Simply put, e-contracting offers lenders a dramatic increase in productivity.  A work flow analysis shows a productivity increase of nearly 100 percent in favor of e-contracting over paper delivery.  That means the same person can do almost twice as much work via the electronic process than the paper process.   

Additionally, early adopters of e-contracting will likely gain an initial competitive advantage over lenders not offering e-contracting.  As e-contracting becomes more widespread, this competitive advantage can be expected to diminish.  This means that lenders who are quick to embrace e-contracting technology have a window of opportunity to gain a greater market share, but this window will close once the rest of the industry switches to e-contracts.

Why E-Contracts Are Good for the Consumer

The benefits of e-contracting are clear to dealers, but e-contracting also helps protect the customer.  The use of electronic data versus a hand-written contract means that information can’t be “lost in translation” simply because of less than perfect penmanship.  That, coupled with the informational settings that reject certain values in certain data fields, leads to a much higher level of accuracy in e-contracts than in paper contracts.  While some consumers may assume that an Electronic Retail Installment Sale Contract may be less thorough than a traditional, hard-copy Retail Installment Sale Contract, that simply isn’t the case.  By law, ERISCs contain the same disclosures and formatting requirements as the paper version. 

Security measures lock the contract in place once it is signed.  That means it can’t be altered from that point forward.  Signatures can’t be added later, there are no couriers involved in transporting the documents, and the electronic chain of custody is clearly documented.

In addition, the entire transaction is performed with speed and efficiency, which means less time spent at the dealership.  It also prevents any inconvenient return trips to the F&I office to re-sign corrected documents. 

Obstacles to E-Contracting

If e-contracting provides so many benefits to all parties involved, why isn’t it a universal practice in the industry? It represents a flow change for the dealer.   E-contracting requires retraining of all dealership personnel involved, which can seem daunting.  This issue can seem especially burdensome when viewed over the long-term dealership operation: every time an employee leaves, his or her replacement will have to be trained in e-contracting as well.  In actuality, though, the time spent retraining staff is minimal when compared to the immense benefits of utilizing an e-contracting system.  The increased accuracy and dramatically reduced processing time lead to substantially increased profitability.

Functionality may vary with respect to the specific documents submitted electronically.  In some states, not all of the required legal documentation may be filed or transmitted electronically.  That means that at least part of the contract must be submitted in hard copy.  E-contracting still offers a streamlined process, but perhaps not to the extent of a purely web-based process.  That being said, there seems to be little doubt that e-contracting will become the norm at some point in the not-too-distant future. 

Conclusion

Based on the growth seen in the last two years, experts predict that within five years, nearly all contracts will be e-contracted.  Many lenders are presently engaged in assessing the cost/benefit tradeoff involved in adopting e-contracting.  In light of the faster turn-around time, as well as the increased security measures inherent in e-contracting, it seems clear that any dealer unwilling to embrace this new technology will lag behind their competitors. 

Simply put, e-contracting is a paperless system that greatly speeds the funding process.  It gives a dealer the ability to forego paper contracts, submitting an electronically signed contract using signature pads to capture customer signatures.  The computer-driven delivery system also transports Electronic Retail Installment Sale Contracts, or ERISCs, effectively replacing the paper-based Retail Installment Sale Contracts (RISCs). 

However, this technology represents more than increased efficiency: it represents a greater measure of security for both dealership and customer alike.

Why E-Contracts Are Good for Dealers

E-contracting enables dealers to greatly reduce – and in many cases, nearly eliminate – contracts in transit.  Fewer CITs means better cash flow.  The process is accomplished electronically, safely and securely, and with lightning speed.  Increased efficiency and productivity have a direct correlation to cost reduction, which translates into greater profitability.

Deals are closed more quickly, and with fewer mistakes.  E-contracting bundles all the necessary documentation into one package, which assures that only complete, properly compiled loan packages are sent off.  In addition, most e-contracting systems have default settings for various fields.  For example, the field for the borrower’s name may be set to reject any entry with non-alphabetic values.  So, any entry made which deviates from the set parameters would trigger an error message.  This can help screen applications for typos prior to submission.

