The Blue Oval is changing who is overseeing its captive finance company.
On Tuesday, Ford announced that Bernard Silverstone, the automaker’s group vice president and chairman and chief executive officer of Ford Motor Credit, has elected to retire effective Oct. 1, after 37 years of service.
Silverstone, 60, will be succeeded by Joy Falotico, who is being named Ford group vice president and Ford Credit chairman and CEO.
“Bernard’s global expertise and strong leadership have been key to Ford Credit’s continued profitability and growth, as well as new financial solutions for mobility,” Ford president and CEO Mark Fields said.
“Throughout his career, Bernard has worked tirelessly to ensure Ford Credit continues to be an important part of our success. We are grateful for his dedication and many contributions around the world,” Fields continued.
Since becoming Ford Credit chairman and CEO in January 2013, the OEM highlighted Silverstone also has guided the company in continually improving dealer and customer services, and maintaining low credit losses while providing consistent levels of automotive financing.
According to its second quarter report, Ford Motor Credit kept its average retail installment contract term below the industry average (64 months versus 73 months) while the captive also kept its lease exposure lower than what other finance companies have posted. Ford said its share of retail transactions in Q2 that were connected to a lease came in at 23 percent, 8 basis points lower than what Blue Oval executives indicated as the industry average.
“It has been a privilege to spend my career with this outstanding team and to have had the opportunity to lead Ford Credit’s contributions to Ford’s success,” Silverstone said.
“Joy is an experienced and trusted leader with a sharp focus on driving strong business fundamentals,” Silverstone continued. “She is in a great position to lead Ford Credit’s success.”
Falotico, 49, has served at Ford Credit for 27 years and will continue the company’s strategies to improve and expand its business in support of the One Ford plan for profitable growth.
Prior to this appointment, Falotico was chief operating officer, leading Ford Credit’s global operations, as well as marketing, sales and brand, business center operations and insurance operations.
Falotico joined Ford Credit in 1989 and has held a wide range of senior positions, including executive vice president, Ford Credit Marketing, Sales, Americas and Strategic Planning; vice president of North American operations; vice president of U.S. Sales Operations; vice president of Global Marketing; and had pan-European responsibility for customer and dealer service operations and risk management for Ford Credit Europe.
Falotico is involved in the American Financial Services Association, previously serving on its board of directors and executive committee, and was chair of the AFSA Vehicle Finance Division Board.
With more than 3 million active subscribers using its GPS-based vehicle telematics and Business Intelligence solutions, Spireon recently highlighted that its SkyLink solution is enabling dealerships to streamline inventory management as well as add a new finance and insurance profit center with a unique connected-vehicle service offered to buyers.
According to SNS Research, connected-vehicle services will account for $14 billion in annual revenue by the end of 2016. Connected-vehicle applications include telematics, infotainment, remote diagnostics, UBI (Usage Based Insurance), semi-autonomous driving and others.
Spireon insisted this connected-vehicle business opportunity has largely escaped dealers, as manufacturers and aftermarket services reap the benefits of this growing market.
With Spireon SkyLink, dealers now have the ability to offer connected car services to their customers, adding a new source of revenue for their business while also providing a compelling connected car product and service for their customers.
Streamlined inventory management
With SkyLink, dealers partner with Spireon for a one-time install of the GPS tracking device to use for their inventory management, saving precious time and resources on the floor.
“Floor plan checks that took over six hours now take less than 90 minutes,” Arrowhead Cadillac general manager Rick Meewes.
“The Find It feature allows my sales department to locate vehicles quickly, which has cut my total transaction time down to less than three hours,” continued Meewes, who oversees the luxury model store in Glendale, Ariz. “SkyLink is an invaluable partner."
New F&I profit center
Once a vehicle is purchased, dealers can add on the SkyLink mobile app service for the buyer, connecting them to the already-installed GPS tracking device. The buyer simply connects to the SkyLink mobile app via their smartphone.
“SkyLink has produced a significant amount of income for our company and our group of dealerships,” Berkshire Hathaway national director Chris Depperman said. “Their customer service is unmatched, and I highly recommend them to any other dealership group or insurance company.”
