f&i and showroom january 2011

-READYChacon Auto’s Gary Chaney and Two Other Dealers Discuss How They’re Navigating the World of Online Reviews

OF FIRST LINE

Learn Why Experts Believe the New Risk-Based Pricing Rule

Could be a Blessing in Disguise

JANUARY 2011 $10.00

SALES DRIVER: 6 NEW SALES TIPS | MAD MARV: SQUISHING THE FLEA | LEGAL: FTC ON THE HUNT

A BOBIT PUBLICATION FI-MAGAZINE.COM

COMEBACKExperian Automotive Says

Auto Finance Surged in 3Q2010 — Even for

Below-Prime Buyers

THE

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2 F&I and Showroom January 2011

January 2011 Volume 14, Number 1

Technology

12 Your Online ReputationWord of mouth has always been the dealer’s best marketing tool, but the Internet age has changed the rules. Find out what dealers are doing to regain control of their reputations.

Auto Finance

16 Doors Open for Below-Prime BuyersIn the third quarter, subprime originations increased for the fi rst time since the credit crisis. Auto fi nance analyst breaks down the results.

Compliance

22 First Line of DefenseKarina Grile worked overtime to get Voss Auto Network’s stores in line with the industry’s newest rule — one that experts say could be a blessing in disguise.

Q&A

26 Getting ResourcefulThe magazine catches up with The Warranty Group’s Michael Frosch to discuss F&I, automotive retailing and the road ahead.

Special Finance

28 Direct Mail Mounts a ComebackMailers were the fi rst line item scratched from many dealers’ advertising budgets during the downturn. Marketing ace says it’s time to add them back.

4 Letters

6 Editorial Page

8 Developments

30 Sales Driver

31 Mad Marv

32 Legal

35 Bottomliners

37 Ad Index

40 Industry Trends

Departments

Features

F&I and Showroom (ISSN 2154-1728) (USPS 018-706) (CDN IPM# 40013413) is published monthly, by Bobit Business Media, 3520 Challenger Street, Torrance, California 905031-1640. Periodicals Postage Paid at Torrance, California 90503-9998 and additional mailing offi ces. POSTMASTER: Send address changes to F&I and Showroom, P.O. Box 1068 Skokie, IL 60076-8068. Please allow six to eight weeks for address changes to take effect. Subscription Prices: United States $20 per year; Canada $35 per year; Foreign: $35 per year. Single copy price: $10; Fact Book: $30. Please allow six to eight weeks to receive your fi rst issue. Bobit Business Media reserves the right to refuse nonqualifi ed subscriptions. Please address editorial and advertising correspondence to the executive offi ces at 3520 Challenger Street, Torrance, California 90503-1640. The contents of this publication may not be reproduced either in whole or in part without the consent of Bobit Business Media. All statements made, although based on information believed to be reliable and accurate, cannot be guaranteed and no fault or liability can be accepted for error or omission.

12

26

28

22

Endorsed as the offi cial publication of the Association of Finance

& Insurance Professionals

Contents

FI0111toc.indd 2FI0111toc.indd 2 12/28/10 8:59:47 AM12/28/10 8:59:47 AM

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FI0111toc.indd 3FI0111toc.indd 3 12/28/10 8:59:54 AM12/28/10 8:59:54 AM

Complying With the RBP RuleTO THE EDITOR: After reading Michael

Benoit’s column (“The Exception Is

the Rule”) in the December issue and

then reading all 200-plus pages of the

Risk-Based Pricing rule, I noticed the

FTC kept saying, “Final rules apply

to any person that uses a consumer

report in connection with …” If I

don’t pull a bureau on a customer, am

I exempted from both types of notic-

es? There are several of us F&I folks

out here that do not pull bureaus. We

merely send the credit application to

our lenders.

Michael WilsonFinance Director

What you have to remember is that pulling a credit report isn’t the trig-ger point for the rule. It’s the act of applying for credit. Now, in a two-party situation like you asked about, your dealership is acting as an agent for the fi nance source that engages in direct auto fi nancing. That means your dealership may be called upon to provide your consumer applicants with a credit score disclosure notice on behalf of the fi nance source. So, you may want to contact your fi nance sources to ask how they will comply with the rules. — Gregory Arroyo

Advertised Price vs. Selling PriceTO MICHAEL BENOIT: I’m a big fan of

your column and was hoping you

could answer a question for me. Most

dealers use a third-party service like

Dealer Specialties or AutoUplink to

pull their used-vehicle inventory and

feed it to the dealership’s Website

and used-car portals like Autotrader.

com, Cars.com and others.

Now, my understanding after read-

ing the FAQ section on the Federal

Trade Commission’s Website is that

the same rules that apply to tradition-

al advertising apply online. So, if a

dealer has a vehicle listed online and

a customer visits the store not know-

ing the price advertised on the Web,

would it be a violation if the customer

pays more than the price advertised

online? I would appreciate any com-

ments you can make.

Eric Damiani

Great question, Eric. The answer is that if you advertise the price (re-gardless of where you advertise it), you cannot sell it for more than the advertised price.

One caveat may be if you limit the amount of time the price is available, e.g., “This price is good through Dec. 2, 2010,” and treat it as a limited time only discounted price. Otherwise, if the advertisement is out there with-out a limit on the timeframe for which the price is good; don’t sell for more than the advertised price.

You’ll never be able to know for sure whether your shopper is aware of the advertised price, so the best practice is to assume he or she is aware. You’ll be happy you did if your customer turns out to be a FTC mystery shopper. — Michael Benoit

F&I Menu for Fleet SalesTO “MAD” MARV ELEAZER: I just read

your November column (“The Slump

Cure”) and the one thing that caught

my eye was what you said about the

menu. I work for an outfi t that’s strict-

ly a commercial dealer, where walk-in

and show-fl oor traffi c is non-existent.

Everything is outbound and we don’t

currently use a menu. Do you have

any menu and best practices recom-

mendations for a gig like mine?

Mike JohnsonCommercial Business Sales and Leasing

Boyer TrucksMinneapolis

Thanks for the note, Mike. I’ll be sending over some menu recommen-dations offl ine. In the meantime, I would suggest you utilize a process wherein the F&I department struc-tures the menu and e-mails it to the fl eet company’s purchasing agent. Then, you can make the presentation over the phone. — Marv Eleazer

Letters


Vice President Group Publisher, Auto Group

Sherb Brown

Publisher, Dealer GroupNational Sales Manager

David Gesualdo727-947-4027

[email protected]

Executive EditorGregory Arroyo

[email protected]

Managing Editor / Art DirectorTariq Kamal

[email protected]

Senior EditorJustina Ly

[email protected]

Great Lakes Sales ManagerRobert Brown Jr.

[email protected]

Sales & Marketing CoordinatorTracey Tremblay

E-Media and Print Production Manager

Brian Peach310-533-2548

[email protected]

Web ManagerSam Kim

[email protected]

Audience Marketing ManagerTony Napoleone

Chairman Edward J. Bobit

President & CEOTy F. Bobit

Chief Financial Offi cerRichard E. Johnson

Business and Editorial Offi ceBobit Business Media3520 Challenger St.Torrance, CA 90503

Phone: 310-533-2400Fax: 310-533-2503

Change Service RequestedReturn Address:

Bobit Business MediaPO Box 2703

Torrance, CA 90509

Subscription Inquiries888-239-2455

[email protected]

Printed in U.S.A.

FI0111letters.indd 4FI0111letters.indd 4 12/28/10 8:58:56 AM12/28/10 8:58:56 AM

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Au


I wrote it last year and I’ll write it

again: the Risk-Based Pricing Rule

(RBPR) represents our chance to

“uphold our job requirement.” I agree

that you shouldn’t be held responsible

for the fi nancial education of your

customers. However, just for a sec-

ond, think about the doors a conver-

sation about credit can open.

Before we get into that, there’s one

thing you need to understand about

this new rule: The Federal Trade

Commission (FTC) and the Federal

Reserve Board (FRB) went out of

their way to make complying with it

as easy as possible. Think about it:

You don’t have to evaluate the rate

your fi nance sources offer your cus-

tomers. Nor do you have to calculate

the impact of your markup on a deal-

by-deal basis. If you did, then I’d un-

derstand why many believed this rule

would be the death of F&I.

But you don’t. In fact, all you have

to do is present a credit score disclo-

sure notice to every one of your cus-

tomers who applies for credit. And

don’t forget about the host of compa-

nies lining up to help you automate

that process, as you’ll see on Page 22

of this issue.

Will it add to your process? Sure,

but let’s try to pull out some positives

here.

Take the dealer exception I just de-

scribed, which the National Automo-

bile Dealers Association lobbied for

on our behalf. Did the FTC and the

FRB have to listen? Did they really

have to consider what goes on inside

the dealership? No, they didn’t.

The agencies also listened when

dealers talked about how they might

not know the credit score their fi -

nance sources pull on their custom-

ers in cases of two-party fi nancing.

That’s why, if you’re handling the

notice on your lender’s behalf, as the

rule allows, you can use the credit

score you pulled, even if it’s differ-

ent from the one your fi nance source

pulled on your customer.

The FTC and the FRB also consid-

ered how you comply with the rule

when it comes to telephone and In-

ternet customers. They’re actually al-

lowing dealers to fi gure out when it is

“reasonably practical after the credit

score has been obtained” to hand the

notice to your customers. For out-

of-store customers, that could mean

mailing the notice or handing it to

the customer when he or she comes

to the dealership to consummate the

transaction — the rule specifi es that

the notice must be handed to the cus-

tomer before that point.

RouteOne recommends handing

the notice to the customer after an

approval decision is communicated

to the consumer; but, again, it’s up

to you to determine when it’s reason-

ably practical.

Now, let’s think about what this

rule is asking you to do — hand ev-

ery customer who applies for credit a

credit score disclosure notice. Yes, the

rule is set up so the customer, armed

with his or her credit information,

can walk out the door without ever

buying a thing. But seriously, how

many of your customers are really go-

ing to seek out better terms? I mean,

the California state vehicle code the

exception is modeled after has been

in effect since January 2006, and I

haven’t heard any complaints.

But let’s think about this notice for

a second. Can you think of a better

way to introduce the F&I process to

your customer than by handing them

this notice? After all, it lets them

know where they stand and that your

F&I guy or gal can arrange for fi -

nancing with one of the major auto

lenders, local banks and credit unions

— maybe even the one they already

belong to. That’s one heck of a cred-

ibility builder, don’t you think?

