Broader shifts in the market and other industries signal even bigger changes to the car buying experience

Change in the automotive industry is a strange thing to witness.

First we hear everyone talking about it: industry media, event speakers, and experts of all kinds speculate about how new technology or consumer trends will disrupt our industry seemingly overnight.

When the dust settles, change rarely happens as quickly as the predictions, or in the way that was envisioned.

But make no mistake, our industry is changing—and for the better. The digital tools that were developed before the pandemic—and tested under fire during the pandemic—are here to stay. And they are just the start of the transformation.

Consider some recent statistics that were presented to auto journalists recently from Google’s Think Auto:

Online vehicle sales increased by 600 per cent over COVID-19 with 6 per cent of Canadian shoppers purchasing a vehicle completely online.

12 per cent of EVs were bought completely online.

We can’t discount these numbers as people choosing this method only because they had no other option. Google also reports that “54 per cent of Canadian car buyers indicated that they would consider buying their next vehicle online, and 62 per cent of the Electric Vehicle buyers indicated the same willingness.”

Although this particular shift in buying behaviour shouldn’t be that surprising, given our adoption of online shopping for so many other products, there’s still a stubbornly held belief that the automobile purchase will resist this trend because of our need to touch and feel the vehicles.

Stubborn beliefs, though, aren’t always supported by the data. Google’s most recent findings show that 74 per cent of Canadians are now comfortable comparing offers online, 71 per cent are comfortable comparing models online, and a (slim) majority 51 per cent say they are comfortable to walk around and check out feature highlights online.

Something that also arrives with an increased digital experience is increased transparency. Gone are the days when dealers could post pics of their inventory and the only way to get a price was to visit the dealership. Consumers greeted by that experience voted with their clicks and just moved on to get the information they wanted somewhere else.

The rapidly growing comfort with a digital new or used vehicle purchase is also shifting into other areas like the business office, where full transparency is still often lacking.

The next generation of technology is more consumer friendly and transparent, and some companies are using tools like artificial intelligence and machine learning to help customers determine what they want, and provide them the knowledge they need to make an informed decision.

54 per cent of Canadian car buyers indicated that they would consider buying their next vehicle online, and 62 per cent of the Electric Vehicle buyers indicated the same willingness.

The emerging tools in the business offices will put the consumer in charge, and will be able to provide them recommendations for F&I purchases based on their actual needs, and not based on the highest margin products the dealer wants to promote, or the ones that typically sell the most and are easiest to close.

By providing information about their vehicle driving habits, their financial and lifestyle situation and their perceived risks, these next generation platforms will be able to provide consumers with an educated suite of recommendations based on their real situation.

This isn’t to suggest some F&I managers don’t already do something similar, many of them are expert at listening to their customers and tailoring an F&I offering to suit their specific circumstances and financial position.

But consumers are increasingly wanting to do their own homework and make better decisions instead of relying on someone whose motives they don’t entirely trust.

Consumers now have a better understanding of the true prices of vehicles and are able to determine fair value pretty quickly.

When the playing field is leveled in the business office, and consumers fully understand the F&I products they are purchasing, and can weigh the pros and cons and costs, we will be able to provide them an F&I experience they won’t dread—and might even enjoy.

The dealership teams will still have a role with customers to help answer any additional questions, but they will be talking to consumers that are well informed and armed with their own research. This experience will be better for consumers and for dealership staff who will no longer be expected to push products they know consumers don’t want or need—and that’s a win-win for everyone.

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The F&I experience needs to be more open, to allow consumers choice

Transparency appears to be at a premium in the automotive industry. We need more and we need it now.

At stake is our industry’s reputation. Transparency boosts that. The consumers’ best interest should always be top of mind. Being transparent with them allows that to happen.

The Federal Trade Commission recently rejected a request from a number of groups—the National Automobile Dealers Association, National Association of Minority Dealers and American International Automobile Dealers Association—to allow more time to comment on the agency’s proposed rules on industry advertising and finance and insurance (F&I) practices.