Stolen vehicle recovery
SkyLink’s connected-vehicle features include a modern solution for consumers to easily recover their vehicle if ever stolen. Owners using SkyLink can quickly locate their vehicle using the SkyLink mobile app, while Spireon SkyLink works directly with law enforcement to recover the vehicle.
SkyLink also features optional theft guarantee coverage, providing up to $5,000 in trade-in benefits should a vehicle be stolen and not recovered in 30 days.
Additionally, users can save up to 25 percent on insurance premiums that offer discounts for vehicles with theft recovery devices installed.
“With over 14,000 car dealerships currently connecting their inventory with Spireon products, we are a trusted partner in the dealer community,” Spireon senior vice president Bill Stephenson said.
"Our satisfied customers can attest to SkyLink’s win-win of being able to not only save time and resources dedicated to inventory and lot management, but also add a new F&I profit center to their business by offering the connected car features that car buyers really want," Stephenson went on to say.
Federal Reserve chair Janet Yellen reiterated again on Friday that an interest-rate increase continues to be closely considered by policymakers as they watch a wide array of broad economic trends to shape their decisions.
During the Fed’s annual retreat to picturesque Jackson Hole, Wyo., Yellen made a presentation titled, “Designing Resilient Monetary Policy Frameworks for the Future,” outlining what the Federal Open Market Committee (FOMC) is seeing and how that’s impacting potential decisions to be announced during its remaining official meetings for 2016.
“Looking ahead, the FOMC expects moderate growth in real gross domestic product (GDP), additional strengthening in the labor market, and inflation rising to 2 percent over the next few years,” Yellen said during her presentation posted on the Fed’s website. “Based on this economic outlook, the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives.
“Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the committee’s outlook,” she went on to say in comments available here.
What Yellen told the gathering fell in line with what Comerica Bank chief economist Robert Dye expected a week ago when he posted his regular commentary.
“The minutes of the July 26-27 FOMC meeting, along with comments by Bill Dudley of the New York Fed, created some buzz about the possibility of a Fed funds rate increase in September,” Dye said. “However, this is still a very divided FOMC. The minutes make clear that there is a significant faction within the FOMC that will not favor raising the Fed funds rate in September.
“We see no reason why FOMC chairwoman Janet Yellen would firm up her intention to raise the Fed funds rate five weeks ahead of the next FOMC meeting,” he continued. “Rather, she will likely wait until she has had face-to-face discussions with FOMC members at the Fed’s annual retreat in Jackson Hole, Wyo., and then wait further until after the August jobs data is released on Sept. 2, before she sets her intentions for the September FOMC meeting.”
Dye pointed out that according to the Fed funds futures market, the odds of a rate hike in September are up to 18 percent.
“We continue to expect only one fed funds rate hike this year in December,” Dye said.
But then Dye added in a blog post after Yellen’s remarks, “I believe that this is too low and I suggest that the odds are now closer to 33 percent.
“If we see another strong month of job growth, after better-than-expected results for June and July, then the odds of a Sept. 21 fed funds rate hike will increase,” Dye continued in this post. “Conversely, a weaker-than-expected result next Friday would diminish the odds of a September rate hike.
“I believe that if we see payroll job growth north of 200,000 for August, then after the Labor Day holiday we will hear comments from various FOMC members that will more strongly hint at a September rate hike,” he added.
Whether a move comes in September of December, Yellen maintained the approach the Fed is taking.
“Although fiscal policies and structural reforms can play an important role in strengthening the U.S. economy, my primary message today is that I expect monetary policy will continue to play a vital part in promoting a stable and healthy economy,” Yellen said.
“New policy tools, which helped the Federal Reserve respond to the financial crisis and Great Recession, are likely to remain useful in dealing with future downturns,” she continued. “Additional tools may be needed and will be the subject of research and debate.
“But even if average interest rates remain lower than in the past, I believe that monetary policy will, under most conditions, be able to respond effectively,” Yellen went on to say.
GWC Warranty, a provider of used-vehicle service contracts and related finance and insurance products sold through dealers, recently announced the addition of Melissa Roberts as the new marketing manager.
As a member of the marketing department, GWC explained Roberts will be responsible for developing and implementing a comprehensive customer strategy focused on engaging and retaining GWC partners by designing a customer experience aimed at helping them sell more cars and increase profitability.