The new notice is going to be a real-

ity check for some of your customers,

especially for those below-prime cus-

tomers bent on buying a vehicle you

know they can’t get fi nanced on. So,

this notice may be your way to transi-

tion them into a more fi nance-appro-

priate vehicle. It could even represent

a nice segue into why your customer

may need your F&I products.

Hey, you guys are the experts on

the frontlines, so I’m sure you can

fi gure out a couple of ways to use

this rule to your advantage. Heck, I

bet someone will even come up with

a nice cash conversion technique

that utilizes these notices. And that’s

my point. It’s time we start making

these rules work for us, rather than

against us, and the RBPR is a great

place to start.

Customer Education Isn’t a Bad Thing

Letter from the Editor

It might seem like just another regulation targeting dealer-arranged fi nancing, but the editor believes the Risk-Based Pricing Rule might be the kind of icebreaker F&I managers have been seeking all along. By Gregory Arroyo

The notice is going to be a reality check for some of your customers. ... It could

even represent a nice segue into why your customer may

need your F&I products.

FI0111editor.indd 6FI0111editor.indd 6 12/23/10 4:59:52 PM12/23/10 4:59:52 PM

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FI0111editor.indd 7FI0111editor.indd 7 12/23/10 4:59:53 PM12/23/10 4:59:53 PM

A seasonal hike in the rate of

loans 60 days past due dur-

ing the third quarter didn’t

dampen TransUnion’s outlook for

the new year, as the credit reporting

agency says the year-over-year rate

continues to decline.

After a 9.4 percent quarterly in-

crease in the 60-day delinquency

rate, which stood at 0.58 percent in

the third quarter, the Chicago-based

credit agency said it expects the rate

to be at 0.62 percent by the end of

2010. However, TransUnion expects

the rate to fall to an even 0.60 per-

cent by the end of 2011 — a 3.2 per-

cent decline over the course of 2011

and a staggering 30 percent decline

from 2008.

“This trend toward fi scal respon-

sibility is refl ected in year-over-year

results, as auto delinquency rates now

have dropped 28.4 percent since the

third quarter 2009 — the largest de-

cline since the summer of 2001,” said

Peter Turek, a TransUnion executive.

“On a state-level basis, 12 states ex-

perienced a drop in their quarter-to-

quarter delinquency rates, while only

two states showed an increase on a

year-over-year basis.”

Additionally, average U.S. auto

debt for 60-day borrowers fell from

$12,643 to $12,500 between the sec-

ond and third quarters and was “es-

sentially fl at” on a year-over-year ba-

sis; however, auto-loan originations

were up 5 percent.

Toronto-Dominion (TD) Bank

Group and Cerberus Capital

Management announced on

Dec. 21 an agreement under which

Chrysler Financial will be sold to

TD for cash consideration of

approximately $6.3 billion.

TD will take over Chrysler

Financial in the United

States and Canada, as well as

the former captive fi nance com-

pany’s processes, technology and ex-

isting portfolio of retail assets. Fol-

lowing this transaction, the business

— combined with TD’s current plat-

forms in Canada and the U.S. — will

be positioned as a Top 5 bank-owned

auto lender in North America.

The acquisition is expected to close

in the second quarter of TD’s fi scal

2011. Following the completion of the

transaction, Chrysler Financial will

continue to operate as a North

American business headquar-

tered in Toronto. TD offi cials

said they expect to rebrand

Chrysler Financial under the

TD brand by spring 2011.

“It’s the foundation we need

in the U.S.,” TD Chief Executive Ed

Clark said on a conference call. “We

needed franchises to generate assets,

and this is an asset class that has held

up well during the cycle. We can take

this platform and grow it, and grow it

a lot faster than we’re assuming.”

Chrysler ‘Showcase’ Dealership Set to Open in Downtown Los AngelesVISITORS TO THIS YEAR’S L.A. AUTO

Show were treated to the debut of a number of new models and concept vehicles in the cavernous confi nes of the Los Angeles Con-vention Center. A few blocks to the south, another attraction awaited

visitors: a “showcase” dealership that will house all four of Chrysler LLC’s vehicle brands, as well as a Mopar-branded service center and a FIAT franchise.

“The Los Angeles Motor Village goes above and beyond the tradi-tional Chrysler Group dealership,” said Peter Grady, Chrysler Group’s vice president of network develop-ment and fl eet. “Our customers will experience our brands in unique salons that refl ect each brand’s identity and character.”

Situated within sight of the Staples Center and convention center footprint, the dealership also will feature a fi ve-story glass tower topped with three large LED reader boards that will house vehicles from all fi ve brands. The tower faces the busy I-110 freeway, which hosts an average of more than 350,000 cars per day.

The store is the site of a 1920s-era Pierce-Arrow dealership, and its opening will mark Chrysler’s return to downtown L.A. after a 10-year absence. Chrysler offi cials planned to open the dealership this month.

TD Bank Acquires Chrysler Financial

Developments


conti

Am

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C

T

“

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The opening of Chrysler’s Los Angeles Motor Village will mark the Detroit Three automaker’s return to down-town L.A. after a 10-year absence.

The latest fi gures from TransUnion show that more U.S. car buyers are making payments on time and reducing their loan balances.

Sixty-Day Delinquency Rate Up in 3Q, Down for 2010

TD BANK CENTRE PHOTO BY SCOTT PULSIFERTD BANK CENTRE PHOTO BY SCOTT PULSIFER

FI0111develop.indd 8FI0111develop.indd 8 12/28/10 9:12:30 AM12/28/10 9:12:30 AM

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HIGH MILEAGE CONTRACTS


Volvo Adds CPO Maintenance ProgramVOLVO CARS OF NORTH

America LLC has added a new maintenance package to its certifi ed pre-owned warranty pro-gram. “Protection Plus+” offers factory-backed coverage on thousands of components, systems and operations, coverage for defective components for up to six years or 100,000 miles, roadside assistance, transferability between owners and a CARFAX Buyback Guarantee.

Columbus Ups Advance for NIADA CPOsCOLUMBUS FINANCE INC.

will provide an additional 10 percent advance, or up to $1,000, on ve-hicles with the National

Independent Automobile Dealers Association certi-fi ed pre-owned warranty. Customers also will re-ceive a 1 percent discount

on CFI’s program rates. Administered by NAC, NIADA’s CPO program aims to help dealers offer their customers

high-quality pre-owned vehicles, get higher resale value and compete with factory certifi cation programs.

BofA Launches Car-Buying SiteBANK OF AMERICA HAS

rolled out a new online shopping site for new and used vehicles that links prospective buyers to the bank’s certifi ed dealers. The new Web-site, www.bankofameri-ca.com/carbuyingcenter, will provide consumers with an upfront price in writing, which will be honored by the more than 4,000 dealers certi-fi ed by Bank of America. The site was created by Zag, a division of True-Car Inc. and a provider of private-label online and mobile car-buying programs.

THE INAUGURAL CLASS

for the DeVos Graduate School of Management’s Dealership Executive MBA program received their diplomas during Northwood University’s commencement cer-emony on Dec. 11, 2010. Introduced in 2008, the

DEMBA program, which attracted students from a host of dealerships and industry companies, including Manheim, Credit Acceptance, and Ford Motor Credit, is an MBA program designed specifi cally for the auto retail market.

NAC, a service contract sales and administration company, has hired Henry Paoli as the company’s new

national business development manager. He will manage agents in Ohio and Michigan, recruiting new agents and focusing on current client relationships. He previously served as the southeastern U.S. regional sales manager for Warranty Solutions.

In addition, NAC hired Paul Leary as its new national sales manager. Leary, who will also serve as a strategic relationship

manager, will be responsible for working with agents in the western U.S. and building on NAC’s recent expansion initiative. He previously served as the national sales director and business development leader for Warranty Solutions.

JM&A Group, a provider of F&I and service-related products, has promoted Michael Stellmach to vice

president of sales and opera-tions. He will oversee and grow JM&A’s OEM relationships and manage the company’s reinsurance business and in-house training center. Stellmach has more than 20

years of industry experience and began his career at JM&A in 1999 as an F&I specialist. He recently served as division manager for the Georgia and South Carolina markets.

Ford Motor Co. named K.R. Kent, former CFO of Ford Motor Credit Co., to the newly created position of executive director of investor relations. Kent will lead the OEM’s efforts to further strengthen the investor relations function. He will report to Ford Vice President and Treasurer Neil Schloss. Replacing Kent is Michael Seneski, former controller of global and U.S. marketing and sales. He will report to Mike Bannister, chairman and CEO of Ford Credit.

Developments


Northwood Graduates First Dealer MBA Class

Moves and Hires


© 2010 Associates Underwriting Limited L.L.C.

Helping dealers carry home bigger profits for 20 years.Give us a call or visit us online and we’ll share our story of industry leadership, and more importantly, our passion for relentless customer service.

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Technology

When it comes to

online reviews,

the stories being

told may not tell

the entire story.

Just ask the owners of Chacon

(pronounced “CHAY-con”) Autos, a

Dallas-based dealer group that lays

claim to six used-vehicle locations

and two Suzuki franchises in Texas.

Gary Chaney, the group’s CEO,

says customer satisfaction has al-

ways been the name of the game for

the 60-year-old operation, and it has

the awards to back it up. The dealer

group earned Suzuki’s President’s

Club Award in 2006 and 2007 for

sales and service. The dealership

also has been recognized by Baylor

University and the Texas Historical

Commission for its business success.

It even made Inc. magazine’s list of

the nation’s 5,000 fastest-growing

private companies.

“We like customer service,” Chaney

says. “We even try to keep the same

employees at each location, so when

customers come in they see the same

faces all the time.”

The problem is, that’s not the story

being told online.

A quick Google search reveals that

the dealer group received an aver-

age of two out of fi ve stars from 15

reviews. Customers either loved or

hated Chacon Autos.

Chaney says the reviews are the

byproduct of working in special fi -

nance, a market the dealer group was

founded on in 1950. Chaney points

out that many of the less favorable

reviews come from disgruntled cus-

tomers upset about their vehicle be-

ing repossessed. He understands their

frustration, but says the reviews don’t

tell the full story — especially con-

sidering the fact that nearly a third

of the dealership’s sales come from

repeat customers.

