Embracing Digital F&I

2016 will be another year of accelerated growth in the ongoing shift toward online retailing. Thousands of auto dealers are already taking advantage of this evolution in the car-buying experience, and thousands more are sure to follow this year.

Consumers can buy nearly everything online, from TVs to paper towels, an experience we call “shopping cart ecommerce.” And those expectations of convenience are translating to auto retail and finance experience as well. However, cars don’t fit in shopping carts and the shopping cart ecommerce model doesn’t work for automotive retail.

Selling cars is a relationship business. It always has been and it always will be. The personal connection will always be an integral part of the equation. For F&I specifically, the Internet is a communication power tool that enables consumers to research products and put them in their consideration set before going to the dealership to verify and buy.

Frustration With the Buying Experience

For most people, the car purchase is the first or second largest investment they’ll ever make. Despite the size of this purchase, the top five frustrations of car buyers are all related to the buying experience. Research from MakeMyDeal and Autotrader provides us five important insights:

• Less than 1% of consumers prefer today’s car-shopping process.
• 54% of consumers will pay more for a better experience.
• 84% of consumers say they would rather learn about F&I products at home.
• 63% of consumers are more likely to purchase F&I products if they learn about them before visiting the dealership.
• 72% of consumers find online F&I paperwork appealing, particularly in order to save time and avoid pressure when filling out paperwork.

When looking at these insights together, it’s clear dealers have a huge opportunity to improve the customer experience by digitizing the F&I process. Dealers are already using online menus and econtracting, and some have added esignature to their growing list of digital tools. These improvements not only provide an experience consumers are expecting but also reduce errors in data entry and simplify recordkeeping.

But focusing exclusively on digitizing paperwork leaves out what is perhaps the biggest opportunity to increase profit: It’s time to take the F&I product sales process online, starting with product presentation and pricing.

Prominently displaying product information, benefits and pricing within the inventory pages of dealers’ websites provides vehicle-specific information that will improve the consumer’s shopping experience. More importantly, it also enables the dealer to educate and inform consumers early in the buying decision, which increases profitability.

Without an online approach, the F&I product sales process is compressed into a high-pressure process amidst confusing paperwork during the hour or more the customer spends in the F&I office. Decompressing the F&I process by bringing product information to the consumer early and often allows them to self-educate and build interest in products before the F&I conversation, which in turn shifts this activity to an upsell instead of just a discovery process.

Busting the Trust Gap

From the time a customer enters the dealership until they complete the purchase, the main question on their mind is, “What’s your best deal?” Their sales professional knows, but they hold back until they get well beyond the meet-and-greet, qualify, walkaround and test drive.

From the time they shake hands with the customer, the sales team’s behavior is primarily driven by the need to get as much information about the consumer as possible —name, contact information, credit situation, cash on hand, monthly budget, trade-in — all the information the CRM and the DMS software need to book the sale.

With both parties doing their best to pry information loose from the other one, the stage is set for destroying trust between the customer and the dealership. This is a relationship dynamic you read about in major publications under headlines like “People Would Rather Go to the Dentist Than Buy a Car.” I call this phenomenon the “trust gap.”

Why is trust so important? Research from Autotrader shows over half of consumers won’t buy from a dealer that delivers the wrong customer experience, even if they do have the lowest price. After all, the car-buying process is a relationship process, and what’s a relationship without trust?

About one in five customers do make it through the sales process to the finance office, where this process continues. Buyer and seller continue to pull in opposite directions, with the customer primarily interested in leaving as quickly as possible and the finance manager working hard to spend as much time selling as many F&I products as possible. This process only reinforces the lack of trust in the process.

Busting this trust gap is surprisingly simple and profitable but requires a change in perspective about the sales process. Rather than hold back information as a means to try to control the customer, sharing product information and estimated pricing upfront and online gives consumers the feeling of control in their buying process and builds trust.

Giving customers pricing information and the ability to personalize their monthly payments doesn’t give them control of profitability, only a feeling of control over their buying decisions. When dealers stay in control of the deal structure (and profitability) and consumers have a feeling of control, both parties win.

The commonplace tools today are payment calculators and pricing promises. Payment calculators give consumers bad information about car payments and pricing promises focus on third parties as the source of truth instead of dealers. These tools widen the trust gap between consumers and dealers.

As for F&I products, a quick Google search for “extended warranties” reveals plenty of reports on whether the products are really worth the investment and warnings from consumer advocate groups about potential “rip-offs.” At best, consumers might find a website with direct-to-consumer sales of aftermarket products that short-circuit the dealer’s profit opportunity.

Rather than leave the airwaves open for negativity, dealers can flood their customers’ screens with relevant and positive messages about the coverage, benefits and pricing for available protection products. Replacing negativity with straightforward information builds the dealer as a trusted relationship and source of information. But that battle begins online, not in the finance office.

Converting the Dealership Visit From a Negotiation to a Confirmation

When dealers offer information upfront, the in-store visit totally transforms. Dealers cause this transformation by providing online vehicle payments and F&I product information and pricing.

When the consumer engages in an online deal-making experience, this shifts the uncomfortable price negotiation and budget conversation to a place where the consumer feels totally at home: the sofa in their living room. Getting customers past the unpleasant part of the purchase puts them at ease before they arrive at the store and reduces time spent at the dealership.

Connecting with customers and leading them to a “Yes” online involves receiving their first pencil, then answering their questions and responding to their proposal. Simply gathering customers’ contact information and working to set appointments is not enough to build a relationship and earn their trust. Actually engaging in the deal-making process with the customer while they are still at home earns their trust and shifts their state of mind for the in-store visit.

The in-store experience thus becomes a confirmation rather than a negotiation. Instead of coming to the store with their guard up, customers visit with their estimated deal structure in mind. They’ll be looking to validate those numbers, and if everything checks out, then the transition to the finance office is a seamless one. Customers will enter the finance office more relaxed, more comfortable and more receptive to a conversation about the F&I products that might be best for them.

As with any significant industry shift, digitizing the sales and F&I process will take a commitment to change and some trial and error. But it will ultimately result in more satisfied customers and higher profits. I firmly believe that online deal-making can close the trust gap and improve the overall car shopping experience for consumers. We can build an interactive conversation that starts online and ends in the dealership with the consumer driving away thinking, “That was the best car-shopping experience I’ve ever had!”