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Jared Hamilton
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The State of Automotive Financing: What Dealers Need to Know

Don’t close down your F&I department just yet, as it turns out the dealer-assisted loan might not be dead after all. Despite what some media reports recently claimed, your ability to put customers into the right financing for the right vehicle will continue to be a critical component of the dealership sales process for the foreseeable future. In this article, we’ll break down everything dealers need to know about the current state of automotive financing.

Automotive Industry Reports on Financing

In early March, Automotive News and other media outlets reported on a survey from credit scoring analytics firm FICO that found dealership-acquired financing was down 10 percent in 2018 from just a year earlier, at 63 percent from 73 percent in 2017. More concerningly, the survey said only 40 percent of surveyed consumers planned to acquire financing for their next vehicle through their dealership. Obviously, this kind of massive – and incredibly fast – transition in the relationship between dealers and consumers concerned many dealers who see F&I as a critical component of their interactions with their customers.


However, a lot of questions were quickly raised about FICO’s survey results, which didn’t seem to reflect dealers’ actual experiences. Few dealers had reported seeing a 10 percent drop in finance deals in 2018, and captive lenders weren’t reporting similar figures.

What the Data Says, The Real Report

NADA’s economists dug into the question, and it appears the issue isn’t that consumers aren’t getting financing through their dealers any more, but rather consumers apparently aren’t very good at remembering or explaining how they got their vehicle financing. Despite what the 510 consumers surveyed by FICO told researchers, the much more comprehensive JD Power Power Information Network (PIN) dataset, which includes millions of transactions from 14,000 participating dealers across the country, showed dealer-assisted financing had held roughly steady from 83.1 percent in 2017 to 83.7 percent in 2018.


In short, FICO collected the responses they were given and the media reported the results in good faith, but the reality appears to be that consumers are still reliant on dealers to walk them through a financing process that continues to confuse them, even with all the options for research and shopping available to them.

Automotive Financing Lessons Learned

There’s also a related lesson here in that just as good data is far more helpful than consumers’ anecdotal input for industry researchers when consumer finance is involved, so too does good data help dealers work with individual customers to find the right financing for their personal situation – whatever they may think that is. Dealers know from experience customers can run the gamut from wildly optimistic to wildly pessimistic about their personal financial status, which is why it’s critical to make solid data a part of the sales process as early as possible.

Looking beyond their survey results, FICO’s industry experts identified just this form of data-driven finance engagement as a real opportunity for dealers. “There’s certainly a lot of opportunity for lenders to improve the digital process,” said Ken Kertz, senior director and practice leader of auto and motorized vehicles at FICO in an Automotive News article. “We’re still seeing that the dealer is the epicenter, and customers would prefer simplicity and preapproved offers with rate subvention and incentives.”


It’s good to hear that dealers are still at the epicenter of the automotive finance process. The more dealers put good data at the center of their own processes, the longer that will continue to be true.
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