New vs Used Customers – Identifying Their F&I Hot Button
New vs Used Customers – Identifying Their F&I Hot Button

We have seen major shifts in customer buying behavior since the great recession. In fact we have realistically seen more changes in their buying habits in the last five years than we have in the previous 25! One of the major shifts has been a record in the length of the average loan with a 27.62% increase of new car buyers going 73+ months during the first quarter of 2014 as compared to the same period in 2013. The used car buyer saw an increase of 25.73%. Consumers have spoken loud and clear as they recovery personally from a downturn in income and/or confidence in today’s economy. They still love their cars and are willing to stretch out their loans to have the vehicle they want.

  New Car Buyer Used Car Buyer
Average Credit Score 714 641
Average Loan Terms 66 61
Increase in 73+ Month Financing 27.62% 25.73%
Loans made with Credit Union 9.26% 20.84%
Average Amount Financed $27,612 $17,927

Secondly, we have seen upbeat projections of new car sales for 2014 from 16 - 17.5 million units. The consumers hunger for the technology that is flooding every new car category rivals that of their hunger for the newest technology in computers and cell phones. Couple these two factors and we are having customers show up in our F&I offices with more needs than ever for the products we offer. Helping customers see their need clearly with an interactive and engaging process can lead to some of the healthiest profits we have seen. F&I managers cannot adhere to a one-size fits all strategy but must develop their ability to uncover the unique motivations, needs and buying factors of each customer and the vehicle they are buying.

Let’s take a look at some of the “Hot Buttons” of the new car buyer. The desire for the newest technology available is one of the most compelling motivating factors for many consumers to buy a new vehicle. J.D Powers disclosed that 79% of those surveyed recently expressed interest in “blind spot technology” on the next car they purchase. J.D Powers also provided research that shows an increase of 24% in overall reliability for the time period 2006-2012. However they also saw an increase of 45% in issues with “in-vehicle technology” during that same time-frame.

Recent announcements of technology coming soon to a vehicle near you are almost too rapid to keep up with. In about two years, an all-new 2017 Cadillac vehicle will offer customers an advanced driver assist technology called “Super Cruise” and in the same timeframe the 2017 Cadillac CTS will be enabled with vehicle-to-vehicle (V2V) communication technology. Also the recent YouTube video of the “Empty Car Convey” by Hyundai where a vehicle’s technology capability is on display which can literally drive and stop itself tells us the future is here!

Here are just a few of the latest vehicle technologies:

• BLIS – Blind Spot Information System • Forward Collision Warning
• Lane Departure Warning • Adaptive Cruise Control
• Lane Assist • Voice Activation System
• Rear View Cameras • Reverse Sensing System
• Rear Cross-Traffic Alert • Panic Brake Assist

Therefore the needs for a service contract are greater than ever. This is fueling record service contract sales in many dealerships. However there must be an intentional effort and process to move the customer to buy. Simply telling a customer “there is a lot more technology on this car” is not likely to change a customer’s mind concerning protecting themselves with a vehicle service contract. The process must make the vehicle service contract come alive by making this intangible product, tangible to the customer.

I have never met an F&I manager who consistently reaches top levels of service contract sales who doesn’t use an interactive process that employs tangible items to bring the product alive. Verbal efforts alone make it simple for the customer to disagree with what was “said.” Don’t talk about the high level of technology on vehicles today; hand them an engine control unit. Comparing an old owner’s manual with a new version that’s three to four times thicker is a great way to demonstrate how much technology is packed into today’s vehicles. When today’s customer hears a verbal response to why they should consider a service contract, their thoughts are shouting one response loud and clear. . . Prove it! Making invisible objects become visible is not the work of a magician; it’s the work of a great F&I manager and it has never been more needed than it is in today’s F&I office! I have seen F&I professionals across the nation who capitalize on the technology acceleration on vehicles today reach record levels of production and many have seen their career best numbers as a result!

Another major “Hot Button” for the new car buyer is to keep their car looking like new. With the new “normal” of keeping the car longer, the desire to protect the appearance both inside and out has taken on greater importance. Appearance or environmental protection products are not new. However the changes in the vehicle being protected have been enormous. One of the major key’s to selling appearance products is to “sell the difference.” This demands an F&I manager who is committed to learning the make-up of metallic paint versus pearl coat paints and how they are applied.

