MakeMyDeal, a Cox Automotive company that is geared to enable dealers and shoppers to negotiate a vehicle deal online, recently rolled out a new solution it’s calling F&I Connect.
The company explained this product is designed to bring the finance and insurance process “into the digital age.” Powered by F&I Express, F&I Connect can let dealers promote their F&I products and prices in a controlled online environment while giving consumers the opportunity to learn about financing and insurance program options before finalizing their deal.
“Our research shows that there is an opportunity within the current F&I process to better educate consumers about the value of F&I products, reduce the time they spend in the F&I office and improve their satisfaction with the overall buying process,” said Mike Burgiss, vice president and general manager of MakeMyDeal.
“By bringing F&I information and pricing online, we are able to give consumers a better understanding of their options, which can ultimately have positive effects for the dealership in terms of satisfaction and sales,” Burgiss continued.
A 2015 study commissioned by MakeMyDeal shows that while 84 percent of consumers believe that F&I products may have real value, 54 percent say that they prefer to simply complete their purchase and leave the dealership as quickly as possible.
The study indicates that the majority of vehicle purchasers feel that they are familiar with F&I products. However, when asked to define F&I products and services, the study reveals a significant gap in consumer understanding.
Additionally, 83 percent are interested in learning about F&I products before entering the dealership, and 63 percent would be more likely to buy F&I products if they could learn about them on their own time, before finalizing their vehicle purchase.
MakeMyDeal F&I Connect, powered by F&I Express, is designed to do just that — provide dealers with the opportunity to present their F&I products online to educate consumers about their options and ensure that they are a part of the total purchase consideration set.
“F&I Express has the largest aftermarket provider network in the industry with more continually joining,”, President and CEO of F&I Express president and chief executive officer Brian Reed said.
“Our digital platform provides dealers with instantaneous and accurate rates for aftermarket products,” Reed continued. “Powering F&I Connect allows us to bring the customer information earlier in the car buying process, resulting in more sales. It’s a win for everyone.”
The MakeMyDeal F&I product was launched in beta with select dealers in June. Dealers who are interested in learning more should contact MakeMyDeal at (800) 309-2040.
Metrolina Credit Co. — which operates a network of branch offices throughout North and South Carolina to service installment contracts that it purchases from dealers in the local market — shared plans to open another location sometime in the second quarter of next year.
The company said its expansion effort into Winston-Salem, N.C., marks Metrolina’s fourth expansion market and the seventh overall dedicated market. Metrolina intends to develop and service business from this market immediately through its branch office in nearby High Point.
“We believe Winston-Salem, N.C., is an excellent market for our brand and our product,” Metrolina Credit president and chief executive officer Doug Marohn said.
“We already have a strong presence in the area through our High Point, N.C., branch. Expanding into the Winston-Salem market with a full service branch operation will allow us to provide our borrowing customers as well as the area auto dealerships with the excellent level of service that has been the cornerstone of our success,” Marohn
In conjunction with the expansion effort into Winston-Salem, the company also announced the addition of Fritz Peters to its branch management team as the branch manager for Winston-Salem.
Peters joins Metrolina Credit Company after spending seven years in the marketplace with North State Acceptance. Prior to North State, Peters had many years of branch management experience in the auto finance industry with Nicholas Financial, JD Byrider, DriveTime and Regional Acceptance.
“Having Fritz Peters join the Metrolina Credit Company team is very exciting,” Marohn said. “For us to be able to attract such a high level of talent with his proven track record is a testament to the success we have been able to achieve over the last two years.
More information about Metrolina can be found at www.metrolinacredit.com.
Investment analysts thought Credit Acceptance Corp. leadership would be a good source to gauge what might be in the subprime auto finance space and gather any clarity about whether turbulence might be ongoing.
Rather than just offering his opinion, chief executive officer Brett Roberts pointed to Credit Acceptance data that compared the company’s forecasted collection percentage against what the firm actually brought into its coffers. And the data Credit Acceptance shares on a quarterly basis goes back almost 10 years, which Roberts said “is pretty unique. I don't think anybody in the industry provides that level of disclosure.”
The actual collection reading has been above the forecast level since 2009, a feat Roberts insisted is the best analysis Credit Acceptance can offer about performance and current conditions. The spread between the projection and actual collected funds has been as high as 7.5 percent back in 2009 but has softened to about 1.0 percent a year ago.