There is no more waiting for approvals to arrive by fax, no more overnight FedEx packages leaving the dealership, no more unhappy customers returning to the Finance office to re-sign paperwork.   

In the fast-paced world of the automotive marketplace, saving time can mean saving the deal.  Current market conditions mean that customers have greater power than ever, and they are fully aware of it.  If their contract is delayed, or of they are faced with the aggravation of having to return to the dealership to re-sign a corrected contract, a customer may simply opt to walk away all together.  An unsigned contract is a contract that can still fall through.   

Even if the customer agrees to return to the dealership to re-sign, the dealership may still suffer for the customer’s inconvenience.  While the deal may ultimately go through, the delay and aggravation the customer endured is likely to negatively impact CSI.  Even if the delay or error was through no fault of the F&I office, the customer’s opinion of the staff’s professionalism will be tarnished.

• History of slow payments
• Recent bankruptcy
• Foreclosure in history
• Repossession in history
• Tax liens and judgments
• Collections and charge-offs
• High debt-to-income ratio.

Keep in mind that nonprime lenders may be prepared to accept greater risk than other lending institutions, but there are still situations that are unacceptable, such as:

• Repossessions, foreclosures within last 12 months (unless included in a discharged bankruptcy)
• Open bankruptcy
• Dismissed bankruptcy within last 12 months or multiple dismissed bankruptcies
• Current auto/rent/mortgage delinquency (60+ days)
• Delinquent child support
• Consumer credit counseling
• Income less than required
• Debt-to-income ratio exceeding the maximum
• Payment-to-income ratio exceeding the maximum
• Residence and employment history less than required
• Fraud/Skip alerts.

At first glance, it may appear that serving the nonprime population is a highly complicated task, far more complicated than prime lending, and is, therefore, not worth the effort.  The reality is the nonprime demographic represents the most lucrative segment of the automotive market; it simply requires a different set of guidelines, and a working knowledge of how to satisfy those guidelines.   This knowledge offers the dealership more than just access to the largest segment of the automotive consumer population:  it plants the seeds for future profits through repeat and referral business. 

Dealers have long been attracted to nonprime because of the bottom line, but the nonprime consumer population offers another, more valuable return: loyalty.  Nonprime customers have often received poor treatment during other financial transactions, and, as a result, will leap at the chance to do business with a dealer who values them.  During the recent economic downturn, poor treatment of credit-challenged customers has been on the rise.  A dealership that treats these customers with respect and accommodates their needs will breed intense customer loyalty.  In all likelihood, these customers will see the dealership as an ally, because the dealer is helping customers re-establish good credit, in contrast to the substandard treatment they received elsewhere.  These customers are often willing to travel beyond the dealership’s normal geographical boundaries in order to conduct business there; such customers are also likely to tell their inner circle how the dealership was able to assist them when their need was greatest.  And, of course, they’ll come back themselves when they are in a better position to upgrade their vehicles.  In other words, one riskier deal now may lead to a prime deal (or several) in the future. 

What Is Nonprime?

The FICO score calculated by Fair Isaac Company is the most common credit score used by dealers and lenders.  On this scale, scores range from 350 to 850.  While there is no one authoritative source for defining the tier ranges, the following FICO auto-adjusted scores have been adopted into wide use throughout the automotive industry:

In the automotive finance sector, most refer to the credit line “beyond prime” as nonprime.  Furthermore, nonprime lenders draw a distinction between the boundaries of “beyond prime” and the subsets of subprime, special finance and the buy here/pay here process.  In the current market, more than half of all consumers score below 700, emphasizing the importance of creating a strong presence among credit-challenged buyers.  This means that, if your dealership is not equipped to accommodate nonprime customers, you are literally removing more than half the marketplace from your pool of potential customers.

Given the absence of product loyalty in the marketplace and intense competition, brand image in the public domain is of paramount importance.  A manufacturer can no longer rely on the historical value of its product.  Today’s market is grounded in the consumer mantra, “What have you done for me lately?”  In order to ensure the future viability of a specific product the manufacturer must understand what need or void in the marketplace needs to be filled.

Manufacturers spend tens of millions of dollars annually to promote their vehicles and send customers to the dealership.  Some manufacturers offer their repeat customers attractive owner loyalty rebates to keep them from switching to another brand.