“I’ve never had a lot of confi dence

in those [ratings], because I know our

customers like us,” he says. “Thirty

percent of our business is repeat cus-

tomers. That’s what our business is

built on.”

Still, in today’s Internet age, Chaney

knows his organization needs to get

out in front of this new word-of-mouth

medium. That’s what Chaney’s daugh-

ter, Stefani Musick, the dealer group’s

controller, is now attempting to do. She

recently established accounts on Face-

book, Twitter and LinkedIn for Cha-

con Autos and says her goal is to use

those platforms to market the dealer

group, tout its vast inventory and dis-

tinguish it from the competition.

“Right now we’re using social me-

dia to market ourselves, to get some

followers,” Musick says. “I guess

we’re still in the infancy stage, but,

ultimately, it would be great to get

some customer feedback.”

New Media, New Management ToolsReputation management is not a new

concept to the industry. Manufactur-

ers frequently track what consum-

ers think of their vehicles and their

franchised dealerships. Dealers also

conduct their own surveys to learn

more about the experience they of-

fer consumers. The difference now

is that consumers can broadcast what

they think via blogs, social network-

ing sites like Facebook and Twitter

and, in some cases, the dealership’s

own Website.

“Consumers have always talked

about their experiences with brands

and products,” says Jared Hamilton,

founder of DrivingSales.com, a ven-

dor rating Website. “Now, with the

Internet, it’s in a public setting,”

More consumers are turning to

Your Online

Word of mouth has always been the dealer’s best marketing tool, but the Internet age has changed

the rules. Find out what dealers are doing to regain control of their reputations. By Justina Ly

PHOTO BY DAVID JOHNSTON

FI0111csi.indd 12FI0111csi.indd 12 12/28/10 9:12:57 AM12/28/10 9:12:57 AM

that public setting as part of the car-

shopping process. According to a re-

cent J.D. Power and Associates study,

about eight out of 10 new-vehicle

buyers who turn to the Web visit at

least one third-party site. One of the

most popular sites for doing just that

is Edmunds.com, which features cus-

tomer ratings and reviews of dealer-

ship sales and service departments.

A recent report by Cambridge,

Mass.-based Forrester Research also

points to the impact rating sites are

having on consumers. According to

the study, 49 percent of male Internet

users and 42 percent of female users

consult ratings and reviews at least

once a month. In contrast, 23 percent

of males and 17 percent of females

post ratings and reviews regularly.

The study also found that, while

consumers are not heavily infl uenced

by peer reviews, they still read them

before making a major purchase.

“People tend to seek out reviews when

they are about to purchase a big-ticket

item and they are reading the reviews

to make themselves feel more com-

fortable with spending that money —

like they have done their homework,”

Forrester’s Reineke Reitsma wrote

in a recent blog. “But, in the end, it’s

their own judgment they rely on.”

DrivingSales.com’s Hamilton says

customer ratings and reviews in to-

day’s social media world come in two

formats: structured and unstructured.

Structured reviews can be found on

Websites such as DealerRater.com, a

car dealer review site featuring more

than 30,000 U.S. and international

dealers. In these reviews, customers

grade dealerships based on customer

service, quality of work, friendliness,

price and overall experience.

It’s the unstructured reviews — in

which customers discuss their experi-

ence at a dealership with friends on

social networking sites like Facebook

— that Hamilton says dealers need

to pay attention to. “You need to be

cognizant of how people are talking

about you, even if they are not fi lling

out a form,” he says.

Some dealerships, like Chacon,

choose to manage their online reviews

in house, while others have turned to

third-party vendors. Hamilton offers

a bit of caution to dealers who have

opted to outsource their online efforts.

“Social media didn’t exist at this scale

three years ago,” he says. “These so-

lutions are just being invented.”

ADP Dealer Services and Reyn-

olds and Reynolds both offer online

reputation management solutions.

Aside from monitoring social media

sites, both companies’ solutions in-

clude consultation services that teach

January 2011 F&I and Showroom 13

e ReputationConfi dent in Chacon Autos’ long-standing tradition of stellar customer service, CEO Gary Chaney is willing to absorb the occasional negative review in the interest of serving Dallas’ special fi nance market.


dealers how to handle negative com-

mentary. They even offer recommen-

dations for attracting positive brand

awareness among consumers.

Another company offering similar

services is Riverside, Calif.-based

eXteresAUTO. It offers a solution

that aggregates reviews and com-

plaints, tracks social media sites and

sorts reviews based on keywords. The

company’s trainers then go one step

further, helping dealers organize the

reviews and use customizable e-mail

templates to send responses. Like

anything that goes on at the dealer-

ship, Merla Turner, director of dealer

training for eXteresAUTO, says suc-

cess with services like hers needs to

start from the top.

“We know we’re dead in the water if

we don’t get the owner or GM buying

in,” she says. “It really does require a

culture change at the dealership.”

Finding the Right VendorWhen it comes to selecting an online

reputation management company,

DrivingSales.com’s Hamilton says

dealers should be wary of companies

offering to “improve” or “fi x” their

dealership’s reputation. They may not

be able to deliver on that promise or,

even worse, may provide unexpected

and unwanted results.

BMW of San Antonio learned

that lesson the hard way. The store

was caught with fake online reviews

after an investigation by San An-

tonio’s ABC News affi liate, KSAT

12, revealed they came from a paid

service. When reporters contacted

the dealership’s general manager,

John Bruns, he confi rmed that the

dealership hired a company called

Review Boost to contact custom-

ers and generate actual reviews. He

said the dealership also questioned

the authenticity of the reviews after

viewing them online, and had since

canceled the service.

However, Hamilton says instances

like that will do little to curb the on-

line marketing race. “People are so-

cial beings. Whether they talk face

to face or online … they’ll always be

talking about the industry,” he says.

Three years ago, Randy Powell

was tasked with creating a positive

conversation about his dealership.

Powell is the general manager of

RBM Atlanta-North, a Mercedes-

Benz dealership in Alpharetta, Ga.,

22 miles north of Atlanta.

The dealership opened in late 2007

— at the start of the recession — and

faced an undeveloped market and

stiff competition from other local

high-line stores. “The fi rst year we

opened was a challenge,” he recalls.

“[We had] no client base. We knew

we needed a strong online presence.”

After a few false starts, the deal-

ership partnered with eXteresAuto.

Powell says he made it clear to the

company that he wanted authentic

and genuine survey results, not just

perfect fi ves across the board. He

adds that he now has a fi rm grasp of

how to handle negative comments.

“We generally don’t try to rebut it,

because it gives the comment a lot of

prominence,” he says. “We also will

adjust our templates to surround it with

love and a lot of good reviews to make

sure it’s not the most prominent.”

So far, the approach has led to

some positive results. “We have the

most reviews and better placement

than other stores,” says Powell, who

adds that the dealership has managed

to capture 20 percent of Alpharetta’s

new-vehicle market and 35 percent of

its used-vehicle market. Powell now

has his sights set on fi xed operations

and is employing eXteresAuto’s tools

to create e-mail campaigns he hopes

will boost business for RBM’s ser-

vice department.

George Grubbs III, executive man-

ager of Grubbs Infi niti in Euless,

Texas, managed his dealership’s on-

line reviews before he outsourced the

work to a third-party company. It was

hard work: At the end of each month,

he would compile a list of customers

who returned favorable manufacturer

surveys and contact them by e-mail.

He would include hyperlinks to sev-

eral highly traffi cked Websites and

ask the customers to post a review.

“I did this for a year, and the result

was very few [customers] taking me

up on my request,” he says. “Instead,

we got almost no good reviews and

most bad [reviews were] from upset

customers wanting to rant. There was

no balance.”

After doing some research, Grubbs

turned to Advantix Marketing, a Dal-

las-based Web marketing company.

“They take the same list I compile

at the end of the month and call the

customers to get permission to post a

review on their behalf using their ini-

tials,” he says. “Only those customers

they make contact with and get per-

mission from get reviews posted. … It

really is a clean process, one we could

do in house if we had the manpower.”

Providing great car-buying expe-

riences has always been part of the

game plan for Powell and Grubbs;

they just needed to make a little in-

vestment to make sure the experience

they offered was refl ected online.

“Two, three or fi ve years ago, [com-

plaints were] handled behind closed

doors. … Now, in 30 seconds fl at,

your customer can write a review and

air your dirty laundry,” says eXtere-

sAUTO’s Turner. “It’s time for deal-

ers to really embrace a new way of

doing business and a transparency

they haven’t done before.”


Technology

After a year of soliciting customers to post favorable reviews online,

George Grubbs Infi niti’s George Grubbs III turned to a third-party

marketing company.

PHOTO COURTESY GRUBBS INFINITI


CarMor® is the product marketing name used by Allstate Dealer Services. Allstate Dealer Services is a marketing name for Pablo Creek Services, Inc., E.R.J. Insurance Group, Inc. (d/b/a

American Heritage Insurance Services), the dealer services division of American Heritage Life Insurance Company (Home Office: Jacksonville, FL), Northbrook Indemnity Company,

(Home Office: Northbrook, IL) and First Colonial Insurance Company (Home Office: Jacksonville, FL); each of these entities is a part of the Allstate family of companies.

©2010 Allstate Insurance Company allstate.com

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*Allstate Dealer Services does not guarantee dealer overall profitability


Doors Open for BelIn the third quarter, subprime

originations increased for the fi rst time since the credit crisis. F&I’s auto fi nance

analyst breaks down the results. By Melinda Zabritski

The auto fi nance market continued to thaw in the

third quarter, particularly for the below-prime

credit segments. Consumers deserve much of

the credit, because more on-time payments

have led to declines in repossessions, charge-

off and delinquency rates.

For the quarter ending in September, subprime origina-

tions grew by 8 percent, marking the fi rst increase for the

high-risk credit segment since 2007. Even terms are be-

ginning to stretch out again for the below-prime tiers, with

the deep subprime category claiming the longest average

term for new-vehicle fi nancing and the largest increase in

term for used fi nancing during the quarter.

Repossessions fell by 5 percent during the period, while

the average charge-off amount dropped by $2,252. The

most promising sign was the drop in the percentage of auto

loans 30 days past due, which fell below the 3 percent mark

for the fi rst time since 2007. Additionally, the total balance

of 30-day delinquent loans dropped by $4.5 billion.

