The current point of sale F&I market is a perfect example of this.
Many would agree that any continued growth is impossible in such a mature market, but I share the views of an increasing number of my colleagues in the industry, and would wholeheartedly disagree with this.
In truth, there could be many opportunities for dealers to grow their F&I profit centre. However, if this is to be sustained then attitudes and current practices may need to change.
The present environment is far removed from the market place we all used to work in and the speed of change is increasing: regulatory changes, consumer borrowing patterns and economic pressures have all had an impact on the market. For that reason the introduction of new products in existing markets is not going to be enough to stimulate increased growth.
Dealers have to consider taking less commission from more customers. This must be better than having an ever-decreasing finance penetration at the point of sale with the resultant fall in F&I income. Consumers are now familiar with being offered a rate that matches their circumstances.
For dealers, this approach would present longer-term opportunities to sell finance to more customers.
If we don’t consider adopting risk-based pricing and continue to underwrite/price on the age of vehicles instead of customer profiles, we’re cherry picking better quality customers. We should be offering dealers the flexibility to submit proposals for all their customers and have that finance deal underwritten.
Risk-based pricing is on our agenda and we are looking at whether we need to change our approach to underwriting to make sure we stimulate growth of F&I at the point of sale. We are currently talking to a number of our dealers, engaging them in this debate, and seeking their views on risk-based pricing as a solution to the current issues facing our industry.