Roberts brings to this role nearly a decade of experience in research and analytics for international business-to-business manufacturer, InterMetro Industries, in Wilkes-Barre, Pa. She most recently held the title of product manager, data & services, responsible for developing and managing the company’s portfolio of extended warranties and service contracts.
Having graduated summa cum laude from the University of Pittsburgh in 2006, Roberts is also an accomplished project manager having received training in risk management and project management from Pennsylvania State University.
EFG Companies, together with Northwood University, launched the second annual F&I Innovator of the Year Competition this week. Held during the fall semester each year, this competition leverages the out-of-the box thinking of today’s Gen Z college students, coupled with F&I industry leaders’ insight, to boost the F&I industry’s focus on innovation.
The annual F&I Innovator of the Year Competition pits six teams of Northwood’s junior and senior automotive students against one another to conceptualize and build a new F&I product, while earning course credit. With an F&I director as a mentor and guide, the competing teams develop a business case for their new F&I product that incorporates industry research, market viability and the product’s potential to facilitate F&I product sales in franchise dealerships.
The teams will also keep weekly YouTube video diaries of their progress, challenges and breakthroughs.
“The automotive industry is going through a period of extensive change,” EFG Companies president and chief executive officer John Pappanastos said. “Consumer expectations and buying habits have shifted towards a more value-conscious and long-term mindset. The Federal Trade Commission and Consumer Financial Protection Bureau are continuing to focus on transparent auto lending practices. Manufacturers are undergoing a shift with the rise of electric vehicles, connected cars and ride sharing services.
Each of these aspects of a dealership’s operations is in a mutually effective relationship with F&I. As new, young talent has brought significant advancements to other areas of the auto industry, it makes sense for the F&I industry to avail itself with new ideas from fresh minds, as well,” Pappanastos continued.
A panel of leading dealer principals from across the nation and EFG executives will judge the business case competition in late November, and crown the newest champion in early December. The winning team will take home $25,000, and more importantly, EFG Companies will develop the winning F&I product and launch it to the retail automotive marketplace. The company will donate a percentage of the profits from the sale of the product back to Northwood University.
“This competition puts Northwood University students at the forefront of the innovation that will forever change the dealership landscape,” Northwood University president Keith Pretty said. “Through this competition, our students have the opportunity to provide a never-before-seen solution to current dealership challenges and drive dealership profitability.
“This exemplifies our philosophy of hands-on learning and developing the leadership skills and talent necessary to bring the automotive industry into the future,” Pretty went on to say.
Last year’s winning team, Quantum Integration, applied consumer research, industry and mentor input and millennial sensibilities to create an F&I product for the connected car. The team’s product utilizes a mobile application to provide consumers a convenient way to stay current on vehicle maintenance, prevent theft or recover their vehicle.
EFG Companies will roll out the product in the fourth quarter of this year.
Richie Durso, from Quantum Integration, had this advice for this year’s competitors
“Think of real world problems and see how you can solve them to make people’s lives easier. Also, remember that your product can be a service and not just a tangible item. Even if you don’t win, the experience is priceless,” Durso said.
Now a senior at Northwood, Durso answered several other questions about the experience in a Q&A session shared by EFG Companies.
EFG: It’s been one year since you were named a winner of EFG and Northwood’s Innovator of the Year Award. Has Team Quantum Integration stayed in touch?
Durso: Collin and Jon graduated from Northwood in June and we have not had a chance to connect since they have moved on.
EFG: How did participating in the program grow your automotive expertise?
Durso: While I always felt that I was up-to-date on my automotive knowledge, the competition taught me new information about the F&I side of the business that I did not know.
EFG: In what ways has your involvement in the program influenced your future educational or career path?
Durso: This competition added more fuel to my drive. I have a strong passion and drive for the auto business and this competition reinforced my decision.
EFG: What are your hopes for the mobile app that EFG is now developing based on your team’s ideas?
Durso: I hope that it actually makes it to market! I also want EFG to stay in contact with my team and me regarding the development of the app and any marketing ideas.
EFG: What did you do with the award winnings?
Durso: My award winnings went to pay for daily living expenses, investments in stocks and a much-needed vacation to Florida.
EFG: What are your career plans upon graduation?
