While the department may appear slow to evolve due to compliance with regulations and other government rules, F&I innovation is gaining momentum and its tools are quickly evolving.
The Finance and Insurance (F&I) department may seem slower to evolve than other automotive retail areas, but that is an illusion. Change is happening — and quite rapidly — spurred by the COVID-19 pandemic.
Some companies are focused on tighter integration rather than separate processes, because dealerships are tired of using multiple systems and having a tool that is not integrated with their process, according to Rick Johnston, Vice President of Product Management for Vehicle Sales at Quorum.
“From desking to F&I and now with the introduction of digital retail, the sales process is naturally going to become more complicated or more complex over time,” said Johnston in an interview with Canadian auto dealer. “I think the biggest challenge in F&I today has got to be the variety of providers that even one dealership will work with. (And) the most challenging is sometimes the extended warranty.”
Johnston previously worked in the Autovance division of Quorum, which he said brings everything they do back into one solution that is fully integrated with Dealer Management Systems (DMS). “It becomes sort of omni-centric, like one piece of software to help you manage the entire sales process,” said Johnston.
He believes F&I is moving towards a more consumer-driven model that allows the consumer to better access information earlier on in the process. Dealerships that fail to offer these options during digital retailing may find it more difficult to sell to consumers who were unaware of their F&I options at the forefront or early on in the process.
“I think the biggest challenge in F&I today has got to be the variety of providers that even one dealership will work with.”
— Rick Johnston, Vice President of Product Management for Vehicle Sales at Quorum
Johnston also believes that auto retailers are early adopters of technology, and that there are many dealerships out there that want to be on the cutting edge. The challenge in Canada, and for quite some time now, has been a lack of that cutting edge; the industry has a tendency to lag behind the U.S. market and has somehow become the “three- to five-year-later adopters of their technology,” said Johnston.
“If one of their companies down there decides they want to bring it to Canada, (then we get it). But if they don’t, then we don’t even get it,” said Johnston. “The F&I menu is a perfect example of it. They’ve been presenting using F&I menus in the United States for 20 years. It’s not new technology, (but) it’s become prevalent in Canada in the last five to seven years.”
He said the Canadian market has been underserved in some areas, specifically where F&I is concerned. As part of the catch-up, the company is working on closing the loop in F&I from digital retail to desking. The question they are tackling is: How do you transform the typical linear process into a circular process where F&I can be introduced at any point in time — desking can be introduced at any point, and digital retailing can be introduced at any point?
“Our big focus right now is depth of integration,” said Johnston.
Compliance amid change
F&I businesses are focused on implementing change and creating more convenience for dealers, helping them to increase or at least maintain profits by focusing on allowing consumers to do more online or remotely.
That is one of the key areas of focus for Reynolds & Reynolds — ensuring dealers have the tools that allow them to be profitable as well as compliant as they go through that process — compliance being the second key focus, according to the company’s director of product management for F&I solutions, Ed Pontis.
Pontis said they recently rolled out new capabilities in the company’s most recent release, and is currently going through the process of piloting them to some of its dealerships in the United States.
“I can present the product and all of the collateral and content associated with that sales tool to help educate the consumer on what products are available.”
— Ed Pontis, Director of Product Management for F&I solutions, Reynolds & Reynolds
“This is because we’re dealing with connectivity to banks and aftermarket providers, and the compliance of the dealership. So it’s an important aspect,” said Pontis. “We don’t want to turn something on and have it propagate out to thousands of stores.”
Once the pilot year officially wraps up, Pontis said they will continue to roll out the capabilities to dealers in the U.S. and then introduce it into the Canadian market.
So what is it? The company calls it docuPAD remote, which Pontis describes as having the capability to take the docuPAD workstation that dealers have invested in and share it remotely (via a screen) with a remote customer. One of the goals is to help dealers drive more profitability, while — again — remaining compliant.
“I can present the product and all of the collateral and content associated with that sales tool to help educate the consumer on what products are available,” said Pontis. “And then based on that, allow them to sign their documents remotely, as well as deliver electronic completed copies and appropriate compliance statements to the consumer via email.”
Greg Uland, Director of Marketing at Reynolds & Reynolds, said the tool creates an opening for the consumer to engage with both the F&I manager and the device; it allows the consumer to be more aware of the products, and to potentially be more open to listening to what products are available.
“It’s basically being able to take this approach and enabling that F&I manager to continue to sell and to educate and to be effective, even in a remote setting,” said Uland.
“We’ve been shifting how we communicate with one another in every aspect of our lives over the last 10-20 years. And the last 12 months have certainly accelerated that shift.”
— Greg Uland, Director of Marketing at Reynolds & Reynolds
It is also worth noting that the company has a payment processing application that allows for remote down payments, which was released in 2019.