“We tell you exactly what we thought when we originated the loan, how we thought it was going to perform, then we compare that to how it actually performs over time and tell you whether we were optimistic or the opposite when we wrote the loan,” Roberts said during Credit Acceptance’s most recently quarterly conference call.
“What you learn from that is that over the last 10 years we have an overall favorable variance with eight years that were positive and two that were negative. The two years that were unfavorable I think are remarkable because they both occurred during the financial crisis when those loans were serviced during a period of severe economic distress,” he continued. “And the variances, although they were negative, were very small in terms of magnitude.
“So, what we see more recently is that every pool still has a positive variance, at least the last eight years, but the magnitude of that positive variance has been decreasing,” Roberts went on to say. “Typically, when you go through a period where there is more competition that can show up in loan performance, so we've been expecting that sort of strong positive variance that we've seen to diminish.
“And so if you look at those static pools we provide, you can certainly see that trend,” he added.
Thus far in 2015, Credit Acceptance is collecting on its vehicle installment contracts at a clip of 68.2 percent, marking the first time the level has been below the 70-percent threshold since 2007.
Third-quarter originations
The company’s origination volume continues to surge as Credit Acceptance brought 73,614 contracts into its portfolio during the third quarter, representing a 41.3 percent spike year-over-year.
Through the first nine months of 2015, the company’s originations are up by 33.1 percent, coming in at 223,948 contracts.
Credit Acceptance’s active dealer network also is considerably stronger, standing at 6,406 when the company closed its third quarter on Sept. 30. Those active dealers are averaging 11.5 contracts per quarter.
Roberts applauded the work completed by the company workforce, which also led to consolidated net income of $74.0 million, or $3.53 per diluted share.
“I think from a sales execution standpoint, we’re pleased with our progress there,” Roberts said. “We did grow the sales force very rapidly for a period of time. We had some work to do to make that successful, and we’re starting to see a pay off in terms of the productivity per salesperson. I think it shows up most visibly in the new dealers that we're signing up.
“You know, volume per dealer can be affected by a lot of different things, but I think when we sign up a new dealer, we can attribute that to the sales team,” he continued. “So, I think they're doing a great job. We made some program changes. I think the changes we've made with respect to terms have been popular with the dealers. We've begun to originate all of our contracts electronically, and that's been a very popular add for our dealers.
“I think there are a lot of things that we're doing internally that we're proud of,” Roberts went on to say.
Regulatory discussion
As often arises, investment observers also wondered how Credit Acceptance is navigating today’s regulatory environment, especially in light of the Consumer Financial Protection Bureau intensifying its action in connection with dealer markup.
Roberts reiterated that Credit Acceptance handles its compensation differently than other finance companies.
“It’s a different issue for us,” Roberts said. “We don't do the traditional buy rate, sell rate methodology that has been talked about by the CFPB. So, we don’t give the dealer a rate so he can mark it up, and we’ll pay him the difference. That's not the way our program works. We typically set the rate for the dealer.”
Nevertheless, Roberts emphasized that Credit Acceptance maintains its diligence in regard to the moves the CFPB might be making.
“I think the way we look at it is anything that is a priority for the CFPB becomes a priority for us, so we watch everything that they say, everything they do,” he said. “We read everything that they publish, and we pay careful attention to it and we make sure that we're comfortable with the way we address those issues.”
F&I Express announced two more companies joined its aftermarket product network.
The newest additions to the network of nearly 100 product providers in an online portal accessible by dealers are Florida-based United States Warranty Corp., and Dent Wizard, a provider of automotive SMART (small to medium area repair techniques) reconditioning services and paintless dent repair (PDR).
United States Warranty was founded in 1975 to fill the unmet F&I needs of local dealerships.
“We are excited to welcome United States Warranty Corp.’s onto the F&I Express eContracting platform,” F&I Express president and chief executive officer Brian Reed said. “USWC offers a full array of customizable F&I products and their customer-centric beliefs align with our business values on amazing customer service.”
USWC president Mark Macek added, “We are looking forward to this union. F&I Express will allow us to continue pushing forward with eContracting options and give our clients better access to the paperless world.”
