| | | WEEKLY REPORT | March 21, 2012 |
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Not bragging, just fact What makes your F&I department stand out? Automotive News invites you to share your best ideas with us, and help make the profession smarter in the process.
The ideas will be considered for a Webinar called "Dealers Share Their F&I Best Practices." It will be part of Automotive News F&I Week, a free, online conference June 19-21.
All ideas -- big and small -- are welcome, from can't-miss recruiting strategies to win-win phrases for a sales presentation. | |
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F&I BY THE NUMBERS
Chrysler Financial fuels TD Auto
TD Auto Finance has continued to grow since it acquired Chrysler Financial in April 2011. Parent TD Bank of Toronto reported its portfolio of U.S. indirect auto loans topped $10 billion in the first quarter of the current fiscal year. | | U.S. indirect
auto loans | Total outstanding
(U.S. $, billions) | | FY 2012 | | | Q1 (ended Jan. 31) | $10.6 | | | | | FY 2011 | | | Q4 | $9.8 | | Q3 | $9.2 | | Q2 | $9.0 | | Q1 | $3.4 | | | |
| | Source: TD Bank Group |
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JIM HENRY
One way to stifle 'predatory behavior'
| |  | Jim Henry is a special correspondent for Automotive News | |
Is it time to replace the dealer reserve with a flat fee?
Chris Markey, Internet sales and finance manager at BMW of Austin, thinks so.
Dealer reserve “invites predatory behavior,” he said Monday on the sidelines of the Consumer Bankers Association’s “CBA Live” conference in Austin, Texas.
Dealer reserve is where the dealership marks up the interest rate and shares in the profit. That’s how indirect auto loans negotiated at a dealership work, and it’s a key component of dealership profits. While flat fees have been around for years, they’ve never been poised to become the industry standard.
But times have changed.
Dealer groups and lenders are worried because the Federal Trade Commission and new Consumer Financial Protection Bureau are said to be looking at dealer reserve with a jaundiced eye. Customers may not realize that the dealership makes more money at a higher interest rate, the agencies say.
It’s not completely an open season on consumers. In today’s competitive climate, dealerships can’t raise the rate too high without losing the deal. Also, many lenders have a ceiling on how much stores can mark up the rate.
Still, some consumer advocates insist that dealerships should have to disclose precisely how much they make on each loan.
A flat fee can be a token payment from a direct lender, such as credit union. And captive finance companies sometimes pay flat fees on subvented loans, in which there’s no opportunity to mark up the rate. Markey said his dealership has arrangements with banks to pay “large flat fees” instead of dealer reserve.
Markey said he’s really not advocating anything too radical. He said flat fees should be large enough to average out around the same as the average dealer reserve. For example, he said, around $600 instead of the more typical $250. “I don’t think a spread [on the interest rate] does anybody any good,” he said.
Still, Markey acknowledges that most dealers likely would disagree.
He’s probably right.
BMW Financial adds BMW-brand lease protection
 BMW Financial Services this month added excess wear-and-tear coverage for lease customers to its arsenal of BMW-branded F&I products. ...  story
| Taking the angst out of the F&I process
 Shortly after joining Byers Ford in Columbus, Ohio, as general manager about two years ago, Chuck Greene became frustrated by the delay between when a customer agreed to buy a car and when that customer entered the finance and insurance office. So he launched a pilot program to speed up the start of the F&I process. ... story
| Sales of tire-wheel plans balloon
 Sales of tire-and-wheel protection policies are ballooning. Ray Ciccolo, president of Village Automotive Group in Boston, says sales of the products at his group's 10 stores have risen 40 percent in the last four years. Some other dealers report sales have doubled in five years. ... story
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F&I PRESS RELEASES
» Ally Financial Announces Renewal of $15 Billion in Credit Facilities
» Consumer Credit Default Rates Decreased in February 2012 According to the S&P/Experian Credit Default Indices
» Fitch: Used Cars and Improved U.S. Employment Trends Boost U.S. Auto Loan/Leasing Sector
DEALER JOB LISTINGS
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F&I BY THE NUMBERS
Mercedes-Benz turns lease losses into gains
In 2011, Mercedes-Benz Financial Services USA saw per-vehicle profits from lease returns for the first time in 5 years. The number of off-lease returns has shrunk, reflecting fewer originations in the recent past. At the same time, higher resale values for off-lease vehicles have turned losses into gains on lease returns. That also motivates dealers and customers to buy off-lease vehicles instead of returning them. | | | | Leases
outstanding
(units) | Units
returned
to captive | Avg. gain
or loss
per return | | 2011 | 290,367 | 60,271 | $2,356 | | 2010 | 253,520 | 95,696 | -$342 | | 2009 | 261,399 | 95,057 | -$4,037 | | 2008 | 295,178 | 88,972 | -$6,557 | | 2007 | 308,741 | 47,341 | -$5,220 | | | | | |
| | Source: MB Financial, SEC filing |
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