Consumers for years have been demanding more transparency from dealerships. The FTC proposal would do away with junk fees and bait-and-switch advertising. These regulations would also require dealers to develop an information security program to protect consumer information.

Long story short: The FTC proposal is saying there needs to be way more transparency tomorrow than what exists today in car dealerships.

Transparency is something all consumers deserve.

DecisioningIT was built so that there would be a system that can align customers with what is in their best interest. Whether they’re seeing their financing options online for themselves or whether an F&I manager is turning their monitor and showing them all their options, the end goal is always the same: Transparency. It’s about letting the customer be involved in the process. They can see what’s happening and be educated.

This is a process that consumers are generally missing.

Our company is trying to bring options to the table—options for consumers and options for dealers. The focus cannot be on going to a single source to find financing for consumers. Even two options aren’t enough. They must be able to see all options and all offers from all lenders.

Every F&I manager’s goal should be to maintain openness and transparency with their customers. This is in the best interest of the consumer. They want to feel great about their purchase. They need to be able to see everything available to them. 

If a lender with which the dealer is not a partner but shows it will approve the consumer at the best rate, the manager can submit the dealership to be a partner with the lender and give the customer the best deal out there.

Think about your mortgage—your broker goes out there and gets the best deal possible for you and shows you all of your options. But this isn’t happening when people want to buy a vehicle. They’re told what the financing will be and that’s it.

Consumers have a right to ask questions. They are entitled to know what they’re prequalified for. This is in their best interest.

We’re closing gaps, we’re making connections and we’re trying to build a network—a network where everything is available for dealers and customers. Everything is visible and everything is transparent.

This is how we build a better narrative for our industry. We’re among the least trustworthy. Having this reputation is tiresome. It’s time to turn it around. And it starts with being open and honest with consumers.

The post What dealers need most: transparency appeared first on Canadian Auto Dealer.

Understanding the mentality and process of how F&I managers approach getting deals financed will help you understand how to lead them to embrace new technologies

When implementing any change, you have to really assess the people that are being impacted by the change. 

It seems obvious enough, but surprisingly it’s often overlooked, particularly as companies get excited about implementing new technologies—and particularly software or tech implementations. 

Even if the processes and systems being implemented are great for the business, they aren’t immediately viewed through that lens by the people who are expected to use them! After all, they are human! 

What we’ve witnessed when implementing new AI-based platforms for helping dealers finance consumer credit applications, is a range of different and unexpected resistance among F&I managers. 

Of course, many feel the immediate risk and threat from any AI or machine-learning tool that can do something they are paid to do—but it does it more systematically, more quickly, and by assessing thousands of data points simultaneously that no F&I Manager could possibly keep in their head at once. 

Imagine your own role in the company if someone more senior showed up with a powerful new tool that was faster, smarter and more reliable than you? 

While the reference above is obviously the wrong way to introduce machine-learning platforms and AI tools to your dealership, it is very likely how those on the receiving end of the change will hear and view it. Even if you are saying all the right things.

The key will be to proactively mention some of their fears and proactively redirect their fears. When people are confident, they will be less fearful of change.

So, a best practice is to work to make your F&I managers aware that you are bringing in the automated platform to “assist—not replace” them.

The key will be to proactively mention some of their fears and proactively redirect their fears. When people are confident, they will be less fearful of change. 

You can use an example some of your older team members might relate to, referencing that credit apps used to be faxed one at a time to each lender to help find one to finance a deal. That was ultimately replaced by a portal technology for getting deals financed. I don’t think many F&I managers long for the days of faxing multi-paged credit apps and collecting the replies! 

It’s a simple example, but can get your team understanding that new technology is about speed, efficiency, an improved customer experience, but perhaps most importantly, a tool to make their jobs more enjoyable. They now can embrace digital assistants and can focus on building rapport with their customers or talking to them about a whole host of other F&I products and services that aren’t related to just who is going to finance their purchase. 