Along with providing on-site reconditioning services and products to the industry through its relationships with dealerships, auto auctions, body shops, rental companies and insurance companies, Dent Wizard offers multiple branded appearance protection programs and service plans such as Ding Shield.
“We have been looking forward to Dent Wizard’s integration with F&I Express,” Reed said.
“This digital solution supports F&I managers to accurately eRate and eContract F&I products and services instantly within a deal. It really simplifies the process and allows the F&I managers to focus on the customer’s deal, not the paperwork,” Reed continued.
Dent Wizard vice president of aftersales Lindsey Bird pointed out, “Dealers who provide the best customer experience will have a leg up in the marketplace and win the most deals.
“In an increasingly competitive marketplace, we want to provide dealerships with every opportunity to improve their customer CSI. eContracting with F&I Express is just the beginning and we look forward to additional digital advancements with them in the new year,” Bird went on to say.
The AFC unit of KAR Auction Services enjoyed a solid third quarter, with volumes climbing 13 percent and profitability remaining strong.
According to the parent company’s quarterly earnings information, AFC had 405,116 loan transactions in Q3, up from 358,800 in the same period of 2014, pushing the year-to-date sum above 1 million (1,198,473).
AFC revenue came in at $69.1 million, against $63.5 million in Q3 2014. Through nine months, revenue has totaled $200.2 million, up from $184.2 million through three quarters of 2014.
Revenue per loan transaction, excluding "other service revenue," was down $5 on both a year-to-date and quarterly level.
Operating profit for Q3 increased from $31 million to $34.4 million, with the year-to-date sum at $98 million (up from $87.6 million).
EBITDA reached $42.1 million for the quarter (up from $38.7 million) and $122.7 million year-to-date (up from $110.3 million).
When adjustments are made per the credit agreement, the EBITDA becomes $37.9 million for the quarter (up from $36.3 million) and $110.6 million for the nine-month period (up from $104.9 million).
A transcript of KAR’s quarterly call by FactSet CallStreet was posted to KAR’s website. In that, KAR chairman and chief executive officer Jim Hallett goes over the success in the various business units (ADESA, IAA, etc.) and calls AFC “ another very good story. ”
He also mentions the market’s appreciation of AFC’s business model and the services it is providing customers.
“No question, we've seen increased competition,” Hallett said. “There has been pressure on fees, but I can tell you, that this still remains a very profitable business, and I think that the AFC management team has been able to respond to the competition and grow our market share in this space.”
Hallett goes on to add: “The average revenue per loan transaction is down approximately $5 dollars overall, just to put that in perspective for you. So, I think we're in a good spot there.”
In regards to impact from interest rates, Hallett said AFC is “very well-positioned.”
EFG Companies, partnered with Northwood University, this week announced the judging panel for the first annual F&I Innovator of the Year Award competition.
According to EFG, the eight-member panel collectively touts over 100 years of F&I experience at auto dealerships and has experience at all of the major brands.
“Each judge selected for this panel has a reputation associated with innovation and raising the bar within the automotive industry,” said John Pappanastos, president and chief executive officer at EFG Companies. “Collectively, their vision, years of experience, and expertise give them the unique ability to determine what F&I product has the most potential to benefit consumers, individual dealerships, and the industry as a whole.”
2015 Inaugural Competition Judges
| Judge |
Title |
Auto Group/Company |
| Lisa Copeland |
Manager Partner/General Manager |
FIAT of Austin, a Nyle Maxwell Family Dealership |
| Alvin Heggs |
Dealer Principal |
Superstition Springs Chrysler Jeep Dodge Ram |
| Kurt Hornung |
Vice President of F&I Operations |
AutoNation, Inc. |
| Tiger Lester |
Regional Finance and Insurance Director |
Group 1 Automotive |
| Patricia Lindseth |
Western Region Financial Services Manager |
Penske Automotive Group |
| Anthony Patterson |
Vice President of Operations |
Patterson Auto Group |
| Fernando Somoza |
Executive Manager |
Central Houston Cadillac, Central Houston Nissan, & Baytown Nissan |
| John Stephens |
Senior Vice President |
Dealer Services, EFG Companies |
There are currently six teams competing for having the best F&I product idea – the winning team will win $25,000 and have EFG develop their F&I product for retail consumption, returning a percentage of the latter’s revenues to Northwood University.
The competition will conclude on Friday, Nov. 13 and the winning team and product will be announced Thursday, Dec. 10.