In the end, it is important to realize that poor performance in the CSI arena is really a wake-up call from the customers.  The message must be heeded if the dealership is to understand what customers need and expect.  Beyond the short-term ramifications, such as loss of inventory preference, chronically low CSI can lead to even greater long-term damage: loss of customer loyalty. Dealers which fail to respond to their customers’ needs and desires is denying themselves repeat and referral business.  To the manufacturers, CSI can guide product development, directly addressing the customers’ needs and desires.  This will help ensure a reasonable market share at the time of product release.

It is important to remember that, although CSI quantifies a customer’s individual experience, its influence extends far beyond that single customer-dealer interaction.  It holds the dealership accountable for both the positive and negative aspects of a customer’s visit, covering everything from the professionalism of the staff to the quality of the service provided.  While many dealers view CSI as a necessary evil, the reality is CSI provides dealerships and manufacturers with the chance to raise the quality of their products and operations.  By systematically rating the customers’ opinions, dealers and manufacturers are able to see things from their customers’ point of view.  They can then use this insight to guide their operations, training and product development to better suit the needs of the consumer.  In other words, CSI is the key to obtaining a greater market share.

CSI surveys are widely used as market predictors to establish the trends of the consumer on the local, regional, and national levels.  This allows the manufacturer’s research and development to tailor its products to the specifically to the demands of its customers.  Many companies consider CSI to be an asset of the organization, to be managed just as any other valuable asset.

CSI’S  EFFECT ON THE DEALERSHIP

CSI is a dealership’s report card from the customer.  It measures the dealership’s effectiveness by asking the customer to rate every aspect of his experience, including everything from sales to service.  Employee competence, product satisfaction, and general treatment received by the customers are some of the most commonly rated areas. 

Follow-up surveys are the most common instrument used to determine CSI.  These surveys are sent either directly by the manufacturer, or through outside companies contracted by the manufacturer, such as J.D. Power.

Dealerships also use other forms of customer feedback – including their own surveys, letters, phone calls, faxes and e-mails – to evaluate their CSI.  The data gathered from these diagnostics is then used to train or discipline staff members with poor ratings, while rewarding those with outstanding reports.

Typically, the dealership’s CSI research is conducted shortly after the sale and prior to the customer receiving the manufacturer’s survey.  This enables the dealership to resolve any issues before the customer responds to the manufacturer’s CSI survey.  

CSI makes it very apparent, very quickly, how the dealership is responding to the needs and wants of their customers.  It is important to know where the organization needs improvement, but it is equally important to know what the dealership is doing right.  Using the CSI survey as a predictor model, you can develop components for future plans which will ensure that customer expectations are exceeded.  This will result in greater repeat and referral business.

Just as the dealership uses CSI surveys to address poor performance and reward high scorers, manufacturers use their own CSI surveys to determine which dealerships are successful and which need improvement.  This influences a dealership’s rank when it comes to receiving the most sought-after inventory, as well as the number of vehicles sent to the dealer.  A dealership with consistently high CSI scores will receive the most desirable inventory, which will, in turn, give them a more competitive edge.  Conversely, the manufacturer will be reluctant to commit resources to a chronically underperforming dealership.   If the issues leading to the consistently low CSI scores remain uncorrected, such a dealership will face the threat of having a consistently lower caliber of inventory to attract new customers, compounded by the loss of repeat/ referral business due to the inefficient practices that caused the low CSI scores.

Should the CSI survey reveal faulty performance and a subsequent failure to achieve the standards set forth by the manufacturer, the dealership may face punitive measures.  These can range in impact from failure to receive preferred inventory allocations to financial penalties.

The bottom line is that putting the customer first improves CSI figures, promotes repeat and referral business, and contributes substantially to the dealership’s overall profitability.

By learning about the customer’s thought process, the F&I Manager can determine what is most suitable for him.  For instance, if the customer has a substantial commute and will be putting a considerable number of miles on the vehicle, an Extended Service Contract would have obvious benefits. The purpose throughout this part of the process is to learn of the customer’s distinct needs, even if the customer himself isn’t aware of them. The F&I Manager is the expert, and as such will provide pre-emptive solutions to future problems the customer may encounter. 