The following analysis will provide a more detailed pic-

ture of how far the auto fi nance market has come since

the credit crisis took hold two years ago and a snapshot of

consumer activity in the third quarter.

Risk Distribution Still Geared Toward Prime The overall risk distribution between the credit tiers has

remained stable over the last several years, with more

loans falling into the low-risk prime and superprime seg-

ments. However, outstanding dollar balances during the

quarter were down $38 billion from the year-ago period,

with banks and captive lenders experiencing the largest de-

creases — $15 billion and $13 billion, respectively. Credit

unions and fi nance com-

panies decreased their

outstanding balances by

$6 billion and $4 billion,

respectively.

On a quarterly basis,

the percentage of con-

sumers who fell into the

combined low-risk tiers,

prime and superprime,

increased by 0.2 per-

cent, inching up from

62.6 percent of all open

automotive loans to

62.8 percent in the third

quarter. Compared to

the year-ago quarter, the

outstanding balance for

both low-risk categories

increased by 3.12 per-

cent and 3.05 percent,

respectively.

The percentage of open

automotive loans falling

into the deep subprime

category experienced a

slight quarter-over-quar-

ter drop, declining from

13.3 percent of all open

auto loans in the second

quarter to 12.9 percent in

the third. The decrease

was more signifi cant on

a year-over-year basis,

with the percentage of

open automotive loans in

the highest risk tier fall-

ing by 14.27 percent. Subprime stayed fl at at 8.8 percent

on a quarterly basis, but its percentage inched up by .02

percent from the year-ago quarter. Nonprime grew slightly

from 15.3 percent to 15.5 percent. On a year-over-year ba-

sis, the credit tier’s percentage of open automotive loans

increased by 1.67 percent.

60-Day Delinquencies Continue to FallFor the second consecutive quarter, year-over-year delin-

quency rates decreased as consumers continued to do a

better job of repaying their loans. Sixty-day delinquencies

fell 17.4 percent from the third quarter 2009 to 0.77 per-

cent. The total dollar balance of 60-day delinquent loans


Auto Finance

Risk Distribution of Open Loans 3Q2010

Deep subprime (<550)12.9%

Subprime (550-619) 8.8%

Nonprime (620-679)15.5%

Superprime (740+)24.6%

Prime (680-739)38.2%

ILLUSTRATION ©ISTOCKPHOTO.COM / PALTO

FI0111experian.indd 16FI0111experian.indd 16 12/23/10 5:16:13 PM12/23/10 5:16:13 PM

elow-Prime Buyersfell by 32.1 percent, or

$1.9 billion, to $4.077

billion.

More importantly,

the decrease in 60-day

delinquent loans was

realized by all lending

sources, with banks and

captives leading the way.

On a year-over-year ba-

sis, banks experienced a

22.74 percent decrease.

Credit unions realized a

16.32 percent decrease,

while credit unions, cap-

tives and fi nance com-

panies touted decreases

of 16.31 percent, 19.99

percent and 12.20 per-

cent, respectively.

Finance companies

held the highest bal-

ance in 60-day delin-

quent loans at $1.4 bil-

lion, which was down

$388 million from the

year-ago quarter. Credit

unions touted a 60-day

delinquent balance of

$509 million, $169 mil-

lion less than the third

quarter 2009. Banks

experienced the largest

drop in the balance of

60-day delinquent loans,

which fell $833 million

from the year-ago quar-

ter. Captives realized a decrease of $539 million.

Credit Scores Remain ElevatedAlthough credit scores during the third quarter registered

a slight decrease for both new and used vehicles compared

to the year-ago quarter, they remain elevated from what

was seen before the third quarter 2008 — the last quarter

before the credit crisis took hold.

Average scores on new-vehicle loans fell six points on

a year-over-year basis to 769 — still seven points higher

than the 762 score seen on new-vehicle loans originated

in the third quarter 2008. Credit scores for used fi nancing

fell one point to 683 on a year-over-year basis, which was

still 13 points higher than the average score registered in

the third quarter 2008.

The still-elevated levels in credit scores means the auto

fi nance market remains restrictive, with about 63 percent

of loans originated during the third quarter going to con-

sumers with prime credit. Still, the 4.1 percent drop in

prime originations and the 8 percent increase in subprime

originations is a clear signal that the market continues to

settle into pre-credit crisis patterns.

Lenders Softening Stance on RiskAccess to credit has been one of the biggest challenges

for dealers attempting to secure fi nancing for their credit-

challenged customers. The situation improved slightly in

the third quarter, with the share of new vehicles fi nanced

to nonprime, subprime and deep subprime customers in-

creasing by 12.7 percent.

Although new-vehicle loans made to customers with

prime and superprime credit during the quarter accounted

for 80.94 percent of all new-vehicle loans, the nonprime,

subprime and deep subprime tiers all registered market

share gains. The share of loans to nonprime customers

rose from 9.79 percent to 10.86 percent, while the share

of loans made to subprime customers increased from 5.66

percent to 6.61 percent. Deep subprime’s share increased

from 1.46 percent to 1.59 percent.

On the used side, 51.98 percent of loans went to custom-


2.0%

1.5%

1.0%

0.5%

0

0.87%

0.67%

Bank

0.74%

0.59%

Captive

3Q2009 3Q2010

0.48%0.40%

Credit union

2.30%

2.02%

Finance/other

60-Day Delinquency Rate

Average Credit Scores by Vehicle Type

800

760

720

680

640

600

769

683

3Q2010

775

694

3Q2009

New financing Used financing


FI0111wellsfargo.indd 1 12/7/10 1:07:58 PM


ers with superprime or prime credit in the third quarter.

The share of used-vehicle loans made to customers with

below-prime credit scores rose by 2.69 percent to 48.02

percent. Loans made to nonprime and subprime custom-

ers grew by 6.2 percent and 10 percent, respectively, while

deep subprime fell by 5.5 percent.

Average Amount Financed RisesThe $2,530 year-over-year jump in the average amount fi -

nanced seems unaccountable until one considers the effect

of Cash for Clunkers. The rebate program had a dramatic

impact on how much lenders were willing to fi nance in the

third quarter 2009. The market conditions during the year-

ago quarter must also be taken into account when consid-

ering the $977 increase in used fi nancing.

Looking at third quarter data from two years ago, the

average amount fi nanced registered at around $24,000, an

approximate $1,200 difference from the average allow-

ance in the third quarter 2010. On the used side, the aver-

age amount fi nanced in the third quarter 2008 stood at

$15,983, a $723 difference from the third quarter 2010.

Looking at year-over-year data, the greatest amount

fi nanced among new vehicles was for the prime risk tier

($26,579), while the nonprime risk segment realized the

greatest year-over-year increase of $2,830.

The average amount fi nanced for used vehicles increased

across all risk segments, with the prime tier experiencing the

greatest year-over-year increase ($1,130). The superprime

risk tier claimed the highest amount fi nanced, resulting in

an average amount fi nanced of $18,044 per vehicle.

Rates Dip Across the BoardAnother positive sign for car shoppers during the third

quarter was the year-over-year drop in interest rates, which

fell 79 basis points for new and 34 basis points for used.

The only rate increase was seen in used fi nancing’s two

highest risk tiers.

Looking at new-vehicle fi nancing, superprime custom-

ers benefi ted from the lowest interest rate of 3.94 percent,

a decrease from the 4.8 percent rate offered in the year-ago

quarter. Even the deep subprime category realized a year-

over-year decrease in interest rates, which dropped from

14.02 percent in the year-ago quarter to 13.54 percent.

On the used side, rates for deep subprime and subprime

increased 156 basis points to 17.81 percent and 45 basis

points to 14.71 percent, respectively. Rates for nonprime

registered at 10.18 percent, a decrease of 48 basis points.

The average rate for prime and superprime stood at 7.44

percent and 5.49 percent, a decrease of 89 and 105 basis

points, respectively.

Market Healing Despite RestrictionsThe automotive fi nance market showed a marked improve-

ment in the third quarter, as a higher percentage of loans

were written for credit-challenged customers. Interest

rates were down and delinquencies continued to fall, all of

which point to a much healthier lending environment.

Despite the positive signs, the automotive fi nance indus-

try remains restrictive compared to 2007 and 2008, when

loans were much more readily available for customers in

all risk tiers. However, the pendulum seems to be swinging

back toward a more robust lending environment.

Melinda Zabritski serves as director of automotive credit for Experian Automotive. E-mail here at [email protected].

Auto Finance

Deepsubprime

Subprime Nonprime Prime Superprime

14.0%13.5%

11.4%10.5%

8.2%6.9% 6.2%

5.2% 4.8%3.9%

16%

14%

12%

10%

8%

6%

4%

2%

0

3Q2009 3Q2010

Average Rate for New-Vehicle Financing

$15,729$16,706

Used financing

$22,743$25,723

New financing

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

0

Average Amount Financed 3Q2010

3Q2009 3Q2010

New vehicles Used vehicles

100%

80%

60%

40%

20%

0

Financing by Vehicle Type 3Q2010

1.59%6.61%

10.86%

13.80%

67.14%

17.62%

15.61%

14.79%

13.65%

38.33%

Despite the positive signs, the automotive fi nance industry remains restrictive

compared to 2007 and 2008. However, the pendulum seems to be swinging back

toward a more robust lending environment.


1Commercial banking products and services are offered through Wachovia Bank, a division of Wells Fargo Bank, N.A. and/or Wells Fargo Bank, N.A. Member FDIC and Equal Credit Opportunity Lender. 2Vehicle service contracts offered through Warranty Solutions® a member of the Wells Fargo family of companies. Wells Fargo Dealer Services, Inc. is a subsidiary of Wells Fargo Bank, N.A. © 2010 Wells Fargo Bank, N.A. All rights reserved. 2010680-001 10/10

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Compliance might create

industries, but it’s also

responsible for what is

and what will continue

to be a critical post in-

side the dealership: the compliance

manager. Such is the case with Kar-

ina Grile, who has held that title for

much of her 19-year career with the

nine-store, Dayton, Ohio-based Voss

Auto Network.

Grile assumed her post 15 years

ago, shortly after her organization

hired a new CFO. He made it abun-

dantly clear that, under his watch,

deals would be turned away if they

weren’t done right. It was Grile who

stepped in to fi gure out what “right”

was, and she continues in that role to

this day.

