F&I Pricing

Myth Buster #1: Never Put F&I Pricing Online So You Can’t Be Rate-Shopped

When dealers are asked why they are reluctant to put F&I pricing information online so they can be competitive with direct financing options, what we commonly hear is that they don’t want to be ‘rate-shopped;’ they can’t afford the risk to profits.

On its face, that sounds like a very reasonable concern.   But, if you look under the hood, the reality differs significantly from the perception.

The truth is that dealers hold the competitive advantage over most direct financing options.

Let’s break this myth down.  And it is all about supply and demand.  Let’s use Bank of America (BOA) as an example, although you could pick any of the bigger banks or lenders.   If the BOA automotive lending portfolio were an open book, you would quickly see they do far more loan originations indirectly through dealerships then loans directly to their own customers.   By a wide margin.  Furthermore, because dealers work with hundreds of banks and lenders, BOA is essentially competing with the other 900 lenders on a DealerTrack or RouteOne, so they have to be more competitive with the financing programs they offer dealerships.  In other words, DT & RO create a marketplace.

The marketplace creates competition.

And that competition gives indirect dealership financing a competitive advantage over direct-to-consumer automotive loans.  The competition means BOA programs for dealer arranged financing will have more options, with more favorable rates and terms, than their own direct-to-consumer loans.    And here’s the real win:  Dealers can confidently quote rates and payments – that include participation – and still compete favorably with the direct-to consumer loan options. Credit Unions would be the only exception – but consumers would go to their CU first anyway.

So, putting F&I pricing online is a Win Win. It creates transparency with consumers, encouraging them into your dealership, while demonstrating that your financing options are the most favorable, meanwhile you capture car sales and loyalty without jeopardizing profits.

A recent survey we fielded with auto dealerships underscores that dealerships can successfully compete with direct financing: dealers reported that they are able to flip 50% of consumers who came in with pre-arranged financing into dealership financing.  But, why wait until they come in and then spend the time and resources flipping customers? Be in the game upfront:  online rather than further down the line in store, where you risk customer frustration and increased transactions times.

Think about it. Why waste time ‘recapturing’ customers when you can capture them first, upfront with real terms, online?

We agree with Adam Arens, Owner and President of Patriot Subaru, who recently said, “…you have to be there or customers will eliminate you as a place to do business.  So if you don’t have at least a payment calculator, it’s a mistake.…. Let people buy when they are ready to buy. on their own…. “

The bottom line is that it is all about selling more cars: good customer relationships fuel more sales and transparency builds trust which helps build those relationships. Says Arens: “Once you realize you are in the relationship business, not the car business, that’s when you might change how you think about how you succeed or fail.”

So, isn’t it time to bust this myth and rethink your decision not to make financing information easily available on your website? After all, it could be costing you both car sales and profits.

Author: Pete Maclnnis

Author Bio: Pete brings over 37 years of experience in automotive finance and technology as Founder and CEO of eLEND Solutions.  Founded in 2003 as DealerCentric, eLEND Solutions is an automotive FinTech company specializing in online and in-store digital credit, identity and finance solutions designed to create a more efficient and profitable vehicle purchase process for the retail automotive industry. 

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