Again, though, it’s never that easy. A lot of F&I managers get paid very well, and they are able to perform a set of tasks that keep deals flowing through the dealership, and the more specialized, and “special” they are, the more they feel secure in their jobs. 

For the rare F&I managers with a deep understanding of the non-prime market, they truly are more special and some won’t be receptive to new tools showing up that automate things they took years to learn.

So, you have to consider all of that, and make sure that you build them up as still being the special ones that you appreciate, that you need them in your business, but you are just trying to give them new tools to make them even better. 

Make sure to allow time for their feedback, and let them air their concerns. If you beat down the resistance too forcefully, it could backfire. There’s nothing worse than everyone agreeing to implement and use the technology in the kickoff meeting, but then doing everything in their power never to adopt it. 

So, be transparent, up front, but firm in your resolve to adopt new technologies. Not just for AI platforms for financing car deals, but throughout your business. 

If you tie it to an improved customer experience, that is the differentiator that all dealerships are fighting for, it will be even easier to have them understand it’s not really about them and their discomfort with new tools and processes. 

Good luck!

The post Managing your F&I managers appeared first on Canadian Auto Dealer.

When it comes to implementing new software, getting the technology working is the easy part. Getting the team to adapt to change is another matter

So you heard from your fellow dealers about an amazing new software tool to streamline your operations, increase efficiency and help your dealership make better decisions. You had a demo from the vendor, and after months of due diligence, it’s time to roll out the software.

But a few months into the installation, things aren’t going well at all. So what happened?

There are a lot of reasons software installations don’t go as planned, but in this column I’d like to address a few of those key reasons and provide some advice on how to overcome them.

Lack of top down support

If you don’t have a Dealer Principal, General Manager, or senior managers supporting and endorsing the change, it won’t work. For our software, which is adding a layer of artificial intelligence as a decision making tool to facilitate credit decisions, it’s important that others like Used Car Managers and F&I Managers are also involved. If it’s not communicated from the top, people can end up working against it.

No clear deployment plan

You need a full onboarding process, and a plan to stay in touch with the dealership team and let them know where they are on every milestone. If you don’t have a deployment plan in place, you might get the attention in the first few months, but you risk losing steam if people don’t see there’s a roadmap for where they are going. The deployment plan also needs to work in conjunction with your training plan so you can build upon the successes as people get more familiar with the tools.

Failure to communicate

It’s a common flaw. First of all, it’s really important to really communicate what your software system can—or can’t do. Sometimes dealerships will watch a demo and think it will do things it wasn’t set up to do. So, once everyone understands the business problem it’s going to help solve, you are off and running. We recommend that a dealership holds a town hall meeting with all employees when making a switch or installing a new software system. The vendor can provide a quick demo, and be on hand to answer any initial questions. Having a formal event, signals to the dealership team that this is important. People sometimes have irrational fears that the software systems will replace them or hamper them from doing their jobs and sometimes a town hall is a place where these issues can be addressed.

Lack of a change management strategy

Even if the software tools you are implementing will make people’s lives and jobs easier, many humans just don’t like change and they will passively or overtly resist the new systems. It’s really important to recognize this and have a change management system in place. Most companies are good at offering more training for those that might not be as tech savvy and struggle at the beginning. But it’s very important for dealerships to enforce the fact that their team must use it. If you measure actual usage, that also allows for conversations between employees and their managers to find out why they aren’t using the new system so you can discover resistance.

Running parallel systems

Sometimes companies decide to ease a transition to a new system by allowing both systems to co-exist for a period of time. But remember, many people are going to be happy to just go back to the old way. It’s easier to train new hires, because you can simply train them on the systems you expect them to use in their role. Make sure to have a milestone date in your roadmap for when the old system can no longer be used.

Undefined roles and responsibilities

When things do go wrong or people need clarification, many times they don’t know where to turn to for help. You can’t just launch and leave. That’s where account management comes into place. Make sure your vendor’s account team is available and that the information you need is easily accessible.