To check out the F&I Innovator of the Year YouTube channel and see each team’s weekly videos, click here.
CUNA Mutual Group recently told attendees during the sixth annual Discovery Conference about the five primary elements credit unions must address if they plan to originate more vehicle installment contracts with subprime borrowers.
CUNA Mutual Group director of loan growth products Steve Hoke pointed out that millions of subprime borrowers are entering the market for new vehicles presents a significant growth opportunity for credit unions to generate new loans while protecting and serving their members.
“Subprime customers took out $129.5 million in auto loans during the first 11 months of 2014, which represents more than one-quarter of all U.S. auto sales, the highest level since before the Great Recession,” Hoke said.
“If you aren’t reaching out to your members and potential members with an auto loan offer at a competitive rate, then you are basically telling them to go elsewhere,” he continued.
Hoke insisted credit unions entering the subprime auto lending market need to be aware of five components, including
1. Reward good behavior
Provide members with an educational financial plan to teach best practices and build credit scores, so members are rewarded with more affordable credit in the long run.
2. Mitigate risk
Offer insurance options for members to protect their auto investment while mitigating risk to a credit union’s loan portfolio.
3. Maximize digital technology
Utilize technology to instantly verify income and employment status. This will speed the underwriting process by indicating whether the member will be able to repay the loan.
4. Recapture existing loans
Capitalize on member loyalty by reaching out to current members who have refinanced at an outside institution through a pre-qualified, auto loan recapture program.
5. Leverage mobile technology
Increase direct loan activity by utilizing mobile apps. These apps allow members to research multiple vehicles, explore loan options and apply online. In return, credit unions reach tech-savvy members at the time of the purchase decision, manage the dealer relationship and provide quotes for insurance products. It’s a win-win situation.
“Our forecasts indicate approximately 35 percent of loan transactions on loanliner.com will come through mobile in 2015 because members want to be able to interact with your credit union on the spot,” Hoke said.
“Mobile lending not only engages tech-savvy members, it also leads to new opportunities to generate additional non-interest income for your credit union,” he went on to say.
The Discovery Conference is an annual event sponsored by CUNA Mutual Group that attracts a national and international credit union audience of more than 1,300. The virtual, no-cost event is designed to give credit union leaders valuable industry insight and trends in the insurance and credit union industries.
After the event, select content is available on-demand for attendees to leverage and share best practices through the end of the year.
Credit unions can learn more about subprime auto lending by viewing Hoke’s Discovery Conference session on-demand at cunamutual.com/registerondemand.
Without necessarily having to be too aggressive with underwriting to consumers lower down the credit spectrum, Ally Financial emphasized that it remains on track to reach its goal for originations this year despite the headwinds of not collecting as much business from direct relationships with General Motors and Chrysler.
The objective of hitting $40 billion worth of paper coming into the portfolio is within reach because Ally originated $11.1 billion in contracts during the third quarter. The performance pushed the company to $31.7 billion through the first nine months of the year.
“We remain on track to surpass our target for the year despite the shifts in the business,” Ally chief executive officer Jeffrey Brown said when the company hosted a conference call with investment analysts after sharing its Q3 financial statement. “The business is well-positioned in the marketplace, increasingly more diversified and poised to provide consistent returns.”
In his opening comments, Brown tried to nip any thinking that Ally would simply hit its targets by taking on more subprime paper.
“Yes, we’ve expanded risk appetite in the more non-prime flows, but we’re still fairly modest at sub-15 percent origination allocation and fully underwrite with the focus on the borrower’s ability and willingness to repay,” Brown said. “And that’s a fact not necessarily true with some of all the deep subprime players.”
Ally insisted that it generated 36 percent increase year-over-year consumer originations, which included $607 million of consumer loans and leases from Mitsubishi Motors Credit of America. Brown pointed out the company collected the highest application volume across all dealer channels in Ally history during Q3. That application flow came from about 17,000 dealers across all 50 states.
“Despite some of the media noise … dealer relationships remain robust, and that was reinforced as I spent several weeks visiting with dealers across the U.S. over the past few months,” Brown said. “We’ve been saying for quite some time this is truly a relationship business and partnering so closely with the dealers allows us to continuously learn and adapt.”