Durso: I hope to be working at the corporate level for an automotive company, and would like to manage auto shows. I also have an interest in the financial aspect of the automotive business, including earnings reporting, guidance and industry trends. Being a part of the F&I competition has also sparked an interest in product development.
Retail used-car prices, at $19,400 a pop, have never been higher than they were in the second quarter, according to Edmunds.com.
But here’s the thing.
Average monthly payments on used vehicles are staying relatively low.
In the second quarter, the average monthly payment on a used car was $382, according to Edmunds’ latest Used Vehicle Market Report. That’s up just $2 from Q2 of last year.
Meanwhile, new-car payments were at $505 last quarter. That’s up $14 year-over-year.
To put that in perspective, monthly payments on used cars have climbed just $13 in the past four years and $18 in the past five, according to Edmunds.
New-car payments have jumped $44 since Q2 of 2011.
So, what’s keeping monthly payments on used cars so low, amid record high prices?
Math, really.
But, more specifically: Term lengths are climbing while average APRs, for the most part, are on the decline.
In Q2, the average term length was 67.0 months. It has been a steady upward march the past five years for average APR, which was around 62 months in Q2 of 2011.
The average APR, meanwhile, was 7.4 percent in the most recent quarter. Five years ago, it was around 8.3 percent.
“Average term lengths have surpassed the five and a half year mark, all in the effort to keep monthly payments for pricier used vehicles at more affordable levels,” Edmunds said in the report.
In less than four years after Westlake Flooring Services was founded, the company recently hit the milestone of 100,000 vehicles in its portfolio.
Since November 2012, Westlake Flooring has grown to a division of more than 100 employees with approximately 1,000 active dealerships.
“We are very excited to cross 100,000 vehicles floored,” Westlake Flooring Services vice president Pat Amato said. “This is a testament to the hard work and dedication we have poured into this division. We look forward to growing the count of vehicles floored significantly over the next couple of years.”
Dealerships that floor their inventory with Westlake Flooring Services can save up to $508 per deal when they combine incentives provided by the Westlake group of companies. These savings include waived term fees, rate reductions on their wholesale line, reduced lender fees and auction-related coupons.
“Westlake continues to invent new ways to help dealerships drive their business,” said Ian Anderson, group president of Westlake Financial Holdings, who will be part of a panel discussion about floor planning during the SubPrime Forum at Used Car Week, which runs from Nov. 14-18 at the Red Rock Resort and Casino in Las Vegas.
“We want to equip dealers with the tools to help them lower their costs and increase their profitability,” Anderson continued. “We call this Bundle and Benefit, where a dealer can see an annual savings of up to $112,000 when they take advantage of the full-spectrum of Westlake’s financial solutions.”
Westlake Flooring Services provides flexible terms, competitive rates and 100 percent financing to dealers. Dealerships interested in learning more about Westlake Flooring Services can contact the company directly at (855) 493-7357) or visit www.westlakeflooringservices.com.
With technology leveling the playing field to a degree, relationships nowadays really matter, especially when they involve how a dealer is going to get a delivery bought for their customers or how they’re going to have the floor planning for inventory.
The J.D. Power 2016 U.S. Dealer Financing Satisfaction Study determined the relationships auto finance providers develop with dealerships are critical to dealer satisfaction and to remaining competitive in the market, especially as the new-vehicle sales market tightens.
J.D. Power insisted a combination of “slowing” new-vehicle sales and an “uncertain” used-vehicle market is contributing to an already contested auto-lending environment. Analysts acknowledged technology has eliminated disparity of speed in financing, leaving finance companies to differentiate themselves by the relationship they are able to form with the dealership.
“Speed has been king and the area lenders have traditionally focused on, but as the market gets tougher, lenders need to center their attention on their relationships with dealers, or they are going to lose business," said Jim Houston, senior director of the automotive finance practice at J.D. Power.
“Lenders need to move beyond a transactional relationship with dealers to a richer consultative partnership,” Houston continued. “Lenders with a dealer-centric culture across their organization — not just in various pockets of the business — are the ones that are most likely to excel.”
Houston noted that in building a dealer-centric culture, finance companies must understand their dealers’ businesses and goals, which helps establish them in the eyes of dealers as their business partner and problem solver. That starts with communication with the dealer.