Inadequate training on new system

If you want people to get over their fears of using the new system you can’t skimp on the training. You need to train them on how to operate the system, but then also come back and see how they are doing, and in particular how they’ve handled real world situations. If they stumble, you need to know about it so that your training can help them be more confident.

The post Change is tough but it’s worth the effort appeared first on Canadian Auto Dealer.

Some people in your dealership might fear artificial intelligence and machine learning tools, but they are already widely in use whether you recognize them or not.

In the last two columns in this space, we took a deep dive into showing how machine learning tools were empowering next generation decision making for the financing teams within dealerships.

We showcased examples of how a credit decisioning platform called Lucy, that was developed by dealers, was being used to get more car deals approved. Lucy is powered by artificial intelligence and pre-qualifies 85 per cent of customers in 16 seconds—regardless of their credit history.

One challenge though, is that many dealership personnel don’t fully understand artificial intelligence and machine learning and this leads to fears and apprehensions about trying out the technology.

In this column, I’d like to take a step back and help demystify and clear up some confusion and bust some myths about concepts like machine learning and artificial intelligence so that dealers can make informed choices about embracing tools that can help fuel productivity and innovation.

Myth: Only large organizations can afford machine learning and artificial intelligence.

It’s true that many big companies use artificial intelligence right now, and have worked on it for many years. But I think people would be really surprised to see how many small companies use AI and machine learning. It’s just the way of the future. Many companies are trying to incorporate AI into their business. It reduces inefficiencies with things that are already being done by human beings. I think everybody’s gonna be doing some kind of AI or machine learning in the future— not just big companies. Mom and Pa shops can, and will use it.

Rather than replace people, a lot of companies use these tools in combination with their people. How can the technology be used to make this person’s job a lot more effective, more accurate and a lot easier to do?

Myth: AI and Machine Learning will replace my people.

That’s a huge misconception. I think there will always be some people that will feel that way. But I think the ones who are up to date with technology will see this as a huge benefit for them.

Rather than replace people, a lot of companies use these tools in combination with their people. How can the technology be used to make this person’s job a lot more effective, more accurate and a lot easier to do? Many systems are not fully autonomous and still need some degree of human interaction. If you have a system that can help you be more effective in your job and does, let’s say 80 per cent of the work for you, why would you not embrace that? So I would just say, don’t be afraid of the future. Don’t be afraid of AI. It’s not meant to replace you. It’s meant to support you and help you be more, more effective in your job.

Myth: Artificial Intelligence and Machine Learning are the same thing.

Artificial Intelligence systems are built to solve complex problems, in some cases by thinking like a human. Machine learning is a subset of that system. Machine learning allows machines to learn from data without being programmed. As data is entered, it starts to learn those algorithms, and gets better, and more accurate in its analysis and predictions as it gets more data to assess.

Myth: No machine can replace the “gut” instinct of my experienced F&I Manager

When it comes to Lucy, our Credit Decisioning Platform for car dealerships, she has the “gut instinct” of hundreds of F&I Managers, who have done this for 20 years! Even your most experienced F&I Manager won’t have seen as many clients as Lucy has. It’s not that it’s a competition, it’s just the volume of data that provides insights into which deals get approved and that’s why Lucy can be a very sharp ally within your dealership. Lucy can work with your experienced—and less experienced finance teams—to help them be more efficient, close more deals and better understand the complex world of credit approvals, particularly in the non-prime market.

Myth: Your AI system will reach the same conclusion as my Finance team so why bother.

When the Founder of DecisioningIT wanted to build this product for his dealerships, he took five of his F&I managers and asked them to work on a credit application file. All five came back with a completely different analysis and recommendation. A system using machine learning can reduce human error because it focuses on actual stats, information, lending criteria, all in real time, and makes decisions based on a massive amount of information in the system.

Myth: If I just keep doing things as I’ve always done, I’ll be fine.