As far as how that portfolio is performing, Ally reported that its delinquencies and net charge-offs in the auto space rose modestly in the third quarter. The delinquency reading moved up to 2.60 percent in Q3, up from 2.28 percent while Ally’s net charge-offs in its auto segment ticked up from 1.01 percent from 0.93 percent a year earlier.
“We continue to feel very good about where we see credit trends. We’re staying disciplined in our buy box and asset quality continues to perform within our expectations,” Ally chief financial officer Chris Halmy said.
As an entire company, Ally said its net income came in at $268 million in Q3. The figure compares to net income of $182 million in the prior quarter and $423 million for the third quarter of last year, which included $130 million in income from discontinued operations.
The company reported core pre-tax income of $431 million, excluding repositioning items, in the third quarter, compared to $435 million in the prior quarter and $467 million in the comparable prior year period. Adjusted earnings per diluted common share for the quarter were $0.51, compared to $0.46 in the previous quarter and $0.53 in the prior year period.
Ally also reported generally accepted accounting principles (GAAP) earnings of $0.47 per common share in the third quarter.
“Ally’s third quarter results demonstrate the ongoing strength of the operations and continued progress on our goals to diversify the business, achieve our financial targets and build upon our leading digital platform,” Brown said
“As we look ahead, our opportunities lie in our inherent strengths — a strong culture of agility and innovation, a proven track-record in digital financial services, a respected customer-centric brand, and a foundation of 5.5 million customers. We have taken initial steps in deepening our customer relationships and expect to expand our customer offerings in the year ahead,” he went on to say.
DocuSign and Visa recently showcased a new proof-of-concept that is geared to bring together secure contracts and payments made online via connected vehicles.
The DocuSign demo highlights how consumers can drive a vehicle off the lot in a matter of minutes after securely signing all documents and paying electronically right from the driver’s seat.
The DocuSign proof-of-concept app, embedded into the dashboard of a connected vehicle prototype developed by Visa for car-based commerce, is designed to simplify the process of leasing or buying a car by automating all the steps into a seamless, completely secure electronic environment.
The technology enables the car to be a smart asset among the Internet of Things (IoT) with the ability to manage services like auto insurance, lease payments and even tolls and parking. The proof-of-concept was developed using the blockchain and brings DocuSign's Digital Transaction Management (DTM) platform, eSignature solution and APIs together with the Visa Token Service for secure payment processing.
“Leasing a new sports car — or any car for that matter — should be fun and exciting, but lengthy paperwork and arduous processes often diminish the experience,” DocuSign head of product Ron Hirson said.
“This proof-of-concept makes it easier and faster for customers to get out the door in their new car by bringing together smart contracts and payments so that customers can electronically sign all pertinent documents and seamlessly pay in one fully digital experience,” Hirson continued.
The proof-of-concept was developed in collaboration with DocuSign Labs, which unites talent from DocuSign’s innovation hubs around the world, together with strategic partners such as Visa, to improve the way technology enables everyday transactions to be 100 percent digital and keep life and business moving forward.
“We see a future where car commerce goes far beyond fuel pumps and drive-thrus, becoming a fully automated experience among the Internet of Things," said Jim McCarthy, executive vice president, innovation and strategic partnerships at Visa.
“Anything you buy from your car, or for your car, can be enabled by automatic payments: whether it's a lease payment, insurance or anything governed by a contract. Tolls, maintenance services, music downloads, parking and even charges from the DMV could all be automated through a Visa token that is securely stored in your car,” McCarthy continued.
Visa is a DocuSign customer and strategic investor, helping fuel DocuSign's rapid expansion to new countries, companies and customers.
“When a customer, partner or investor wants to partner with us to create new, game-changing innovation, we're thrilled,” DocuSign chairman and chief executive officer Keith Krach said.
“Visa is the trusted global leader in the payment industry, and is relied upon by millions of merchants and billions of consumers around the world. DocuSign is the trusted global leader in digital transaction management and eSignature. Together, our Labs teams are the perfect partners to help consumers and companies fast-forward their journey to becoming fully digital,” Krach went on to say.
For more on the app, view the demo video at the top of this page.
For more information on DocuSign, visit www.docusign.com. For more information on Visa, visit www.visa.com.
General Motors Financial president and chief executive officer Dan Berce took multiple opportunities after the finance company reported its third-quarter performance to state that despite being elevated to be the captive for the parent OEM, the company remains a significant institution in the subprime space.
