The CFPB is determined to eliminate dealer finance participation and wants the industry to move to a flat fee finance model. Opponents have been mostly focused on the potential financial impact to dealers and they have paid very little attention to the potential impact on the sales and finance process. This is where dealers can, and should, start focusing. Whether or not the CFPB regulations come, there are serious issues with the current sales and financing process, from the unwieldy four hour transaction process to multiple and expensive deal unwinds/rewinds.
Today, consumers have to slog through time-consuming stages in the dealership sales and financing process: trudging from test-drive, to sales department, to F&I. Managers use educated guesswork to set a financing rate and “spray and pray” terms to multiple lenders, waiting for those lenders to return finance terms that deliver the biggest dealer profit. This archaic, guesswork-based model happens without any involvement on the part of lenders, resulting in a percentage of loan deals either unwinding or having to be rewritten: a costly, time-consuming headache.
In the post-reserve world that appears to be on the horizon, the negotiation of finance terms, monthly payments and interest rates without lender involvement will no longer be practical. The lender interest “buy rate” will necessarily become one and the same with the consumer contract interest rate/APR. Dealers will have to determine the lender and final loan approval terms before contracting with the consumer, so the financing “piece” will move right up to the point of the sales negotiation.
This can be a good thing. Moving financing to the front of the sales process and eliminating all the dealer-lender back-and-forth will generate a more streamlined, integrated sales and finance process – and with it, dramatically reduced transaction time. Plus, by getting a customer’s information upfront, the transparency balance shifts from the consumer having all the information, to the dealer having the consumer’s information at his/her fingertips, meaning a greater ability to structure profitable deals.
In my presentation at the 17th Digital Dealer Conference & Exposition, I will show how implementing new tactics for a post-reserve model could ultimately benefit you, making your dealership far more efficient and profitable.
We’re at a real crossroads with the sales and financing process – and I look forward to sharing new data and tactics to help take you and your dealerships down the road to a more efficient sales and finance process, reducing the time to sell a vehicle from hours to minutes.
Pete MacInnis is founder/chairman/CEO of eLEND Solutions and has 34 years experience in automotive finance, including co-founding Onyx Acceptance which originated over $14 billion in auto loans, and was acquired by Capital One. He began his career with WFS Financial, helping grow the company from $100 million in assets to over $4 billion serviced. Pete has transferred his vast auto finance experience to the web, and with eLEND Solutions is focused on providing a better and more streamlined and efficient sales and finance efficient process for the automotive industry.