A lot of dealerships might not recognize how much Artificial Intelligence is already baked into their own personal lives and their dealerships too. For example, companies that mine CRM data and trigger alerts to touch base with customers after a certain time or service interval, or make predictions based on their expected mileage and vehicle usage. Or the voice activated assistants streaming their music or powering their search. The reality is that many dealerships are embracing a host of advanced technologies that help them run their businesses, and help provide a better customer experience. Machine learning tools that help make faster, more accurate decisions are just part of that.

The post Busting myths about artificial intelligence appeared first on Canadian Auto Dealer.

When people think of automation, they think it will make life easier. It’s something that will make things quicker, reduce manual or dangerous processes, and let us spend time on something else.

But that’s really only part of the picture.

I discovered that myself, when I took the role of CEO and Co-founder of a fin-tech framework company that uses an AI loan-matching platform and customer credit management to help dealers better (and more quickly) match consumers with various financial institutions.

We all have certain pre-conceived notions of automation, artificial intelligence or machine learning, and the way the terms are used interchangeably doesn’t help much either.

In my regular column in Canadian auto dealer, I hope to help dealers better understand how these, let’s say, “automated tools” are being used in the Canadian dealership space.

The applications are amazing, and the industry is ripe for even more new products to help transform what is still a pretty manual, and at times tedious experience for car shoppers and buyers, particularly when it comes to finance and insurance.

I come by that opinion honestly, as I’ve been working in the automotive industry for more than 15 years, with experience in sales and marketing and BDC, increasing and tracking ROI, and more.

Eighty-one per cent of finance or lease applications with a score below 675 are declined by dealerships. Those are lost deals from people we turn away from our stores.

My knowledge includes the Internet of Things (IoT) and working with companies focused on automotive tech, connected vehicles, and cyber security. But recently, I’ve really been focused on the challenges with the F&I operations in the store.

The good news is that these “automated tools” can help dealers close more leads, which is always something dealers like to hear.

I am enjoying this journey because it’s been great to show dealers how predictive AI technology can help them. Our tech was developed initially from within a dealership because our team had its own issues getting approvals.

Eighty-one per cent of finance or lease applications with a score below 675 are declined by dealerships. Those are lost deals from people we turn away from our stores— and the vehicles they want and need!

Most declines are due to a lack of experience and understanding of the non-prime space by the F&I manager. But predictive AI technology can help them match customers with various financial institutions, offer consumers a more transparent and seamless process, and reduce the F&I manager’s time spent on certain tasks.

Imagine your F&I manager going through lender criteria and all the updates they have on hand. It’s a lot of work and it can be time-consuming. But if that process is automated with AI that does machine learning, the machine is able to reduce that time and can hold onto a lot more data than a human being—or in this case, the F&I manager.

If one human being sees a thousand customers in their lifetime—and we’re talking about thousands of scenarios, thousands of ways to make that credit application work, where an actual human being may not be so focused on seeing the connections—AI can learn and automate tasks and processes, and open up possibilities and opportunities for dealers to better service their customers.

New technology that uses AI and machine learning can act like an assistant. So rather than spending an hour or two a week or more trying to figure out how to work a deal, you have a virtual assistant that’s going to give you all that information and make your job so much easier.

This type of automation is a lot about precision. It’s not taking that shotgun approach, but being more of a sniper, knowing exactly what you need to do to finish a client’s credit file. So when it comes down to it, especially on the finance side, it’s a very tricky, sensitive, dance you have to do, which is why the technology is so promising, and for so many areas of a dealership’s operations.

Automated tools, and machine learning algorithms that get smarter and smarter are all part of a big shift that auto retail is experiencing.

In future columns I will cover a broad range of topics ranging from decoding prime, sub-prime and deep-prime, to understanding the world of lenders, e-signatures and compliance, bank decisions, their approval process, machine learning, tech stacks versus portals, and so much more.

The challenges may be wide ranging, but the opportunities for AI and machine learning are seemingly endless.

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