“I guess I kind of fell into this,”

says Grile, who was serving as the

assistant to the fi nance director when

she assumed her current position. “I

guess if it wasn’t for the CFO and my

dealer, I wouldn’t have a job.”

Leading the ChargeGrile has since grown into her po-

sition. She leads the dealership’s

new-hire training, stays in constant

contact with her state dealer associa-

tion for any regulatory updates and

tackles any issues or questions that

come up about her compliance pro-

cedures. In fact, she’s fi elding ques-

tions daily from her F&I managers

about the dealership’s Red Flags

Rule (RFR) procedures, which she

established shortly before the Federal

Trade Commission (FTC) delayed its

enforcement of the rule for the fi fth

time back in May 2009. The enforce-

ment moratorium was expected to be

lifted on Dec. 31.

“I get [Red Flags Rule] calls daily

with questions like, ‘This is what I

have, what should I do?’ That’s when

we start looking at DealerTrack,”

she says. “The process itself takes

maybe fi ve minutes, but it was yet

another step in all the paperwork we

have to do.”

The group’s RFR protocol has yet

to nab any would-be ID thieves, but

Grile says she’s had to turn away

one or two deals because customers

couldn’t provide the required verifi -

cation. Because of the way the RFR

played out, the compliance manager

admits to taking a wait-and-see ap-

proach to the new Risk-Based Pricing

Rule (RBPR), which was expected to

take effect on Jan. 1. In December,

she found herself racing to get her

group’s procedures in place, signing

up for whatever Webinar she could

fi nd for guidance. “It’s defi nitely

been a thought this entire year, but

I knew it would snowball toward the

end of the year,” she says, adding that

she’ll once again turn to DealerTrack

for a solution.

Lining Up for BattleGrile says she was a little nervous

when she fi rst caught wind of the

new rule through the Ohio Automo-

bile Dealers Association (OADA),

but was relieved when she found out

about the dealer exception. The rule

— mandated by the Fair and Accu-

rate Credit Transaction Act of 2003

— requires creditors, including deal-

ers, to provide a specifi c notice to

applicants who, based on their credit

report, receive credit terms less fa-

vorable than those granted to other

consumers. Not factoring in penal-

ties at the state level, noncompliance

with the rule can lead to fi nes of up to

$16,000 per violation.

If not for the work of the National

Automobile Dealers Association

(NADA) in securing an exception,

dealers would have been forced to

evaluate the rate their fi nance sourc-

es offer on a deal-by-deal basis. That

work would include determining the

impact of their markup on that rate,

then executing a disclosure based

on those fi ndings. With the exemp-

tion, dealers are merely obligated to

hand every customer who applies for

fi nancing a credit score disclosure

notice, which, among other things,

must contain a written description

or graphic representation of how

the applicant’s credit standing ranks

against other consumers in the same

scoring pool.

Manas Mohapatra, who serves in

the FTC’s Division of Privacy and

Identity Protection, says dealers can

thank the advent of risk-based pricing

— a practice where lenders set or ad-

just the price and other terms of credit

provided to a customer based on his or

her credit worthiness — for the rule.

“With the adverse action require-

ment, people are told information in


Compliance

Karina Grile worked overtime to get Voss

Auto Network’s stores in line with the industry’s

newest rule — one that experts say could be a

blessing in disguise. By Gregory Arroyo

First Lineof

FI0111comply.indd 22FI0111comply.indd 22 12/23/10 4:59:20 PM12/23/10 4:59:20 PM

their credit report probably caused

their denial of credit,” Mohapatra

says, “However, what had been occur-

ring was that people were not being

denied credit, but were getting much

worse material terms and weren’t be-

ing informed of that fact. This rule is

supposed to fi ll that gap.”

Although the rule is intended to

help consumers make an informed

credit decision, it’s also intended to

help them spot errors in their credit

report. That’s why the rule is very

specifi c about when the notices must

be issued, requiring that the notice be

handed to consumers as soon as “rea-

sonably practical” after the dealer-

ship pulls the credit report and before

consummation of the deal.

“This is a consumer education rule,

so the idea is to try and get that infor-

mation to the consumer at a mean-

ingful time,” Mohapatra adds.

Back in the TrenchesGrile isn’t so sure reality will match

the FTC’s expectations. She says it’s

clear consumers are more aware of

their credit standing these days, esti-

mating that about 75 percent of her

customers know exactly where they

stand. However, she doubts the notic-

es will result in consumers shopping

for better credit terms.

“Given what happened to our econ-

omy, I certainly think the average

consumer needs to be educated,” she

says. “But making dealerships respon-

sible for that? I just don’t know that it’s

going to serve the intended purpose.”

The ones really benefi ting from the

rule, Grile says, are the credit reporting

agencies. Because the rule encourages

customers to shop for better terms,

the cost for pulling a bureau (usually

between $2.50 and $4) could soon be

walking out the door with each deal.

“Once you add in OFAC and Red

Flags checks,” Grile points out, “that

cost can jump up a little bit.”

The rule will cause a major proce-

dural change at Grile’s dealerships.

Her salespeople don’t touch credit

reports — a procedure she put in

place because she felt it was a con-

fl ict of interest for them to have ac-

cess to credit reports. With the rule’s

timing requirement, that may need

to change.

Forming a Battle PlanWhere in the sales and F&I process

the credit score disclosure notice is

issued will depend on the dealer-

ship’s policy, which will also need

to factor in Internet sales. Whatever

a dealer comes up with, RouteOne’s

Dan Doman, vice president and gen-

eral counsel, said dealers need to

consider how the rule could open the

door to a more constructive conversa-

tion with nonprime customers.

“It’s going to be a reality check for

some customers,” Doman says. “And

it doesn’t take a real inventive individ-

ual to say, ‘Mr. Customer, you fall at

the 45 range. I can help you out. I’ve

sent your application to four fi nance

sources and here are the rates I got

back. Let’s see if we can’t do better.”

For that reason, Doman sees the


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new requirement as one that dealers

should welcome.

“I think this is one of those rare fed-

eral rules that serves the intended pur-

pose of the legislature and would be a

helpful tool to the industry,” he says.

RouteOne began digesting the

rule last February before engaging

its lender and dealer customers in

June and July. By mid-November,

the company began staging educa-

tional Webinars, the last of which

was held Dec. 21. The company then

joined fi ve other providers — includ-

ing CoreLogic Credco, DealerTrack,

Reynolds and Reynolds, and Wolt-

ers Kluwer — in releasing a solution

aimed at automating the dealer ex-

ception process.

RouteOne is offering its solution

as a complimentary tool within its

credit application management sys-

tem. DealerTrack is offering its solu-

tion for free to all dealerships on its

credit application network. Reynolds


Compliance Automating ComplianceTHE FTC WAS PRETTY SPECIFIC ABOUT what it expects from dealers opting for the dealer exception when com-plying with the Risk-Based Pricing Rule. In fact, the FTC’s 200-page rule summary includes model forms deal-ers can easily adapt to comply with the exception requirement — just as long as they are able to deliver the required content. The key ele-ment is the ability to show potential buyers how they stack up against other consumers in the same scoring pool, but there are 12 additional items that need to appear in these notices. That’s why software provid-ers are offering solutions to help automate that process. Here are fi ve companies that are doing just that:

CoreLogic Credco: The company provides an exception report free of charge with each Credco credit report ordered. The report includes

model forms prescribed in the 200-page rule summary published by the Federal Reserve Board and the FTC.

DealerTrack: The DealerTrack Performance Suite offers a RBP Rule compliance tool for free to all dealerships on the DealerTrack credit application network. Deal-ers will be able to print credit score disclosure notices prefi lled with all the required information, as well as exception notices on their lender’s behalf for two-party fi nancing. In addition, dealers subscribed to the DealerTrack Compliance Solu-tion will be able to electronically store and view status reports on all exception notices generated by the


and Credco are offering notices with

each credit bureau inquiry report,

while Wolters Kluwer is making its

tool available to dealers using its Ap-

pOne credit platform.

Each solution allows dealers to

print exception notices prefi lled with

all of the mandated information.

In the case of two-party fi nancing,

most solutions will allow dealers

to provide exception notices on the

lender’s behalf.

Although she was racing against

the clock, Grile has no doubt her deal-

ership will be in compliance with the

rule some said would bring the F&I

process to its knees. But the work of

a compliance manager is never done,

especially as the industry heads into

a new period of rulemaking with the

Consumer Finance Protection Bureau

looming large. In fact, the bureau will

oversee any further rulemaking with

regard to the RBP Rule.

“We’ll roll out [our RBP Rule pro-

cesses] regardless of whether they put

the brakes on it, because it’s the right

thing to do and because it’s inevita-

ble,” Grile says. “As for what lies

ahead, there’s so much unknown. I

know we were carved out of the bu-

reau, but there’s language in there

about third-party paper, and every

dealer in Ohio does third-party pa-

per. I also know they were picking on

dealers located near military bases,

and we have one right here in Dayton.

I guess we’ll just have to wait and see

what they’re going after.”


dealership through the solution’s dashboard and audit tools.

Reynolds and Reynolds: Reynolds is offering exception notices with each credit bureau inquiry report a dealership pulls. The notice will contain all of the text and contents prescribed by the regulation.

RouteOne: The company is offering a complimentary Risk-Based Pricing Notice tool within its credit appli-cation management system. The company also offers a two-party fi nancing option whenever a dealer is issuing the exception notice on the lender’s behalf.

Wolters Kluwer Financial Services: Wolters Kluwer is offering the required credit score disclosure notice for dealers utilizing its AppOne credit platform.

“I think this is one of those rare federal rules that serves the intended purpose of the legislature and would be a

helpful tool to the industry.”

— Dan Doman, RouteOne


It’s the largest single-source

provider of underwriting and

administration of service con-

tracts and extended warranties,

touting a global footprint that

extends into a variety of consumer

goods, from autos and electron-

ics to major home appliances and

travel. But as complex as The War-

ranty Group has become, it remains

true to its principles, says

Michael Frosch, the com-

pany’s president and COO

of North American opera-

tions. Frosch opened up to

the magazine and offered

his vision of the road ahead

for the automotive industry.

F&I: The Warranty Group and its Resource Automotive entity have been through a lot of changes. Can you get our readers caught up with where your company stands today?