“We’ve been shifting how we communicate with one another in every aspect of our lives over the last 10-20 years. And the last 12 months have certainly accelerated that shift,” said Uland. “It’s now about making sure to find ways to leverage what is successful today and yesterday, and modify your communication channels and strategies.”
Asked what he sees as the next big shift in F&I, Uland said he is anticipating a movement of connectivity, a direct connection to the bank, and vaulting of contracts. In other words: “true e-commerce.”
A docuPAD workstation shared remotely with a customer.
Comprehensive virtual F&I
Evolving from the traditional business of face-to-face to interactions over the phone, email, and computer screens, automotive retail’s F&I department is now walking the path from preliminary virtual F&I to a more comprehensive definition of the term.
The latter represents one of the biggest transitions in F&I, according to Derek Sloan, President of Sym-Tech Dealer Services, and a prominent trend that he called out years ago. Sloan revealed his definition of virtual F&I and why it is so important now.
“When I speak about virtual, I’m talking about having the same experience where we’re putting the tools in the customer’s hands to make decisions — the same experience as you would have if you were in front of a human being,” said Sloan.
This means the customer should be able to view all the options that are available to them from a menu presentation and/or visual presentation of the product, with videos to help shed light on the products and their benefits — and all while having an actual conversation with a person through a screen or on-site to help guide the customer through the process.
It also means that, once the buying decision has been made, the customer should have the opportunity to sign off on the purchase in the comfort and safety of their home.
“When I say virtual, and I don’t mean to be devaluing other people’s version of virtual, I want to ensure that people understand our version of virtual is comprehensive,” said Sloan in reference to the company’s services. “It’s the full process, buying the product from beginning to end — meaning specific to F&I, online and the benefit of that.”
Sloan said Sym-Tech’s comprehensive offering allows dealers to know that, when a customer purchases a vehicle from them, no matter where their F&I manager is they can complete a full transaction (full presentation, full disclosure) with a sign off thanks to their products and services, which also includes training. Everything can be done online, rather than just pieces of the process.
Catering to the near/ non-prime opportunity
Another area that companies are focused on is meeting what is or will be a growing need by near- and non-prime consumers to receive vehicle financing from dealers, thanks to the rise in unemployment numbers in 2020, according to Réal Breton, Chairman and CEO of Iceberg Finance.
“For the vast majority of Quebecers and Canadians, there is a collective impoverishment there,” said Breton. “And there is a business opportunity that is going to be important in this.”
“It (the program) can be for a dealership, because the primary creditor doesn’t want to finance all the product accessories when the vehicle is purchased, whether that means credit insurance, replacement insurance, or an extended warranty.”
— Réal Breton, Chairman and CEO of Iceberg Finance
During the first 11 months of 2020, the unemployment rate in Canada reached 9.5 per cent before rising 0.4 points in November, according to the Institut de la statistique du Québec, which pulled data from Statistics Canada’s Labour Force Survey last year. In comparison, the 2019 unemployment rate was 5.6 per cent, based on Statistics Canada.
For dealerships looking to capitalize on the opportunity presented by near- or non-prime consumers considering, planning, or ready to purchase a vehicle, Iceberg Finance offers a program called IF Express that provides financing solutions for personal loans of up to $5,000.
“It’s a cash loan program of between $1,000 and $5,000, where automotive dealers visit our (online) portal and within five minutes their request is complete: the loan is either accepted or refused,” said Breton.
“It’s the full process, buying the product from beginning to end — meaning specific to F&I, online and the benefit of that.”
— Derek Sloan, President of Sym-Tech Dealer Services
The program can be used towards multiple goals, such as a down payment, to cover negative equity, maintain the profit margin of a transaction, finance vehicle repairs, or for the sale of parts, accessories and equipment, among other things.
“It can be used to supplement product financing, (such as) vehicle accessory purchases,” said Breton. “It can be for a dealership, because the primary creditor doesn’t want to finance all the product accessories when the vehicle is purchased, whether that means credit insurance, replacement insurance, or an extended warranty.”
Interest rates range from 12.99 per cent to 22.50 per cent, depending on the borrower’s credit risk, and financing terms range from 24 to 60 months. The program also states that there is no responsibility for the dealer, no proof of purchase required, and that it is an open loan that is payable at any time at no additional cost. It also offers second and third-chance credit through three programs, depending on the quality of the debtor’s credit report.
Changes in F&I tools and processes and the potential influx of buyers, whether prime or non-prime, offer dealers the opportunity to create momentum in a field that can sometimes appear slow to evolve. Consumer-centricity is the growing trend, and it has the potential to bring the F&I department to a whole new level.
