Agent Entrepreneur reached out to four executives and thought leaders in the F&I product provider and administrator segment to learn how far digital sales and F&I has come, whether car buyers should expect a one-click transaction anytime soon, and what role agents will play in educating and counseling dealers in an increasingly digital future.
Progress Is Relative
The industry will have to clear a number of legal and regulatory hurdles to make a fully online vehicle purchase happen. Some documents still require wet signatures, and the list varies by state. Trade-in valuation and dealer-arranged financing are complex pursuits, not easily managed remotely.
“We are making headway, but we are still behind the curve compared to the digital retail norm today,” said Cindy Allen, CEO of StoneEagle F&I. “Most dealerships and OEMs offer an option to start the initial process of understanding vehicle and F&I product options online today, but few offer an end-to-end online buying experience. A vehicle purchase is still one of the largest personal acquisitions consumers will make, and the idea of doing it completely online, without walking into the dealership for a test drive and to get a few questions answered, is a stretch for most.”
Allen believes that most solutions available today act more like marketing tools than true digital retailing platforms. And, they sell customers and dealers short by failing to collect and save information the customer entered online, perpetuating frustration and mistrust.
But aren’t these the same concerns the industry faced 10 years ago?
“In many aspects of the ideal end-to-end digital experience, the industry is further along than it was, but adoption has been slower than anyone anticipated. Much of the marketing done by dealers and vendors of online sales and F&I platforms promises an end-to-end digital experience but falls short of enabling a customer to purchase a vehicle outside of a dealership showroom,” said Jim Maxim Jr., president of MaximTrak Technologies (div. RouteOne). “Our company is delivering these services to major clients, but we are just at the trailhead of where this can go once adoption ramps up.”
To be fair, Maxim pointed out, unlike most other consumer goods, vehicles require at least some human interaction to sell — and that’s not a bad thing. While the industry awaits a true end-to-end online purchase, tools designed to engage customers on dealer websites are proliferating.
“This suggests that good customer-handling fundamentals are still the foundation of a truly exceptional customer experience, which can then be enhanced by the judicious use of digital sales aids that increase convenience, transparency, and flexibility,” Maxim said. “The digital engagements will continue to get more sophisticated, exciting, and interactive, but must still hand off the data to a human-driven but digitally streamlined showroom experience.”
Brian Reed, president and CEO of F&I Express (div. Cox Automotive), said buying a vehicle is “more completing-your-taxes online than it is buying-a-pair-of-shoes online,” and he believes most car
buyers appreciate the complexity of the transaction. So they still want to engage with dealerships, but they don’t want to have to start over once they get there.
“Finding a car, applying for credit, managing a trade-in, negotiating price, factoring in incentives, selecting protection products — those have all historically been managed by separate tools and systems within the dealership. This presents a difficult challenge for auto digital retailers to efficiently drive a consumer through the entire process. There are several possible entry points and it is easy for a car buyer to become confused or frustrated,” Reed said.
“The F&I industry, and the auto industry as a whole, are behind the curve when compared to other industries,” said John Lutman, vice president and head of IAS’s agent channel. “Just think of all the other things you can get done online. Right now, there’s no solution to purchase vehicles that agents and dealers are comfortable sending their customers to. It’s certainly not a limitation of technology, and we’re already seeing manufacturers investing and pushing online capabilities.”
Lutman said his company is investing in technology that allows their product to be purchased online, directly from dealerships. Reed noted that facilitating the sale of F&I products is “at the very core” of F&I Express, which maintains a network of more than 150 product providers, 10 DMS providers, 10 menu systems, and 25 digital retailing platforms. Maxim said RouteOne and MaximTrak have integrated and developed several user experiences in the F&I space, and MaximTrak’s FLITE Engage solution is now deployed on Tier 1 OEM sites, helping guide customers through the F&I product selection process.