Berce first referenced subprime when GM Financial discussed its Q3 North American origination mix, which included $1.769 billion in leases and vehicle installment contracts to customers with FICO scores below 620. Berce elaborated about the figure since it constituted only 19 percent of GM Financial’s origination total in the quarter, a level less than half of what it was a year earlier when the company’s subprime penetration stood at 44.1 percent.
“I will point out that subprime lending has not decreased,” Berce said. “In fact in absolute dollars, it is higher year-over-year but as a percent of our total originations, it is down because of the growth in prime and near prime.”
All told, GM Financial’s North American Q3 origination figure spiked to $9.316 billion, more than double the year-ago figure of $3.669 billion.
But GM Financial not only generated more paper in absolute dollars in the subprime space, the company posted more in the near-prime space, too, booking deals with customers who have a FICO score between 620 and 670. That origination segment climbed from $533 million to $1.235 billion in the most recent quarter.
With still a significant amount of subprime and near-prime paper in its portfolio, GM Financial also touched on the impact that mix had on delinquencies and losses.
The company indicated consumer finance receivables 31-to-60 days delinquent stood at 4.0 percent of the portfolio as of Sept. 30 compared to 3.9 percent a year earlier. Accounts more than 60 days delinquent constituted 1.6 percent of the portfolio when Q3 closed, down from 1.7 percent a year ago.
GM Financial also reported annualized net credit losses were 1.9 percent of average consumer finance receivables for the quarter compared to 2.0 percent for the year-ago quarter. For the first nine months of 2015, the company’s annualized consumer net credit losses stood at 1.7 percent, compared to 1.8 percent at the same juncture last year.
“I want to point out though that finance receivables with FICO scores less than 620 or so called subprime do still comprise 65 percent of our North American portfolio, which is the reason losses are higher at 2.6 percent than what you would see in a prime portfolio. But our loss trends should be favorably impacted by the increasing mix of prime lending over time,” Berce said.
“Recovery rates at 56 percent for the quarter were fairly flat with the 57 percent number a year ago; still very strong from a historical perspective,” he continued.
“Our outlook continues to be moderation in that rate as we go through 2016. And I will point out that recovery rates are seasonal so that December of 2015 just like December of 2014 should be lower sequentially than the September quarter,” Berce went on to say.
As Berce referenced, GM Financial’s subprime and near-prime originations are being dwarfed by its prime paper additions. That trend is likely to continue since the company is enhancing its relationship with the parent automaker as GM winds down its relationship with Ally Financial.
“We have also taken further steps in our evolution as a captive,” Berce said. “Effective Nov. 3, we will expand our role in GM's loan subvention programs with the removal of Ally from this channel. GM and GM Financial remarketing organizations are now realigned under the GM Financial brand. GM Financial is responsible for asset remarketing, for GM Financial off-lease vehicles as well as GM company cars and rental vehicles.”
Other Q3 financial metrics
GM Financial reported that it third net income climbed from$158 million to $179 million on a year-over-year basis. Earnings through nine months came in at $515 million, compared to $478 million through the same span a year earlier.
The company indicated its outstanding balance of commercial finance receivables was $7.8 billion as of Sept. 30, up from $7.2 billion. Berce noted 607 dealers currently use company’s offerings in this space.
“Floor planning continues to represent 86 percent of the portfolio with the balance of the portfolio being dealer loans such as real estate and lines of credit,” he said. “We do believe our expanded product suite and increasing penetration in GM’s retail channels enhances our ability to continue to grow this business at the steady rate that we have been on.”
GM Financial also shared that it possessed total available liquidity of $11.6 billion as of the close of the third quarter. That figure consisted of $1.6 billion of cash and cash equivalents, $8.0 billion of borrowing capacity on unpledged eligible assets, $1.0 billion of borrowing capacity on unsecured lines of credit and $1.0 billion of borrowing capacity on a junior subordinated revolving credit facility from GM.
“That liquidity increased primarily due to increased borrowing capacity on unpledged eligible assets and again, we do expect our leverage to continue increasing as our earning assets expand in the higher credit tiers in advance of the earnings generated by those assets and as we continue to build our liquidity through unsecured debt issuances,” GM Financial chief financial officer Chris Choate said.