Frosch: The big picture is The

Warranty Group, whether it’s in

China, Latin America or North

America, or whether we’re talking

protection products for electron-

ics, appliances, travel coverage or

automotive. Resource Automotive

simply represents the auto side of

our business.

F&I: What was the strategy during the downturn?Frosch: The strategy was to work

with the best of the best. It was about

helping dealers through automation,

enhancing our solutions and provid-

ing support to maximize the benefi t.

F&I: Your insurance carrier, Virginia Surety, defi nitely won some battles in the trenches

this year, picking up clients such as Safe-Guard and Interstate. What was behind that division’s success this year?

Frosch: There have been a lot of com-

panies that have come in and out of

our business. A lot of them thought

they could do it, but, in the end, they

couldn’t. Unfortunately, the only ones

who got hurt are the dealers and their

customers. So, what you saw

in 2008 and 2009 was re-

ally a fl ight to quality, which

obviously benefi ted us since

the clients we picked up were

looking for a partner with the

focus and experience in this

very specifi c business.

F&I: Talk about the company's ResourceVIP program, which you rolled out in 2004. If I’m not mistaken, it represents your fi rst foray into inventory management.

Frosch: Well, our mission is to maxi-

mize income for our clients on a

per-vehicle basis, and ResourceVIP

supports that concept. It’s a custom

program that helps dealers manage

their returns on their inventory and

allows them to see what’s moving,

when it’s moving and what the re-

quirements were for their inventory

to move.

F&I: Where do you stand on all this talk about dealers combining sales and F&I roles?

Frosch: We continue to see great val-

ue in the F&I model. It has worked

and it has been successful. How-

ever, we recognize that there is no

one-size-fi ts-all [solution], so we sup-

port our clients as they wish to be

supported.

F&I: I’ve noticed a real pickup in interest for reinsurance. What are you seeing?

Frosch: Reinsurance remains a suc-

cessful model in this industry, and it’s

an extremely valuable tool if you part-

ner with a company that understands

it, has experience with it, knows how

to handle claims, takes care of cus-

tomers, knows how to price and con-

fi gure the product and will act as a

partner to you. And that’s what we

bring to the market.

See, we’re not a monoline, one-

approach kind of company. We have

direct programs, reinsurance pro-

grams, dealer-obligor programs. We

are the underwriter, the actuary and

the administrative company, and we

own our own compliance groups and

entities. So, it really is about what our

Getting The magazine catches up

with The Warranty Group’s Michael Frosch to discuss F&I, automotive retailing and the

road ahead. By Gregory Arroyo


Q&A

PHOTO ©ISTOCKPHOTO.COM / LEVENTKONUK

FI0111qa_frosch.indd 26FI0111qa_frosch.indd 26 12/23/10 5:02:36 PM12/23/10 5:02:36 PM

clients want to accomplish. I always

like to phrase it as, ‘What you need,

when you need it.’

F&I: Talk about your prepaid maintenance product and the things you’ve done to increase customer loyalty.

Frosch: It defi nitely is a great prod-

uct for pumping the service drive.

However, we view our entire product

portfolio as valuable components of

a customer-retention strategy. What

makes us different is the customer

touchpoints we’ve built into these

products — e-mail reminders, things

of that nature.

So, prepaid maintenance is a vi-

able product, as is our QCertifi ed

product, as is our LUXCARE envi-

ronmental protection product, as is

GAP. We just believe it’s the technol-

ogy we employ that really adds value

for the consumer.

F&I: Do you consider mobile devices a viable touchpoint?Frosch: We’re looking at every po-

tential touchpoint with a consumer as

you would expect, and each customer

really has a different way that they

wish to interact. So, we’ll continue,

as others in the industry will, to look

at new options and opportunities.

F&I: Fuel effi ciency remains a big topic in the industry. How has that impacted your offerings?

Frosch: When you see the Volt or

the Leaf come out, it’s clear prod-

ucts must continue to evolve. It’s the

same thing when you see manufac-

turers offering longer warranties or

longer powertrain coverage. Now,

the advantage we have is that when

new technology is introduced, we’re

going to see it pretty quickly because

of our global exposure. Remember,

electric cars are not a new concept

and neither are hybrids. What we are

able to do is leverage the information

we collect, pull it together and make

decisions on how to create, custom-

ize and adapt.

F&I: Speaking of longer warranties, were the fears expressed a couple of years ago regarding the factories extending out warranties ever realized?

Frosch: That defi nitely didn’t have

an impact, because, again, we found

mechanisms to expand our cover-

age to complement whatever the

expanded warranty was. Expand-

ing powertrain coverage is great,

but that’s not expanding the cover-

age on the vehicle. There are still

a lot of items out there where the

customer needs protection. Still,

when these changes come down the

pike, it’s about how well you under-

stand the business and about how

quickly you can market and devel-

op new products to complement the

changes.

F&I: Given the intense fallout from the US Fidelis debacle, where do you stand on the direct-to-consumer sales model?

Frosch: We have multiple points of

distribution. At the end of the day,

it really is about how the customer

wants to be interacted with and mak-

ing those options available to dealers.

As for US Fidelis, we don’t view that

as a distraction to that model.

F&I: With the economy growing again and added stability on the lending side, will we realize the industry’s “new norm” in 2011?

Frosch: There are micro- and macro-

economic issues that are driving ev-

erything, so right now the new norm

is holding your vehicle longer. The

new norm also is change, which is

why it’s critical that you partner with

someone who is fl exible and can

adapt. As for my outlook, there’s no

denying that the last couple of years

have been interesting, and that the

next two will be the same. The good

news is, we’re looking at a big block

of consumers who will be coming

into their prime spending period.

For right now, I just think we’re in a

transition period.


Resourceful

FI0111qa_frosch.indd 27FI0111qa_frosch.indd 27 12/23/10 5:02:38 PM12/23/10 5:02:38 PM

FI1010friendly.indd 1 9/21/10 1:43:39 PM

As the founder and

president of Dealer-

Link, a Charlotte,

N.C.-based marketing

services provider, Tim

Parker has helped his auto dealer cli-

ents launch all manner of direct-mail

campaigns. The economic downturn

and onset of the Internet age, however,

put mailers on the back burner for

many dealers, but Parker believes the

medium is poised for a comeback —

so sure that his company is offering a

money-back guarantee. The magazine

caught up with Parker to fi nd out why

he thinks dealers will turn to direct

mail in a big way in 2011.

F&I: Just how badly did direct mail suffer as a result of the credit crisis?

Parker: Certainly, a number of deal-

ers cut back. But direct mail suffered

for other reasons as well. First, for

years, dealers had been doing direct

mail almost blindly, without any con-

sideration for whether the customer

could qualify. It’s known in the in-

dustry as saturation mail. Why, in to-

day’s economy, would a dealer want

to advertise to someone who simply

can’t qualify to buy?

Second, in talking to dealers over

the last two-plus years, it was evident

they felt opportunities were missed

when they were fi elding the inquiries

from customers on their direct mail.

See, during the downturn, many deal-

ers disbanded their BDCs, so their

salespeople had to answer phones.

F&I: In the third quarter 2009, subprime auto loan originations grew for the fi rst time since the onset of the credit crisis. Did you see more orders from dealers looking for special fi nance customers at that time?

Parker: Across the board, we started

to see an increase in activity. Lenders

still are asking more questions. Scor-

ing is in place for prime, but they’re

double-checking everybody else.

F&I: Do you think dealers will react to that news by sending more-targeted mailers and restaffi ng their BDCs?

Parker: Yes and no. I do expect deal-

ers to choose their campaigns more

carefully, and they’re going to want

to know exactly where they’re spend-

ing their money. As for the BDCs, we

have eliminated that concern because

we insist that our call center, which

is based in the United States, fi eld all

the calls and set appointments based

on a schedule the dealer provides. We

also follow up with any no-shows.

F&I: What types of campaign are you recommending for 2011? Parker: We don’t offer saturation mail,

only bankruptcy and credit score-

based direct mail. Frankly, we see

anywhere from three to six times bet-

ter results from the credit score-based

mail than the bankruptcy mail.

F&I: Why is that?

Parker: Just because a consumer

has a discharged bankruptcy doesn’t

mean they can qualify for an auto

loan. There are any number of factors

that may disqualify them, such as re-

cent derogatory credit items after the

fi ling, or multiple bankruptcies. Or

they may simply not meet the banks’

minimum credit criteria.

F&I: If you’re going by credit score, what’s your target range?

Parker: We let each dealer determine

the credit score range for his or her

campaign, but our history shows the

greatest success with scores between

525 and 675. There’s not much re-

sponse from consumers above 675.

However, if you have in-house fi -

nancing — or perhaps Credit Accep-

tance — and can do anything below

525, you can have a lot of fun with

this program. And, to my knowledge,

DealerLink’s credit score mail is the

only one in the industry that is willing

to guarantee the dealer’s investment.

F&I: What do you say to dealers who believe direct mail’s role is better fi lled by Internet and social media marketing?

Parker: Social media marketing is

certainly a medium in which every

dealer should have a presence, but the

consumers you reach through social

media marketing already know who

you are, and they may not qualify for

the fi nancing you’re advertising. The

consumers you get from our direct

mail programs are new to you, and

they absolutely will have the credit

required for you to sell them a car.


Direct MailMailers were the fi rst

line item scratched from many dealers’ advertising

budgets during the downturn. Marketing ace says it’s time to add them

back. By Tariq Kamal

Mounts a Comeback

ILLUSTRATION ©ISTOCKPHOTO.COM / MIPAN

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1

2

3

4

5

6


Forget those New Year’s resolutions. Here are six things you can do to improve your chances in the showroom in 2011. By Cory Mosley

If you’ve been reading my columns

over the last few months, you’ve

heard me talk about taking respon-

sibility, setting goals and the benefi ts

of continuing to be a good student.

I want to drive that message home

with what I believe are the six keys to

making 2011 your best year ever.

Reinvent Yourself: Whether you re-

alize it or not, you’re a brand, and that

brand is refl ected in how you sell or

manage. In fact, at this very moment,

you are known for something. It could

be that you’re great with customers.

Maybe you’re a strong closer.

Now, whatever you are today

doesn’t have to be what you are tomor-

row. Way too often, people will hide

behind the idea that they are simply

just the way they are, which is really

an excuse to ignore their opportunity

to be better. Why not try to become

a specialist in trucks, SUV or coupes

and learn all there is to know about

the category, including competing

brands? Not only will this newfound

confi dence contribute to higher gross

profi t, it will eliminate the fear of los-

ing deals to products of lesser quality.