The three objectives of the consultation process include:

1. establishing a mutual respect with the customer,
2. reviewing the purchaser’s statement and credit report
3. verifying the terms of the purchase order. 

If these objectives are accomplished, the F&I Manager will have enough facts to determine, and satisfy, the customer’s needs.

While the idea of presenting a professional demeanor may seem elementary, it plays a pivotal role in the success or failure of a dealership’s F&I Office.   An F&I Manager who fails to achieve the delicate balance between professional and approachable runs the risk of alienating his customer.  Even if the customer doesn’t walk away from the deal entirely, he will be far less receptive to the F&I Manager’s recommendations. 

So, even if the deal goes through, it will probably be far less profitable than it could have been if the F&I Manager had taken the time to make a good first impression.  Attention to seemingly minor details, such as grooming, can mean the difference between success and failure.  Since the Finance Manager is the last authoritative dealership representative to interact with the customer, he can have a positive impact on the dealership’s Customer Satisfaction Index (CSI) and leave a lasting impression that could result in repeat and referral business.  In the end, communication and rapport building are the KEYS to a successful consultation process and outstanding CSI.

Read more F&I Articles Here

1 – Verbal Communication
Verbal – Using professional word tracks designed to achieve specific objectives
Vocal – How the word tracks are delivered – tone, emphasis, inflection

2 – Nonverbal Communication
Body Language – Eye contact, handshake, posture, smile
Appearance – Attire, grooming, cleanliness, professionalism 

Interestingly, it is nonverbal communication that often has the greatest impact on the customer’s rapport with the F&I Manager.  While what the F&I Manager says is important, especially when explaining the particulars of the transaction or the value of an aftermarket product, the way in which he says it will have a greater influence on the customer.  Careful word tracks and effective delivery will be sabotaged if the customer is receiving contradictory nonverbal cues. 

Consider the F&I Manager as the dealership’s equivalent to a bank manager.  Sensitive financial information will be discussed in the Finance Office and for those who have experienced financial setbacks – a majority of the population – it is a topic that’s not always easy to talk about.  In addition to the pressure of the large financial obligation the customer is contemplating, there is often considerable “emotional baggage” which comes with the discussion of past financial hardships.  Besides being a competent professional, it falls to the F&I Manager to play the part of emotional diplomat, balancing the customer’s psychological and financial needs.

Consequently, the F&I Manager must establish a personal bond with the customer in a very short amount of time.  This is called building rapport, which really means getting to know your customer quickly and effectively. 

This bond plays another role during the transaction in the F&I Office, during the recommendation of aftermarket products.  Only by knowing the customer’s situation – what area he lives in, the distance between his home and work, how long he expects to keep his vehicle – can the finance Manager help protect his customer and the large investment he is making. 

Due to the sensitive nature of the information about to be discussed, many customers feel intimidated by the F&I Manager.  Therefore, when the customer enters the Finance Office, he must enter an atmosphere that inspires confidence. To set the proper stage, the F&I Office must be neat and clean.  It should also contain family pictures or other items with which the customer can identify. 

Again, a balance must be maintained: too many personal mementos will make the office seem sloppy, and too few will make it appear sterile and intimidating. To support the aura of friendly professionalism, the F&I Manager should look like a bank manager – the epitome of professionalism.  That includes proper grooming, being dressed appropriately, and carrying the demeanor of authority.

POSITIVE ATTITUDE

The power of a positive attitude must be realized. There is no other way to become a success, whether in sales or in any other endeavor. Think successful, become successful.

The individual who feels like a failure will find a way to fail. There is a definite relationship between positive attitude and accomplishments. Professional people cannot afford to give out negative energy. The more positive your attitude, the greater your prospects for achieving success.  A positive attitude helps generate the energy to get things done. Attitude, like health and diet, can be changed. It can be improved.

Seek opportunities at every turn. If things do go wrong – and they sometimes will, it is the human condition – view them as a learning experience.  In other words, strive to find a positive angle on what otherwise might be a negative (and destructive) incident.  Keep striving for success, and realize that if you take two steps forward for every step backward, you are still making progress.  Take pride in ethics and legal compliance.  Exercise self-control. Your customers will appreciate it, your company will generate more business, and you’ll feel better about yourself.

