Online F&I – Page 11 – Virag Consulting

Trade Valuation and Online F&I

What Dale Pollak says about trade valuation is spot on, and it also applies to upfront pricing. Dale says that having an efficient process is worth more than wringing every last dollar out of every car. Brian Benstock says the same thing about his new-car business, “making less per transaction, but doing more transactions.”

Readers of this blog already know my thoughts on upfront pricing. Trade valuation is another objection to online F&I. How can the customer desk his own deal if he doesn’t know what his trade is worth? Well, the pieces are falling into place. In addition to choosing a car online, the customer will soon be able to do his own F&I. The challenge to us, as innovators, is to present software tools that encourage customer involvement.

Update: Six years later, Brian Benstock is still at it. Read here about his vision for a digital “store without walls.”

Upfront Pricing

AutoNation is going to have another try at no-haggle pricing. This time, I think they will succeed. I think the market is ready for it. By coincidence, I had just read Zag’s white paper when Mike Jackson made the announcement. He was talking about no-haggle in the showroom, but this has important implications for my field, e-commerce.

Zag’s argument is that if you’re the only dealer in town not giving a price on the internet, then you’ll be left behind. The flip side is that if you’re the only dealer who is doing it, then your competitors can easily undercut you. The trick is to create a movement in the industry – and AutoNation has the scale to do that. The article also cites Sonic, Asbury and Lithia.

Mr. Jackson says pricing is the last frontier in auto retail, and this is doubly true on the internet. It’s the one thing preventing true, business-to-consumer, online F&I.

Why e-Contracting Doesn’t Work

In the software business, we often blame the customer for not embracing our latest innovation. This has certainly been the case with e-contracting. We solved a host of technical problems, from data standards to digital signatures, only to discover – dealers won’t use it.

They have some good reasons. Laser forms require multiple copies and multiple signatures. Signature pads cost money and customers don’t trust them. Laser printers are expensive. Inkjet printers are cheap enough, but you need one in each office. Blank paper is $9.00 a ream, compared with contract stock brought in free by agents and field reps. All things considered, the impact printer works just fine.

This reminds me of when we first put credit applications online. Dealers already had the perfect solution. “I go have a smoke while they fill out the app, and then I blast fax five lenders.” How do you compete with that?

We showed that online credit, combined with automatic approval, closed more deals. We showed that the internet was cheaper than the fax, and that the system would share data with your DMS. We also kicked in a $20.00 spiff, as I recall, which we recovered in data entry costs.

Today’s challenge is no different. Dealers are shrewd enough to know that the benefits of automation accrue mainly to the finance sources and the product providers. As innovators, it is our job to show what’s in it for them.