| | | WEEKLY REPORT | April 4, 2012 |
| | | | | | | Car loans top consumers' payment lists
 Consumers juggling debt are making their car payments even if they're skipping mortgage or credit card payments, recent data show. ...  story
| Q&A
Shunning 20-minute decisions in a 20-second world
Regions Financial, the biggest bank in Alabama, is still working to regain dealers' indirect loan business after pulling out of the segment for two years during the recession. ... story
| Making dollars and sense to cash buyers
 Some finance managers wince inwardly when buyers of a new or late-model used vehicle say they'll be writing a check for their purchase. It's generally tougher to sell finance and insurance products to cash buyers, dealership personnel say. But despite the challenge, finance managers still can make the F&I sale by consistently presenting products and emphasizing their value to the cash customer ... story
| How to play it smart on smart key coverage
 Key-replacement coverage could be on its way to unlocking more profits for dealerships. Consumer interest in the coverage is growing as more vehicles get programmable smart keys, which can cost $185 to $700 to replace. ... story
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LEGAL FILE
Ex-dealer's tally adds loan-fraud damages
A former New York dealer who defrauded dozens of customers should pay $5,000 in punitive damages to a customer whose signature he forged on a loan application, a federal court has ruled in a civil suit.
U.S. Magistrate Judge Frank Maas said Robert ... >> Story
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F&I BY THE NUMBERS
Auto loan delinquencies
lag mortgages, credit cards
It was relatively rare for consumers to fall behind on their auto loan last year while keeping other accounts current. The opposite was more likely to be true: Consumers fell behind on other payments, but not their car payment. | | | | | | | Delinquent account | Current account/s | % of consumers delinquent 2011 | | Mortgage | Auto, credit cards | 39.1% | | Credit cards | Auto, mortgage | 17.3% | | Auto | Credit cards, mortgage | 9.5% | | | | |
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JIM HENRY
Service contracts are growing -- just slowly
| |  | Jim Henry is a special correspondent for Automotive News | |
For a while, the increase in extended-service contract sales penetration was so slow I wondered where all that effort was going. You know -- F&I "Boot Camp," sales in the service lane, menu-selling to every customer, etc.
Over time, it's clear that extended-service contracts have grown significantly. It was just slow growth, with some ups and downs.
According to the Power Information Network, about 32 percent of retail new-vehicle customers bought extended-service contracts in the first quarter (through March 18), up from about 30 percent a year earlier, 29 percent the year before that and 28 percent the year before that. OK, that's not exactly skyrocketing, but it's a positive trend.
Real-world numbers are probably even a little better because PIN doesn't capture service contracts unless they're sold at the same time as the vehicle. So PIN doesn't show service contracts sold in the service lane.
Some in the business say sales in the service lane aren't rising as fast as they would like, but those sales do appear to be going up.
Add in the fact that U.S. auto sales are increasing. That means higher sales penetration represents a bigger percent of a bigger number. So the picture is a little rosier than the numbers indicate.
Maybe all that effort is paying off after all.
JAMIE LaREAU
Watch for more direct lending
| |  | Jamie LaReau covers auto dealers for Automotive News | |
I was struck recently by a subprime lender chief's fairly benign observation.
"We know the amount of Internet leads on the car purchasing side is a pretty big number and growing," Jim Landy, CEO of CarFinance Capital, told me. "It doesn't take a lot to think that would extend to financing."
If Landy's right and more consumers start taking out direct loans via the Internet, that would have a big impact on many dealerships' operations. It would mean needing to tweak the finance and insurance sales process, for one thing.
Many finance managers say that some subprime auto loans aren't large enough to cover extras such as service contracts, GAP, wheel-and-tire protection and other items.
And those are important products for dealerships because they often carry at least a 50 percent profit margin.
Only about 20 percent of CarFinance Capital's loans are made directly to consumers, Landy said. But he suspects that amount will rise.
"It's attractive to a borrower to do the approval online with anonymity, then walk into the dealership and do the transaction with their own financing already in pocket," Landy said.
With a nod to this trend, CarFinance advertised last month on Edmunds.com. And Landy is preparing to do more online advertising, he said, although he declined to give details.
Landy also said he expects the number of indirect car loans — those arranged for customers by dealerships — to rise in the subprime space. National statistics show that almost half of consumers have credit scores that qualify as subprime, he said.
That means dealers will have to become even more diligent in searching for lenders that will finance the back end of the deal. Losing that $1,000 or so for a service contract or a GAP policy will not be an option.
DEALER JOB LISTINGS
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F&I BY THE NUMBERS
Extended-service contracts up
With some ups and downs, extended-service contract penetration has climbed since 2009. Percent of U.S. new-vehicle retail volume -- individual loan, lease and cash customers -- with an extended-service contract. | | | | | | | Service contract penetration | | 2012 | | | Q1 (thru 3/18) | 31.7% | | | | | 2011 | | | Q4 | 30.5% | | Q3 | 30.8% | | Q2 | 30.2% | | Q1 | 29.9% | | | | | 2010 | | | Q4 | 29.0% | | Q3 | 29.1% | | Q2 | 29.8% | | Q1 | 28.5% | | | | | 2009 | | | Q4 | 27.7% | | Q3 | 29.8% | | Q2 | 28.1% | | Q1 | 27.5% | | | |
| | Source: Power Information Network | | | |
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