I am in the process of creating an eCommerce department for Safe-Guard. Regular readers know that I specialize in creating new organizations, and my record is pretty good. The training function, which is also a kind of sales function, is likely to grow. So, this is an opportunity to get in early.
The job is to train all of the F&I managers who sell products administered by Safe-Guard, and ensure they know how to present them properly using any of the top ten menu systems. For one person, at least to begin with, this will be a challenge. We are in thousands of dealerships.
Thus, the successful candidate must have the skill and temperament to leverage the resources of our affiliated agents, vendors, manufacturers, and dealer groups. Self-starter. Travel. Proficiency in F&I procedures and software, notably menu systems. Salary commensurate with experience.
I have just wrapped up design work on a web service to cancel and refund F&I product contracts. Whether a refund is owed to the customer, from an early termination, or to the lender as recovered funds, it is in the provider’s interest to support an efficient automated process. On the lender side, it is also a compliance issue.
This job was rewarding for me because it completes the lifecycle I began automating, ten years ago, with electronic rating. MenuVantage was a leader in rating and originating product contracts, and many providers adopted our model specification.
I then did related work at GMAC Insurance, which was to include claims processing. Sadly, the crash of 2008 ended that project. GMAC also had the bright idea to check for an earlier contract, and apply the refund to the results of the rating call.
The industry has been developing web service support piecemeal. First, there was a need for rating and contracting, supported by companies like MenuVantage. Now, there is financial and regulatory pressure to automate terminations, supported by companies like Express Recoveries.
In hindsight, a savvy provider would have looked at the core processes and developed web service support for the whole lifecycle. It would look something like this:
- Dealer and vehicle information ⇒ Return customized rate structure
- Deal information with chosen rate ⇒ Originate contract
- Form request ⇒ Return contract as PDF
- Form with digital signature ⇒ Store in secure archive
- Blank form request ⇒ Return blank form
- Void request ⇒ Void contract, if eligible
- Remittance query ⇒ Return remittance log
- Remittance notify ⇒ Post pending payment
- In-force query ⇒ Return contract data
- Claim diagnosis ⇒ Verify coverage
- Claim estimate ⇒ Approve/deny claim
- Claim entry ⇒ Issue payment
- Vehicle data from contract ⇒ Return cancellation quote
- Contract data plus authorization ⇒ Cancel contract, issue refund
You could do one big API to manage the product from cradle to grave, and build provider portals and such on top of it. This would have the usual benefits of decoupling the back-end from the presentation layer, and it would facilitate integration with dealer and lender software.
The last time you turned in your car, did you remember to get the refund on your service contract? Me neither, and I have been in this business a long time. The only way I know to get the refund is to dig up the paper contract and phone the provider. It’s like the “breakage model” behind rebates and gift cards.
The first time I tried, professionally, to account for the refund was at GMAC Insurance prior to the bankruptcy. I was working on an interface to do rate quotes. Our plan was to detect the existence of a prior GMPP contract, and then apply the refund as a discount to the new contract.
Imagine how many vehicles are traded or repossessed and never see the end of their VSC or GAP contracts. Actually, I don’t have to imagine, because I have statistics from Rich Apicella, who runs Express Recoveries. This is an ingenious business model, leveraging the provider relationships of F&I Express to automate VSC refunds for lenders.
In case of a repossession, the refund from a product contract will reduce the deficiency balance. What was once found money in the recoveries department is now a compliance requirement. It never hurts to review the CFPB Examination Manual. This is from page 42:
This is a great business for F&I Express, because it’s countercyclical. Their main business is originating product contracts and then, when times are bad, they can earn some money cancelling them. It’s also handy as a leading economic indicator.
Disclosure: Intersection Technologies is a client and, although I am not working with Express Recoveries, Rich is just down the hall.
My title is somewhat facetious, but “how to position TrueCar so that it makes dealers less hostile and invites fewer lawsuits” was too long. The Auto News forum is not exactly laden with objectivity. People see the headlines and the share price, and then they crow about TrueCar going out of business.
Complaints or negative publicity about our business practices, our compliance with applicable laws and regulations … could diminish users’ and dealers’ confidence in our products and adversely affect our brand
Investors are more objective, as in Why I’m Buying TrueCar despite the Sell-Off. You can look at the Morningstar rating (undervalued) and the quarterly report. TrueCar is making twice the revenue of Autobytel, and growing faster. Still, there is the hostility. Here are my thoughts:
- Enhance the site to support online buying, as I have described previously.
- Add features like the ability to sell protection products. This feature alone would compensate for foregone gross on the front end.
- The platform should help individual dealers to compete with consolidators. Make it a “community” that includes dealers, affinity groups, and finance sources.
- Prepare for a world of one-price dealers. Look at Scion, for example. The histogram for a Pure Price dealer has only one bar.
- Use out-of-market data, consumer data, and statistical inference to provide a more detailed pricing picture. This feels less like “ratting out” the dealers.
- Make the database a research tool, as Zillow is for homes. TrueCar owns ALG, so they already have the machinery.
- Update the revenue model, to avoid legal classification as a broker. The current model, ironically, becomes less effective as more dealers adopt it.
- Think about pay per lead, or monthly. I can’t share the details, but I understand the AutoNation deal could have been saved.
These measures should allay the hostility that some dealers have toward price transparency, and the TrueCar business model. If all else fails, and litigation persists, there is the “nuclear option.”
I can think of a few ways to end price obfuscation, for good. The practice is obsolete anyway (not to mention unfair and deceptive) and would not survive six months of concerted attack. Of course, that would also damage the TrueCar model, as presently constituted. I recommend doing the strategy alignment first.