the company, and whether the relationship is worth saving.
The Stress Factor
Sheridan says dealers should also look to open lines of communication with lenders and make them two-way streets, despite the fact that they haven’t histori- cally worked that way. “Go back and ask them what’s going on in their business, whether they’re tightening up lending standards and how those changes will affect internal underwriting practices,” says Sheridan. “With financial institutions under a tremendous amount of stress right now, the smart dealers are picking up the phone to find out what’s going on.”
Going forward, expect to see tighter lending practices forcing dealers to continue re-evaluating the financial institutions that their customers do business with. By taking proactive measures when working with new and prospective lenders — and when structuring the deals themselves — Sheridan says dealers can be better prepared to handle any changes that come their way. “This is going to force dealers to react quickly,” he says. “Hopefully the close relationships they have with their lenders will see them through, otherwise it could result in further funding problems.”
How Virtual Inventories can provide a real Advantage
By Peter Plazza
“You can’t take a salesperson from the front of the house and tell them they’re going to now sell cars online,” because the dynamics are so different. – John Foley, President, izmomedia
Dealers know that most customers research their car purchases online before buying. To some that may seem a risk since it adds more competition to the mix. But many dealers use the Web to lure and capture buyers by using virtual inventories.
John Kimel, who heads the Internet sales department at Lewis Motors in South Burlington, Vt., says he’s heard that as many as 95 percent of car buyers check online before they buy a car. Lewis Motors put a virtual inventory on its Web site five years ago, and kimel says it’s been a boon for business. “If you don’t have a good Web site and you’re not showing everything you need to be showing, such as inventory, specials, and your finance rates, you’re just telling people ‘Don’t bother shopping here,’” Kimel says.
Helping Small Dealerships Look Big
At the most basic level, virtual inventories simply show every car that’s available on a dealer’s lot, with automatic nightly updates from the Dealership Management System (DMS) as cars come in or are sold.
But virtual inventories can go further and show all makes and models that are available, with data updated directly from car manufacturers. These expanded inventories create an opportunity for small dealerships to gain customers, says Andy Flint, national sales executive with Tk Carsites, which creates Web sites with virtual inventories for dealerships.
“If somebody is on the Web site looking for a specific vehicle, if you don’t have it, they’re simply going to move on to the next Web site, so you’ve lost a potential client,” he says. By displaying all makes and models, many of which can be ordered, dealerships are not limited to selling whatever is currently on hand.
Virtual inventories help small dealerships compete with large dealerships without having to spend enormous amounts of money, says John Foley, publisher of izmomedia, which also builds virtual inventories and dealer Web sites.
“The first thing you have to do is get the dealer to realize that by creating an online store, he is actually opening up a new dealership. The difference is he doesn’t need land.”
“Hi, I’m Your Web Salesperson”
Foley explains that dealerships need to understand the difference between selling a car online and selling one in a showroom. “You can’t take a salesperson from the front of the house and tell them they’re going to now sell cars online,” because the dynamics are so different, he says. Izmo also offers sales training to help dealerships take advantage of Web-based opportunities.
Mark Heer, general sales manager at Sonnen Porsche in Mill Valley, Calif., says that having a virtual inventory helps sales. Sonnen’s virtual inventory has been active since the dealership opened in 2002.
Virtual inventories are also lead-generation tools. Flint says that individual Web products start at approximately $100 per month, with full packages ranging from several hundred to several thousand dollars monthly, depending on variables such as the number of brands being sold. Getting sites up and running does not require extensive technical know-how; ‘off the shelf’ software can be plugged into the DMS and running in three business days.
Online inventories help dealers generate leads and compete for customers who are researching their purchases online before they buy. “People’s buying habits have changed, and that means our selling habits have to change,” kimel says. Putting a virtual inventory in place can help dealerships make that transition.
What everyone is saying about Drive
Drive provides our dealership with an avenue to make incremental deals that would otherwise be missed through traditional lending programs. With the newest push to capture midrange paper, Drive is once again proving their competitive edge and interest in becoming every dealer’s “relationship lender.” Whether sub-prime or near-prime, Drive representatives are always willing to push hard to make deals.
At Alpine, we rarely miss a deal. That is why having the Drive connection is so important. On average, we make 10 to 15 deals each month with Drive that would have otherwise been missed. While the fees can be substantial, we rarely lose money on these transactions. Instead, we have happy, satisfied customers that spread the word that Alpine can do what other dealers can’t do – get them approved!
With people like Roger Glas, how could Drive fail? From the approval to funding, he is never more than a phone call away! People really do make the difference. Where other representatives are absent, Roger is a hands-on area sales manager. He visits regularly and stays until the problems, whatever they may be, are handled. I truly appreciate such attention to detail. For that, Alpine is proud to be a part of the Drive connection.
Julie Burney /// FINANCE MANAGER
ALPINE PONTIAC BUICK GMC
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The relationship we have with Drive Financial continues to grow as you show great determination to meet the needs of the sub-prime customer market. The diversification in programs to the One, Complete, Solution tiers gives us the opportunity to expand our business together.
The unique qualities you present to our dealership is the flexibility of the buyer to work a deal, the options you give with self-employed, employees and the ability to assist with our credit-challenged customers.
Our dealership experiences fast funding, which is a valuable benefit that we recognize and appreciate! Thank you for providing your service to help us generate new customers.
Paul Sweeny /// BUSINESS MANAGER
TAMPA HONDALAND
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I am excited about the new relationship we have started with Drive Financial. In the first month of working with you, we have funded nine deals!
Drive Financial offers us programs that meet the profile of our customers. I am very impressed with fast approvals and callbacks that we receive within moments of sending the applications. As a resourceful lender, we recognize the impact you are making to our business and customers.
We appreciate your service and relationship with us!
Ray Farhat /// SALES AND FINANCE MANAGER
BOULEVARD AUTO SALES
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Using Drive has been a big advantage for me because I have real people to work with. The system Drive uses is very user-friendly and the buyers and dealer reps are wonderful. I can remember several times a deal where I could not get in touch with my buyer but I was able to reach my rep (Merica) and she was able to get the problem solved immediately. If all the other banks would handle problems as fast and with as much effectiveness as Merica, the world would be a better place. Thanks for always being there when I need you.
Brennan Hammond /// SPECIAL FINANCE MANAGER
CR AIN KIA/CR AIN MAZDA LITTLE ROCK, AR