The study indicated that fewer than half of dealers receive consistent sales rep calls or visits, both of which can boost overall satisfaction by as much as 68 points and 75 points, respectively, on a 1,000-point scale. But it's more than just the frequency of the contact, it's the nature of those touch points that adds value to the relationship.
"Dealers value a lender that can help them handle the tough issues and solve those 'outside-the-box' situations,” Houston said. “This is where having the right people focused on their dealers and helping them execute their strategic plan is essential."
Opportunities to excel and grow business
The study identified three areas of opportunity for finance companies that will help them enhance their dealer relationships. They included:
1. Consistent performance among their dealer relationship managers
2. Identification of their best dealers and a prioritization of those relationships
3. Efforts that focus on areas most important to dealers
“These are the things dealers say they want from their lenders, but are not necessarily getting on a consistent basis,” Houston said. “When the market gets tough, lenders that meet dealer expectations are going to get a greater share of the business.”
Findings of the study showed that high satisfaction with finance companies leads dealers to increase the amount of business they send to those respective lenders over the next year. Falloff is swift when satisfaction declines.
When satisfaction scores are 900 points or higher, J.D. Power found 62 percent of dealers say they are likely to increase the amount of business they send to the lender over the next year.
When satisfaction falls to between 800 and 889, J.D. Power noticed only 37 percent of dealers indicate they intend to send more business to that finance company.
When satisfaction dips to 700-799, J.D. Power said only 22 percent of dealers intend to increase business with that finance company.
Analysts mentioned two other key findings from the study, which included:
—Speed still matters: Speed still plays a significant role when dealers are choosing lending partners.
When finance companies fund error-free contracts on the same day as they are submitted, dealer satisfaction increases by as much as 64 points.
When finance companies notify dealers of contract issues or errors within four hours after they are submitted, satisfaction increases by as much as 60 points.
—Exceptions to the rule: Dealers want their lending partners to value the total relationship. In some cases, this means providing exceptions when warranted.
A well-managed exception process can increase overall satisfaction by up to 79 points.
Dealer financing satisfaction rankings
German luxury brand captives dominated the dealer rankings.
Mercedes-Benz Financial Services ranked highest among lenders in the prime retail credit segment for a second consecutive year with a score of 961. Following in the rankings were BMW Financial Services (959), Alphera Financial Services (941), Lincoln Automotive Financial Services (936) and Infiniti Financial Services (930).
Mercedes-Benz Financial Services also ranked highest among finance companies in the retail leasing segment for a second consecutive year with a score of 982. Following in the rankings were BMW Financial Services (958), Ford Credit (913), Volvo Car Financial Services (912) and Subaru Motors Finance (911).
And making it a sweep for the captive, Mercedes-Benz Financial Services ranked highest among floor planning providers for a sixth consecutive year with a score of 986. Following in the rankings were BMW Financial Services (975), Huntington National Bank (969), Hyundai Motor Finance (945) and Kia Motors Finance (945).
J.D. Power explained satisfaction is measured across three factors in the prime and non-prime retail credit segments: finance provider offerings, application and approval process, and sales representative relationship.
Four factors are measured in the retail leasing segment: finance provider offerings, application and approval process, sales representative relationship and vehicle return process.
Four factors are measured in the floor planning segment: finance provider credit line, floor plan support, sales representative relationship, and floor plan portfolio management.
The 2016 U.S. Dealer Financing Satisfaction Study captures more than 20,000 finance provider evaluations across the four segments. These evaluations were provided by 3,100 new-vehicle dealerships in the United States. More details can be found here.