AVOIDING A RUT

Human beings, by their very nature, are creatures of habit. Some habits, as we all know, are better than others. Often, the difference between success and failure are the quality of their habits. Think about it, and the kind of habits that will generate success.

Those who continually fail generally often find it difficult, if not downright impossible, to abandon the immediate pleasure bad habits may offer.  Consequently, they have low expectations which they may or may not realize. Successful people have learned that they are responsible for their own success. They are willing to put their long-term goals ahead of short-term pleasures by cultivating proper habits. They strive to make each day – and each deal – count, even if the odds appear against them.

LISTENING WITHIN

Developing a good understanding of ourselves is an important phase of human growth and development. Self-awareness, a thorough understanding of our own identity, sets the stage for improved relationships.  To become meaningfully involved with others and to make a positive impression we must have an awareness of self.  Without first understanding the persona you current project, how can you change the way others perceive that persona?

Few people are aware of how they feel about themselves, of what is important to them, and thus are relatively unaware of the feelings of others. Individuals who are not aware of self tend to lack superior judgment and wisdom. When we discover that something we do bothers someone else, we have the option of altering our behavior. Greater self-awareness also improves our communication skills. 
 
When faced with a toxic, unproductive outlook or negative habits, many people refuse to examine the source of their problems: themselves.  Rather than undergo the sometimes painful process of introspection, they continue in their destructive practices.  If you hope to succeed, you must avoid this trap.  If you want to be successful, you must be willing to face the unpleasant possibility that you are the cause of most of your failures.  Your courage will be rewarded with a greater insight into yourself, and, subsequently, a more successful career.

THE PROPER ATTIRE

It’s a well-known fact that people make assumptions based on a person’s attire. While there are certainly exceptions to this rule, the surest method of maintaining success is consistently putting your best foot forward.  Your customer’s first impression will lead them to form assumptions about some important attributes, which will, in turn, influence the way the customer responds to you during the business transaction.  Should your appearance lend itself to a poor first impression, you have sabotaged yourself from the start.   Some of the assumptions your customer may make based on your appearance are your:

• Professionalism
• Education
• Economic well-being
• Success level
• Moral fiber

Take whatever time is necessary to select the proper wardrobe. If you want to be taken seriously by customers who are going to spend a lot of money at your dealership, honor them by wearing appropriate attire. Customers should have an idea if they like you or not, if they feel comfortable with you or not, based on your appearance.  This gives you a significant advantage during the sales process: if your customers take you seriously in your capacity as an advisor, they will be listening attentively as you discuss product knowledge and other aspects of the sales process. 

BE COURTEOUS

Your customers are hoping to spend a lot of money with you – that’s why they are at the dealership. Treat them with respect. These are people who generally have worked hard for the money they are about to spend, and they deserve to be treated accordingly. Be polite to them, and remember where you are: You are in a professional dealership, be careful with the car lingo!

ADDITIONAL PERSONAL ATTRIBUTES

Always smile, let your customers see that you care about them.  Your facial expressions and body language communicate a great deal; in fact, communication is primarily non-verbal.  No matter how courteous your words are, they will be undercut by body language and facial expressions that seem disrespectful or insincere.  Let your non-verbal communication say you have an interest in presenting your products to your customers, rather than trying to force them into a particular decision.  Let them feel that the decision is their choice, not yours.  In other words, don’t give them an opportunity to dislike you. That’s self-defeating, and will result in fewer sales.

How you project your voice is important too. Project with confidence, and convey enthusiasm and sincerity. In the old days, customers were wary about fast-talking salesmen. They still are. Remember, these are people, not dollar signs!  Look at them.  Talk to them.  After all, you know your product.  Let them hear your expertise in your voice. 

The way you shake hands never goes unnoticed by the recipient.  Let it represent your professionalism and attention. Let the customer know you really are pleased to meet them, that you’re not just saying that. 

In the end, you are responsible for what your customers see.  If you put forth the effort to present a polished, friendly appearance, your interactions with your customers will be more productive and more enjoyable for everyone involved.  Taking the time to create a professional image for yourself is an investment in your own success.