Here are just a few of the recent changes in vehicles and the products to protect them:

• Body Side Moldings Eliminated • Dent and Ding Protection
• New Generation Thermo-Set Enamel Paints • Exterior-Interior Protection
• Alloy Wheels Replace Metal Wheels • Road Hazard Protection

Today’s paints are much more advanced than their predecessors. They are thermo-set enamels and are applied by a water-borne process. The manufacturer bakes on the paint at 250-400 degrees. This can’t be duplicated at the dealership so the process to re-paint a vehicle takes more time and matching the mixture of special flakes to create a pearl coat and/or metallic paint is costly. However if the customer does not know how the paint has changed, they will not perceive value in the product offered to protect it.

To effectively build the value of these products and enable the customer to see how it will benefit them takes an educated and intentional effort. Using an effort to push and pressure a customer to purchase these products will only create resistance and bad CSI scores. Yet if the F&I professional is not educated on the differences of the paint on a vehicle today and other appearance factors, they will find the push technique the only thing they are left with. F&I managers must educate and inform to be successful, not push or pressure a customer to buy. That demands intentional effort to become an expert on today’s vehicle paint. The new car customer is looking for three things in any environmental protection product. (1) Save me time, (2) Save me money, and (3) Guard my trade in value. The advanced protection products offered today are true surface science at its best and are backed by three to five years of guaranteed protection. They provide a protective shield on the exterior and interior of today’s vehicles and when it is time to trade in this vehicle, it will have a heads up on competing vehicles of the same age and miles. That alone can make the protection products valuable.

Another “Hot Button” for new car customers is the need to protect the factory installed windshield. The factory seal on the windshield is difficult to duplicate so a product that keeps the original one in place is valuable. Again it is imperative that the F&I manager has acquired the product knowledge necessary to educate and inform the customer to move more customers to buy. The windshield provides 50-75% of the structural integrity of the vehicle in a roll-over accident and it can prevent collapse of roof and protect passengers from major injury. The passenger airbag deploys against the windshield at 200 MPH and the original seal becomes a life saver and may keep the passenger inside the vehicle in the event of a collision. Improved safety is a major consideration that moves a customer from buying a used to a new one. When presenting a windshield protection product, the main focus should be on safety.

Now the used car buyer has unique needs and expectations and forming a process and products specifically tailored to them is critical for success. Used car buyers are usually in one of two categories. The first is the low mileage used car buyer. They are looking for a used car price and new car appearance and performance. The effort of selling F&I products to this customer is similar to that of the new car buyer since they perceive they are buying a “like new” vehicle.

Changing the names of the products can show the targeted benefits they can provide for every used car buyer and build perceived value. The service contract becomes the Pre-Owned Performance Plan. Windshield protection becomes Driver’s Care, and tire and wheel road hazard protection becomes Emergency Care. The product line-up must meet the unique challenges of the used car buyer. If you haven’t changed your product line-up on used cars in the last 12 months you are behind the market demands and it is costing you money!

The high mileage used car buyer is the most challenging to the F&I manager’s efforts. A high mileage service contract is no longer an option. Plans that will cover the customer for 12,000-24,000 are key to provide coverage for the initial ownership period. Every vehicle, regardless of the age or miles, can face an emergency that would leave the customer stranded without assistance on the side of the road. So a tire and wheel or more effectively named Emergency Care product is valuable to this customer and should be presented with conviction.

The most important “Hot Button” with every customer is why they need the product! Helping the customer see their need for the product offered takes an intentional effort that is backed by exceptional product knowledge.

The number one differentiator in the F&I office is the ability to focus! The majority of production issues are not a skill issue but a lack of focus. Wherever your focus is that is where your energy and creativity go! To be successful in today’s F&I environment you must be focused on personal development through consistent training and practice. All professionals practice and top producers consistently evaluate their production and look for ways to improve. Today’s car buying market provides multiple challenges. However, I don’t hear the top performers complaining. Instead they are practicing and strategizing on ways to improve and provide more desirable products to every buyer - both new and used.

I grew up watching Hank Aaron play baseball. My father would take my friends and me early to watch him take batting practice and try and catch a home run ball. We noticed some players would “skip” batting practice occasionally. However we never saw Hank Aaron skip practicing before a game. That taught me that the difference between good baseball players and legends of the game is consistent practice. It is true in professional sports and it is true in the F&I office! Building an F&I team that is committed to consistent practicing of their skills is critical to keep everyone sharp and ready to help customers. So let’s build that kind of a team in our markets. Now go practice!