Tag: F&I Products

Cancellation Refund for Service Contracts

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:

Recoveries

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.  

How to Save TrueCar

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.

TRUE

 

See You at NADA

I am heading up to Orlando to represent Provider Exchange Network.  PEN will soon have direct integration with ADP Drive, ERA, and POWER – in addition to the dealers already using PEN through MenuVantage.  I have spoken with a number of F&I providers, and all agree this is an exciting prospect for the industry.

To learn more about PEN, please contact me.  Click here for the press release. I will be splitting my time between the Reynolds booth and the ADP booth.  You can also check out a brilliant demonstration of web rating and e-contracting by MenuVantage.

Efficient DSP Integration

I have just published a white paper on DSP integration for F&I providers.  This builds on an observation I made while working at GMAC Insurance last winter.  Rather than struggle with a DMS interface, providers should develop their own web services – and let the various point-of-sale systems come to them.  This is much more efficient, and good SOA practice besides.  Click here to download the paper, or visit the Virag Consulting web site.