Create Separation: When all things

are equal, you have a 50/50 chance to

win or lose with each prospect. While

those odds may be OK on the roulette

table, I doubt they will work in the

showroom. That’s why you need to

focus on enhancing the customer ex-

perience to the maximum level. For

instance, instead of telling people to

“come on down,” invite customers to

schedule a “price and vehicle con-

sultation, where we use all of our re-

sources at the dealership to help you

make the best car-buying decision.”

Doesn’t that sound more intriguing?

To improve in 2011, you must fo-

cus on enhancing the experience and

your approach on the road to the sale.

During a recent celebration for my

grandparents’ 60th wedding anni-

versary, my grandfather gave a short

speech and offered a few words of

wisdom about marriage that I think

is extremely relevant in the sales en-

vironment. He said that the way you

stay married for 60 years to is to al-

ways make your wife think she’s in

control. The same goes for your cus-

tomers, make them feel like they’re in

control. All it takes is a little fi nesse.

Focus on Service: It saddens me to

see salespeople who spend their day

staring at the door, waiting for the

next “up” to come in. I don’t care

what you sell, every brand and deal-

ership retains a certain percentage

of its customers. It is your responsi-

bility as a salesperson to maintain

a relationship with your customers

after the sale. And we all know the

rewards associated with customer

retention: referral business, sales to

others in the household and less ne-

gotiating the second and third time

around. In most cases, the result is a

higher gross profi t.

Strive for Excellence: If you don’t

care, who will? Strive to be the best

and don’t settle for anything less.

And if your gauge for excellence is

what others are doing, stop.

There’s a story I like to tell about

a salesman I once knew named Al

Bowers. He could literally take half of

the month off and roll 20 cars in the

last week. Al, who had two phones at

his desk, didn’t mess around. Some

salespeople were jealous of his tal-

ents, others just wanted to beat him

on the monthly leaderboard, but

never thought it was possible — well,

until someone fi nally did.

Evaluate Outcomes: Start taking

a look at the deals you don’t make.

Sales guru Zig Ziglar states that ev-

ery sale has fi ve basic obstacles to

overcome: no money, no hurry, no

time, no desire and no trust. Instead

of simply deactivating that lost deal

from your CRM system and moving

on to the next customer, take a mo-

ment and refl ect on which obstacle

you might have failed to overcome.

Work the Payplan: Do you really

understand how your payplan works?

More importantly, do you know how

to maximize it? If not, you could be

leaving big money on the table. Are

there special “spiff” cars that pay

double the commission? Do you get

a piece of the back-end action, but

haven’t taken the time to work closer

with your F&I manager? Are there

bonuses on aging inventory? You

need to know all of these things be-

fore you work your next customer.

Finally, let’s have some fun! Ex-

perts who track the business say it

should be a good year for the busi-

ness, so let’s rock ’n’ roll and make it

the best year ever!

Cory Mosley is principal of Mosley Train-

ing LLC, a nationally recognized training

provider focused on new-school tech-

niques, products and services. E-mail

him at [email protected].

6 Sales-Driving Ideas

Sales Driver

FI0111salesdriver.indd 30FI0111salesdriver.indd 30 12/23/10 5:03:00 PM12/23/10 5:03:00 PM

Will creating a list of New Year’s resolutions really help you better yourself? The magazine’s front-lines columnist doesn’t think so. By Marv Eleazer

In just about every trade publica-

tion this month, you’ll fi nd some-

thing written about setting New

Year’s resolutions and getting back

to the basics — each touting a “fresh

start” message. These articles cer-

tainly catch our attention, and why

not? They come at a time when we’re

refl ecting on our shortcomings from

the past year, so we pause and read

in hopes of changing for the better.

Good for us, right?

Well, I’d like to take a different

tack with my New Year’s column.

It just seems like the same promises

appear on my list year after year:

treat people better, stop smoking (I

love my cigars) and lose weight. The

problem is, we tend to fall back into

the same old habits after a short few

weeks or months. Hey, we’re crea-

tures of habit, aren’t we?

See, unless we have some sort of

epiphany, it’s often diffi cult to con-

vince ourselves to endure a behavior-

al change. The truth — whether we

accept it or not — is that we are lim-

ited by our own desire to improve.

Consider the common fl ea. This

tiny, fragile critter thinks nothing of

biting creatures thousands of times

his size. You might think he was

determined not to allow anything to

get in his way. A simple experiment,

however, proves otherwise.

See, it is common knowledge that

a fl ea, after having been sealed in a

jar and after having made numerous

attempts to jump out, will not leap

beyond the height of the jar’s lid —

even after it has been removed. It only

takes a few knocks on the head before

the fl ea begins to realize that jump-

ing into the lid only leads to pain. The

experience engrains in the fl ea’s mind

that he can only go so far.

Now, if you really want to be

amazed, try adding fl eas

to the jar that weren’t

part of the original ex-

periment. The new ad-

ditions will jump right

out, but, incredibly, the fl ea

from the original experiment won’t

follow his kin, even as he watches

them leap to freedom.

If his friends are able to escape,

why can’t he do the same? The an-

swer is simple: He doesn’t believe

he can, so he remains a prisoner of

his own self-imposed limitations.

Doesn’t this sound familiar?

Some of you began 2010 with a

renewed vigor to improve your profi t

per retail unit, so you made a resolu-

tion to change. However, somewhere

between then and now, your vision

started getting cloudy and your num-

bers fell back into the same rut —

or worse. What happened? Did the

lumps on your head cause too much

pain to try again?

Listen, I’ve been there and ful-

ly understand what you’re going

through. Like the fl ea, I’ve believed

something couldn’t be done while I

watched others leaping right past me.

I was convinced by my self-imposed

limitations that that’s the way it was,

which meant I kept falling short of

my abilities.

During the course of our lives, we

become accustomed to staying within

certain parameters. We do that be-

cause moving beyond those check-

points would require us to risk a

little pain. So, we stay in our

self-imposed ruts to avoid

leaving our comfort zones.

It’s easy to stay where

we are because there is

no suffering when we’re

in our comfort zones. But ask your-

self, are you satisfi ed with where you

are? Are you okay with not rising to

the challenge in this new economy?

If you’ve made it this far in the col-

umn, my bet is your answer to those

questions is a resounding “No.”

If that’s the case, then, right here,

right now, analyze what you want to

accomplish this year and beyond and

determine what behavioral changes

you need to make to get there. Don’t

make another silly New Year’s reso-

lution. Be brave and make a promise

to yourself to truly improve. Don’t do

it because I’m challenging you — do

it because you deserve it, your family

deserves it, your dealer deserves it,

and, Lord knows, it’s about time you

did! So, stop bumping your head and

leap out of your jar.

Marv Eleazer is the fi nance manager at

Langdale Ford in Valdosta, Ga. E-mail

him at [email protected].

Squishing the Flea Mentality

Mad Marv


It’s easy to stay where you are because there is no suffering when we’re in our comfort zones. But ask yourself, are you satisfi ed with where you are?

Are you okay with not rising to the challenge in this new economy?

PHOTO ©ISTOCKPHOTO.COM / NNEHRING

FI0111madmarv.indd 31FI0111madmarv.indd 31 12/23/10 5:02:08 PM12/23/10 5:02:08 PM

FI0410vision.indd 1 3/22/10 7:49:57 AM


Legal

The FTC has been poking around at some dealerships in recent months. What is the agency looking for? The magazine’s legal expert weighs in. By Tom Hudson

My dealer client called in a

blind panic. He had arrived

at his dealership that morn-

ing to fi nd a letter lurking in the mail

from the Federal Trade Commission,

or, more specifi cally, from the FTC’s

Division of Financial Practices, Bu-

reau of Consumer Protection.

The letter announced that the FTC

was conducting a “nonpublic inves-

tigation” to determine whether the

practices of my client’s dealership

complied with the FTC’s Trade Regu-

lation Rule Concerning Preservation

of Consumers’ Claims and Defenses.

The letter requested that the dealer

voluntarily provide, “in lieu of com-

pulsory process” (hint, hint), a boat-

load of information, and requested

copies of a number of documents, in-

cluding copies of all consumer credit

contracts executed by the dealership

on or after Oct. 1, 2009.

A little background is in order at

this point. The rule referenced in

the FTC’s letter is commonly called

“The Holder Rule.” It has been on

the FTC’s books since the Pilgrims

landed at Plymouth Rock. The Hold-

er Rule was the FTC’s response to a

particular abuse it had identifi ed in

the credit sale of consumer goods.

See, way back when, a merchant

who sold a shoddy refrigerator on

credit could assign the consumer’s in-

stallment contract to a fi nance com-

pany. When the consumer quit mak-

ing payments to the fi nance company

because the refrigerator was a piece

of junk, the fi nance company could

claim that it was a “holder in due

course” of the customer’s obligation

and, by virtue of that status, was im-

mune from the consumer’s claims.

The FTC’s Holder Rule brought

those practices to a grinding halt. The

rule required credit sellers to include

a provision in their contracts stating

that the holder of the contract was

subject to the claims and defenses of

the consumer. Problem solved.

I was a new lawyer when the Hold-

er Rule took effect, and I still recall

the anguished screams of banks and

fi nance companies who bought retail

installment contracts from car deal-

ers and who thought they would be-

come targets for all of the car buyers

who had claims or defenses against

the dealers who sold them their cars.

It never happened. Dealers and fi -

nance companies stuck the required

language in their credit contracts,

and banks and fi nance companies

amended their dealer agreements so

that dealers would be on the hook for

any consumer claims and defenses

asserted under the Holder Rule. Sure,

there were a few problems here and

there, but the world didn’t end.

So, why did the FTC suddenly

get its shorts in a twist about dealer

compliance with the Holder Rule?

The short answer is, I have no idea.

About the only thing that I can

come up with is that the members of

the FTC’s newly formed Auto Dealer

Task Force were sitting around a table

trying to fi gure out a good fi rst move

to show how serious they are about

curbing abuses. So, they decided to

gather some facts about one of their

early consumer protection initiatives

to see how it was working. To my

knowledge, the FTC has never taken

any steps, formal or otherwise, to as-

sess the Holder Rule’s effectiveness.

