Will Technology Bridge the Auto Financing Process Gaps?
In the past year, IBM put out annual predictions for technology trends over the next five years. Among them were things such as superhuman vision via artificial intelligence (AI), body chips that serve as real-time diagnostics tools, sensors that detect pollution, and self-driving cars.
IBM’s prediction was that in five years, driverless cars would be on sale to the public and dominate rideshare services. That makes sense: Waymo, formerly known as the Google Self-Driving Project, has already logged 3.5 million real-world test miles, and the federal government is actively removing regulatory hurdles.
Think about that for a second. In five years or fewer, there is a very good chance that your airport Uber or Lyft will be autonomous. It’s not a question of if but whether you’ll get inside and trust the technology.
Get inside, take the ride
But what about the car business? If technology can create amazing advances in science, health, and transportation safety, why can’t it build a better auto financing process? It’s been more than two decades since the last technology-driven shift in financing and lending behavior, back when the internet offered consumers the option (and power) of financing a vehicle online.
Although much has changed, recent consumer experience surveys show that auto lending has stayed stuck in 2004, walking through sand traps of slow adoption and antiquated systems. It doesn’t take artificial intelligence to understand that we can do much better — that we must do better. Still, the relationship between technology and car sales has, over the years, been contentious.
Think back to 1996, when new automotive internet practices were beginning to burst onto the scene. One start-up made headlines by predicting the demise of the dealership. It was all over the front page of the Wall Street Journal: So-and-so’s website and brilliant tech strategy would doom dealerships, put them out of business, and start the dawn of a new, dealer-free world.
Not so fast, internet
Last time I checked, dealerships were alive and well — and thriving. Yet, as ridiculous as that type of hyperbole was (and is), it created an adversarial relationship between automotive retail and technology, a conflict that grew to the point where dealerships adopted low-tech philosophies of business, delaying the application of efficiency models and fighting against the idea that technology would benefit the business — not replace it.
Eventually, reality evolved: Dealerships launched websites and began to focus on serving their digital customers. Today, most apply technology strategically, investing in digital tools and nurturing the idea that every dealership has two storefronts: physical and digital. Many are progressive in their approach and to the changing nature of the business. Except for one area: finance.
Back to the F&I future
The process of F&I remains at loggerheads with the idea of technology-driven efficiencies and improved experiences — things consumers are demanding. A recent Kelley Blue Book survey found that 40% of car buyers were most frustrated with F&I-related tasks like filling out paperwork (27%) and applying for financing (13%).
Virtually every study shows how the greatest customer pain point is F&I. It stems from anger over the amount of time invested after customers have agreed to purchase, apprehension of not knowing what’s next, and frustration over idle time and grinding sales pitches.
The good news is that they bought the car, and maybe even some GAP insurance. But they’ll take out their dissatisfaction on your CSI, and will rarely, if ever, come back. We all know the cost of acquiring a new customer, and the value of loyalty.
So ask yourself: Which is greater, positive CSI and customer loyalty, or GAP insurance? And why can’t a savvy dealer have both?
Technology — right time and place
Dealers can have both. But it takes the application of technology at the right time in a process designed to meet customer expectations of transparency, and the immediacy of information. Doing this isn’t easy, and it’s certainly no flash in the pan. It’s complicated and intimidating: Between retailing, contracting, menu selling, and even registration and titling, there are possibly more moving parts to the process of a car sale than there are in a typical autonomous vehicle.
And that’s not all. Add in a healthy dose of fear: Your team likely sees changes in process and technology as career-enders, not expanders. But effective technology applied the right way expands opportunity and creates a right-time, right-place F&I process that empowers customer, dealer, and lender.
Over the next five years, the question won’t so much be whether you’re using AI to drive your business (you won’t be), but if you’ve evolved your team and processes to integrate available technology, and create a better approach. The technology is here. It’s been tested, and it works. The only question is whether you decide to get in and take the ride.
Jim Landy is CEO and founder of SpringboardAuto, a digital retail company that is revolutionizing the automotive fintech space. SpringboardAuto’s mobile-friendly auto finance solution simplifies a secure online transaction for customers, dealerships, and private sellers. As an automotive finance innovator and veteran, Landy has founded and served as CEO of multiple companies including CarFinance Capital; RoadLoans.com, one of the first online auto finance companies; and Triad Financial Corporation, a consumer vehicle loan and lease origination company that was sold to Ford Motor Credit and later, a consortium of private equity investors.