Prime retail credit overall customer satisfaction index scores, based on a 1,000-point scale:
Mercedes-Benz Financial Services: 961
BMW Financial Services: 959
Alphera Financial Services: 941
Lincoln Automotive Financial Services: 936
Infiniti Financial Services: 930
Subaru Motors Finance: 908
Jaguar Financial Group: 902
Chase Automotive Finance: 895
Land Rover Financial Group: 891
Huntington National Bank: 890
Volvo Car Financial Services: 890
Ford Credit: 888
NMAC: 884
BB&T: 881
Citizens One: 875
TD Auto Finance: 874
Ally Financial: 873
Mazda Capital Services: 873
Volkswagen Credit: 873
Industry Average: 868
Capital One Auto Finance: 867
Fifth Third Bank: 867
Bank of America: 866
SunTrust Bank: 864
Toyota Financial Services: 860
Kia Motors Finance: 859
Wells Fargo Dealer Services: 853
PNC Bank: 851
BMO Harris Bank: 844
US Bank: 835
Bank of The West: 822
Hyundai Motor Finance: 821
GM Financial: 815
Credit Union Direct Lending: 813
Honda Financial Services: 813
Chrysler Capital: 798
Note: Included in the study but not ranked due to small sample size are Acura Financial Services, Alaska USA Federal Credit Union, Fidelity Bank, First Niagara Bank, Gateway One Lending & Finance, MINI Financial Services, Santander Auto Finance and Security Service Federal CU.
Retail leasing overall customer satisfaction index scores, based on a 1,000-point scale:
Mercedes-Benz Financial Services: 982
BMW Financial Services: 958
Ford Credit: 913
Volvo Car Financial Services: 912
Subaru Motors Finance: 911
Land Rover Financial Group: 891
NMAC: 891
Jaguar Financial Group: 890
Mazda Capital Services: 886
Industry Average: 885
Toyota Financial Services: 869
Kia Motors Finance: 868
Honda Financial Services: 866
US Bank: 863
Ally Financial: 851
GM Financial: 843
Hyundai Motor Finance: 835
Chrysler Capital: 828
Note: Included in the study but not ranked due to small sample size are Infiniti Financial Services, Lincoln Automotive Financial Services, MINI Financial Services and Volkswagen Credit.
Floor planning overall customer satisfaction index scores, based on a 1,000-point scale:
Mercedes-Benz Financial Services: 986
BMW Financial Services: 975
Huntington National Bank: 969
Hyundai Motor Finance: 945
Kia Motors Finance: 945
Ford Credit: 944
Chase Automotive Finance: 941
Industry Average: 938
Ally Financial: 935
NMAC: 931
Bank of America: 927
GM Financial: 926
Toyota Financial Services: 899
Chrysler Capital: 897
Note: Included in the study but not ranked due to small sample size are PNC Bank, Volkswagen Credit and Wells Fargo Dealer Services.
GWC Warranty, a provider of used-vehicle service contracts and related finance and insurance products sold through dealers, has successfully topped $400 million in claims paid to date.
GWC Warranty’s $400 million in claims paid, combined with sister-company EasyCare’s $3.1 billion, brings the APCO Holdings claims paid total to more than $3.5 billion.
“Surpassing $400 million in claims paid is an important milestone for GWC and our dealers as well,” GWC Warranty chief executive officer and president Rob Glander said.
“By partnering with an organization that has totaled more than $3.5 billion in claims paid, dealers who sell GWC service contracts can rest assured that we’ll stand behind it,” Glander continued. “And their customers can enjoy their vehicles knowing that if a breakdown occurs, GWC will be there to get them back on the road quickly.”
This new claims paid milestone is the latest accolade for GWC Warranty, which has been recognized in both SubPrime Auto Finance News’ SubPrime 125 and Auto Remarketing’s Power 300.
Earlier this week, J.D. Power appointed Jim Houston as senior director of its auto finance practice. In this role, Houston will deploy his significant auto finance business experience to help guide the industry through what J.D. Power contends could potentially be a volatile period of new-vehicle sales and declining used-vehicle values.
Houston comes to J.D. Power with nearly 30 years of experience in the auto finance business, most recently with TD Auto Finance.
Houston has held leadership positions at both captive financing companies and banks across the spectrum of auto finance functions, including dealer operations, sales and marketing, business intelligence, product management, commercial services, fair lending, customer service and collections.
“I’m very excited to be joining J.D. Power to lead the auto finance practice, especially at this critical time for the automotive market and lenders,” Houston said.
“The combination of new-vehicle sales tapering off and the growing volume of off-lease vehicles driving down used-car values creates some potential business concerns for auto lenders,” he continued.
“It’s not a doom-and-gloom scenario, but it does require banks and captive lenders to remain diligent in order to stay competitive," Houston went on to say.