If that is what is going on, I predict

that the FTC will be mightily pleased

with what it fi nds. I haven’t seen a re-

tail installment contract printed since

the Holder Rule went into effect that

didn’t contain the language mandated

by the rule.

So, let’s get back to my dealer client.

After he recovered from his panic, I

told him that unless he had encoun-

tered a specifi c problem lately, it was

not likely that the FTC had a particu-

lar interest in his dealership, and that

it was more likely than not that such a

letter was sent to a random sampling

of dealers in an attempt by the FTC

to test industry compliance with the

Holder Rule.

This particular story has a happy

ending. The dealer forwarded the let-

ter and we worked with the FTC’s

staff to scale down the scope of what

our client would produce. Our client

does a little legwork for the commis-

sion and can rest easy that he isn’t in

the FTC’s gunsights.

The next story might take a nastier

turn, though. Industry compliance

with many of the FTC’s rules and reg-

ulations isn’t what it should be, and the

next letter might be directed at prac-

tices where dealers are much more

vulnerable. If you haven’t had lunch

lately with your friendly dealership

lawyer, now might be a good time.

Thomas B. Hudson Esq. is a partner in

the law fi rm of Hudson Cook LLP and

author of several books. For more on

his books, visit www.CounselorLibrary.

com. ©CounselorLibrary.com 2010, all

rights reserved. Based on an article

from Spot Delivery. Single print publica-

tion rights only, to F&I and Showroom

magazine. HC# 4819-7967-3352 (12/10).

The Hunt for Noncompliant Dealers

FI0111legal.indd 32FI0111legal.indd 32 12/23/10 5:01:40 PM12/23/10 5:01:40 PM

Seeing is Believing

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• More Friday Events including 2 full afternoon workshops sessions and a NADA Welcome Reception co-hosted by J.D. Power and Associates

• Dynamic Speaker line-up including former Secretary of State Condoleezza Rice and hero pilot Capt. Chesley Sullenberger

• New Specialty Workshops including Google, J.D. Power and Associates and our exciting new Social Media Series

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After acquiring CoVideo and its streaming video e-mail technology in December, EasyCare is making the company’s proprietary communications platform available to its dealer customers. The new offering will allow dealers to create and send personalized video e-mails and embed links that direct recipi-

ents to the dealership’s Website or F&I microsite. Dealers can use the tech-nology to communicate with existing customers

or to create campaigns to attract new prospects. The platform also allows users to track the success of their campaigns. For more infor-mation, visit www.easycare.com or www.covideo.com

EasyCare Acquires CoVideo, Offers Video E-mail

CAR-Research XRM Adds Service Drive Module

CAR-Research XRM, a CRM solution provider, has added the Service Drive Control Manag-er module to its CRM. The new functionality

helps service technicians identify needed maintenance and repairs in their customers’ vehicles. The mod-ule, which is built into the CAR-Re-search CRM solution, also provides service departments with an online scheduling tool and a route sheet that automatically displays key information related to repair orders. For more information, visit www.CARResearchXRM.com

Counselor Library Releases RBP Rule GuideBook CounselorLibrary has launched, “Dealer Compliance Guide: Risk-Based Pricing,” which addresses the obligations of dealers under the new federal Risk-Based Pricing Rule, which was expected to go into effect on Jan. 1. The 53-page book focuses on best practices for compliance with the RBP Rule and provides an overview of the various compliance methods. To purchase the book, go to www.counselorlibrary.com/public/com-pliance_dealer.cfm.

ATcon Offers Updated RO Analysis ToolATcon, a consulting fi rm focused on fi xed operations, has launched Electronic Repair Order Analysis v5.0, a management tool that sorts through and analyzes thousands of repair orders to identify trends and deviations from best practices. The solution also can be used to create e-mail and direct mail campaigns using customized reports based on ZIP code, make/model, year and mileage. To download a free, 30-day trial of EROA, visit www.atconsse.com/TryTheEROA.

KBB Launches Free App for AndroidKelley Blue Book has launched a free, interactive app for Android mobile devices, which pro-vides car-buying and -selling information. Users gain access to new- and use-car values, including MSRP, invoice, fair purchase price and more. Dealers also can use this information in vehicle transaction negotiations. The app also offers directions to dealers, vehicle photos and video reviews. To download the app, visit http://market.android.com/details?id=com.kbb.mobile on any Android device.

Product Feature

CAChDeT

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Introducing F&I TV’s

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Company Phone Web Page

Allstate Dealer Services 888-244-1935 allstatedealerservices.com/ads008 15

Association of Finance & Insurance Professionals (AFIP) 817-428-2434 afi p.com 24

American Financial & Automotive Services 800-967-3633 afasinc.com C4

AUL Corp. 800-826-3207 aulcorp.com 11

CNA National 800-345-0191 x720 cnanational.com C2

Dealerlink 800-890-8850 DealerLink.us 25

F&I TV – Tip of the Week • fi -magazine.com/FITV 36

Friendly Finance Corp. 800-872-2877 friendlyfi nancecorp.com 29

Innovative Aftermarket Systems (IAS) 800-346-6469 x8989 smartdealerproducts.com 3

NAC (National Auto Care Corp.) 800-548-1875 nacsolution.com 7

NADA Convention & Expo • nadaconventionandexpo.org 34

National Automotive Experts 800-810-8859 nationalautomotiveexperts.com 9

Protective 800-794-5491 protectiveassetprotection.com 5

Reahard & Associates Inc. 866-REAHARD go-reahard.com 1

Resource Automotive 800-527-3448 resourceautomotive.com 20-21

Ristken Software Services 800-368-9680 ristken.com C3

United Car Care 800-571-6412 unitedcarcare.com 35

Vision Menu Inc. 800-413-9902 visionmenupro.com 33

Wells Fargo Dealer Services 888-937-9997 wellsfargodealerservices.com 19

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Several factors will contribute to successful year-end sales, including an increase in consumer demand and higher loan approvals.

Strong November sales and an in-

crease in consumer demand had

the industry poised for a strong

end-of-year sales month and an even

better fi rst quarter, CNW Research’s

Art Spinella predicted in his Decem-

ber “State of the Industry” report.

Retail sales as a share of total sales

increased 64.2 percent in November,

according to the Bandon, Ore.-based

market research fi rm. Total new-

and used-vehicle sales increased 4.8

percent in November, following a

spike of 26 percent in October. Based

on Spinella’s preliminary data, total

vehicle sales could be up as much as

8 percent in December.

“In fact, this month may be the

most positive outlook this early in

a month since pre-2007,” he wrote

about December. “If it is, the fi rst

quarter of next year should be

extremely bright.”

The performance of December

sales will depend on the infl ux of

consumers who are entering the new-

vehicle market. Looking at the months

of October and November, as well

as the fi rst full week of December,

CNW believes the measure of new-

to-market share could climb to more

than 46 percent by the end of the

fourth quarter 2010.

Floor traffi c jumped in the early

part of December by more than 33

percent for new cars and more than

54 percent for used cars, compared to

20 percent and 6 percent, respectively,

in November.

This increase in demand shortened

the average delay of new-vehicle

acquisitions in November, which could

bode well for the fi rst quarter 2011.

Another positive indicator of the

industry’s improving health is the

shrinking gap between average

transactions prices and MSRPs,

wrote Spinella. The gap hit 85

percent in November and may close,

based on preliminary data, to nearly

86 percent in December.

Meanwhile, loan approvals

continued to increase for subprime

buyers, reaching 8.51 percent in

November. Additionally, 66.29

percent of nearprime loans were

approved, while 84.17 percent of

prime loans received approvals.

November also was the sixth

consecutive month in which the share

of fi nance units increased. Spinella

attributed that streak to looser credit,

a general acceptance of lower credit

scores and the willingness of banks to

lend on private-party sales. Spinella

added that recent increases in used-

vehicle fi nancing should continue in

December and into the fi rst quarter

of next year, putting the industry back

on track for a 40 million-unit year.

The average FICO score for used-

vehicle sales in December is expected

to be 622, the lowest fi gure of the

year. Additionally, the share of used-

vehicle sales under the 670 FICO

score was expected to reach 37.23

percent in December, the largest

percentage of the year.

Leasing also continues to pick up

steam. In November, Ford equaled the

industry average with 25.4 percent of

vehicles leased, while 29.28 percent

of Toyotas and 28.46 percent of

Hondas were leased.

“The drive for leasing among some

automakers — especially second-tier

Asian and weaker Detroit nameplates

— is the extremely positive results

leasing has on brand loyalty,” Spinella

wrote.

This year, 39 percent of customers

who took out leases back in 2008

ended up selecting the same brand at

the end of their lease term. The share

is slightly higher for lessees who had

short leases written in 2009.

Sales to Strengthen in December and Beyond, Reports CNW

Industry Trends

40%

35%

30%

25%

20%

15%

10%

5%

0

8/2009

9/20

09

10/2

009

11/2

009

12/2

009

1/20

10

2/201

0

3/20

10

4/201

0

5/20

10

6/20

10

7/20

10

8/20

10

9/20

10

10/2

010

11/2

010

12/2

010

Share Used Sales Under FICO 670680

660

640

620

600

580

560

8/2009

9/20

09

10/2

009

11/2

009

12/2

009

1/20

10

2/201

0

3/20

10

4/201

0

5/20

10

6/20

10

7/20

10

8/20

10

9/20

10

10/2

010

11/2

010

12/2

010

Used Avg FICO Score

FI0111industry.indd 40FI0111industry.indd 40 12/23/10 5:01:10 PM12/23/10 5:01:10 PM

FI0111industry.indd 993FI0111industry.indd 993 12/23/10 5:01:11 PM12/23/10 5:01:11 PM

PROTECTIONThe American Bald Eagle’s feathers trap air to insulate it against cold and protect it from rain.

Just like the eagle, American Financial & Automotive Services, Inc. can help protect your

dealership from unforeseen challenges.

t Dealer participation programs

t Revenue generation with high legal and ethical standards

t Complete dealership synergy for optimum results

t Rapport building sales process to ensure returning customers and high CSI

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FI0111cover.indd 994FI0111cover.indd 994 12/28/10 10:02:49 AM12/28/10 10:02:49 AM

f&i and showroom january 2011

Documents

indd 2fi0111toc

indd 991fi0111cover

indd 992fi0111cover

indd 1fi0111cover

am2 fi

auto fi nance analyst

sales driver

address changes