“This includes product education, needs analysis, intelligent recommendations, interactive sales aids, interactive menu, rating, contracting, electronic signatures, and other tools embedded in the process,” Maxim said. “We are creating integrated services that can be plugged into web, mobile, and showroom experiences that can be configured to support the way an organization wants to do business with their customers.”
Maxim firmly believes in the value of introducing F&I products online as part of a “sophisticated” experience that engages and informs consumers. Allen of StoneEagle F&I pointed out that, to sell a product online, you must first be able to price it. She said that StoneEagle Inc., which merged with F&I Administration Solutions LLC in February, has offered real-time access to F&I product rates from its administration systems since 1997. In 1999, the company delivered a rate calculator integrated with ADP’s and Reynolds and Reynolds’ DMSes.
“While we still have dealers leveraging that technology today, most of the market has shifted rating intelligence to point-of-sale tools, such as F&I menus and dealership sales portals,” Allen said. “Our Connect solution currently powers this type of product rating and contracting for the dealership F&I office, as well as provides an API for digital retailers and consumer sites to have access to that same functionality, capable of empowering the buyer to research options and shop right from their couch.”
Flaws in the Amazon Analogy
Asked whether the oft-mentioned goal of an “Amazon-like” experience is a fitting analogy or a flawed analogy for auto retail, “Actually, it’s a little of both,” Lutman responded. “It’s fitting because consumers will eventually have the ability to purchase the vehicle and F&I all at once, all online, and have the vehicle delivered — not setting foot outside of their house. However, it’s also a little flawed because consumers still want to be able to drive the vehicle prior to purchase.”
“I think it depends on what part of the Amazon experience you are talking about,” Reed said. “The core Amazon platform is an ecosystem of manufacturers and resellers driving a customer-centric experience for various product sales that are not complex in nature. Amazon is great for getting to know their customers’ buying habits, driving recommendations, and leveraging a single-click purchase option. But it is not a complex sale.”
To protect F&I, Reed added, the Amazon of auto retail would educate customers about protection products and allow them to self-select at the time and place that’s right for them.
“New tablet-based technologies and online menus are helping dealers get over those hurdles by allowing consumers to research, review, and make decisions before they finalize their car deal. F&I product providers must make sure digital information and online educational tools about their products are readily available,” Reed said.
The Amazon analogy “absolutely fits what buyers want, but not the complexity of what they are buying,” Allen said. “To captivate today’s Amazon-savvy buyer, we must redesign the vehicle purchase process to provide what consumers love about their ‘Amazon-like’ experience and eliminate what they hate about the traditional instore experience.”
Citing a Capgemini study that found 71% of car buyers “still want to take a test drive and see the car in real life,” among other sources, Allen said research proves car buyers switch back and forth between online and offline channels as their journey progresses.
“When it comes to a vehicle purchase, they want it easy, like Amazon, with an offline, in-person twist,” she said.
Amazon is perfectly suited to ordering paper towels, soap, clothes, electronics, books, and groceries, Maxim said, but the analogy falls apart when one considers the high cost of a vehicle purchase, the ongoing investment in maintenance and monthly finance or lease payments it represents, and the maze of regulations that govern it.
“People get mixed up between ‘shopping’ and ‘buying.’ It’s the buying part that is really tough right now — and that is exactly the part that people are trying to clean up and streamline,” he added. “But no dealer is going to give up the essential profits of the F&I department in the name of an ‘Amazonian’ online experience until we get real experience and get really good at it. … It takes real automotive expertise and know-how to apply the right technology to incorporate similar transaction features in order to meet the needs of our unique industry. It takes the ability to understand and work with the mind of the car buyers and then how to create a solution that takes into account the culture of a given dealership. So while the analogy is not flawed, it is an insufficient approach to a real solution.”
When it was released in January 2018, Cox Automotive’s “Future of Digital Retailing” study found only 11% of surveyed car buyers said they wanted to review and sign paperwork away from the dealership — hardly the overwhelming demand many industry watchers would have expected.
Asked whether that low percentage is reflective of disinterest on the part of consumers or a lack of opportunities offered by the industry, Allen suggested it’s possible some respondents didn’t fully understand the question.
“But, generally, I would say neither,” she added. “I believe the paperwork is overly complicated and there is a fear something is being ‘slipped in’ on them. In a recent study, 57% of consumers said that there is ‘too much paperwork’ and 40% said they experienced ‘pricing issues/haggling,’ according to the  Deloitte Global Automotive Consumer Study. While 60% of U.S. consumers from that same study said they ‘are interested in acquiring their next vehicle online.’ I believe that points to a question of trust, not a reluctance to the action of signing online.”
“Ultimately, I think consumers will get extremely comfortable with reviewing and signing paperwork online. They’ve done so for other large purchases, like real estate,” Reed said, adding that a more “robust” online experience would compel more customers to adopt. “The paperwork is only one part of the car-buying process. However, it is the one that can benefit the most from moving online. It can’t be stated enough that the majority of consumers still want to interact with the dealership to do things like test drives, getting familiar with the vehicle’s technology features, and taking delivery of the vehicle.”
Lutman agreed. “The industry hasn’t made this possible yet, at least not easily. There are early adopters who are saying that they would welcome the chance to review and sign,” he said. “As the kinks get worked out, and our industry provides better solutions to consumers, more will demand an easier experience.”
Next Steps and the Agent’s Role
Lutman predicted that, over the next five years, digital retailing technology will continue to evolve, making online transactions easier while adding more options. Reed believes the industry will make “significant progress” toward a fully online transaction in that time.
“However, I believe consumers will continue to seek out their local dealership, but they’ll do so on their own terms. Digital retail platforms such as Cox Automotive’s will provide a seamless purchasing workflow by ensuring everything performed online by a consumer matches what that consumer encounters when they enter the dealership,” Reed added, noting that he will be tracking the advancement of AI- and machine learning-powered customer-engagement and inventory-management tools and the growing presence of subscription ownership models. “It’s truly an exciting time to be in the car business.”
Over the next five years, consumers will become increasingly familiar with and skilled at all aspects of digital retailing, which will in turn increase their comfort level with online vehicle purchases, Allen said.
“The entire automotive ecosystem will continue to evolve into a more fluid methodology between the instore and online experience,” she added. “In creating this easy online-to-instore path, we decrease the risk that consumers will simply skip our skilled sales teams and purchase the vehicle without F&I products.”
Maxim predicted that the ongoing evolution and maturation of automotive digital retail will produce a number of would-be problem-solvers. Most will prove to be gimmicks, some will endure, and many will work for some dealers but not others. He urged agents to start the work of building better processes now to position themselves for success in the future.
Reed suggested agents start by educating dealers on the importance of embracing digital retailing, stressing the need to remain “relevant” in car shoppers’ minds while improving the experience for those who are ready to buy.
“Agents can also influence the technology companies behind dealer website and digital retailing platforms by encouraging those companies to focus on creating online experiences that effectively educate consumers about, and guide them to, appropriate finance options and aftermarket insurance products,” Reed added. “Consumers have shown us that, if we let them learn about F&I products at their own pace, outside the F&I office, they are much more likely to purchase those products.”
Allen said the agent’s role “doesn’t really change” in a fully digitized industry. After all, agents will still be relied upon for their product knowledge, training, and access to the latest F&I technology.
“I believe the strongest agents are busy working with dealers to help them understand their audience and adapt the consumer conversation based on how much online interaction they have had — either with the dealership or generally about F&I products — prior to walking into the F&I office,” Allen said. “In contrast, agents who are not figuring out how to adapt to the digital retailing component are paving the way for their own obsolescence.”
“Agents need to encourage the dealers who want it,” Lutman concluded. “Just like everyone, agents have to be trusted advisors to their client by providing perspective and solutions. The best agents become more relevant and more trusted in times of change.”