There’s been a fair amount of hand-wringing in the industry following the recent carloanapplication A Consumer Perspective On Vehicle Financing, F&I Practices New York Times editorial that addresses the rise of vehicle financing for credit-challenged buyers and how some deals make their financial situations worse. The piece calls for greater regulation of the market and rules that would prohibit dealers from “gaining additional profit by manipulating interest rates.”

NADA issued a strong rebuttal, an Automotive News columnist says the editorial makes “unreasonable demands” while “grossly misrepresenting” industry F&I practices, and it’s a topic of discussion among dealers.

Here, however, I’d like to side-step the debate over greater regulation of dealer F&I practices—except to say that Wall Street’s new-found interest in vehicle loan portfolios, particularly in sub-prime, suggests more, not less, scrutiny in the future.

Instead, I’d like to focus on an aspect of the editorial that has generated little, if any, industry discussion—what consumers think about vehicle financing and other F&I practices at dealerships. Consider the following reader comments on the editorial:

From Joshua Bauman, Brooklyn, NY: “Car dealers are dependent on these types of loans to generate the kinds of profits they need to stay in business. Selling the used cars at large markups to people with bad credit makes up for all the new cars sold and leased at little or no profit. While most dealers are able to make 1500 to 2500 a unit on new cars, most of that money comes from the “back end” or F&I (finance and insurance) department….The solution is not so simple, but the sub-prime auto loans should be a thing of the past. Additionally, the ability for car buyers to make deals close to or even below dealer invoice on new cars needs to end as well, if we want to expect auto dealerships to stay in business while running a clean finance department.”

From David R (Location Undefined): “Lots of us (probably most of us) do research on what car to buy; how reliable it is, what kind of fuel economy it gets, etc. Yet few of us do that kind of research regarding the dealership, but fortunately, that task has gotten considerably easier. It is now pretty easy to go online and see what kinds of complaints any particular dealership has received. and are but two websites that have frank descriptions of consumer transactions…Considering that virtually all cars made now are tremendously safer and more reliable than cars of the past, picking the right dealer is more important than picking the right car.”

From Allison, Irvington, NY: “The internet has removed dealers’ monopoly on price information, but there is far less transparency on credit pricing. Therefore, they make more of a profit on the loan kickbacks than sale of the vehicles…If at all possible, get pre-qualified for a loan at an acceptable rate before setting foot in a dealership.”

From Jon Greene, NYC: “It is interesting to consider that we may be looking at the beginning of the collapse of the car dealership as a business model. If regulators are successful in clamping down on the banking side of dealerships’ profits, it just may be the end. Long regarded as one of the shadiest players in any local economy, car dealers have always found clever ways to squeeze enough from customers’ pockets to keep their own heads above water. But transparency in pricing has pinned them against a wall. That genie is out of the bottle and cannot be put back; so margins on sales are not enough to keep the doors open. Without the financing side, what’s next? We should ask what utility these dealerships provide…”

These reader comments caught my attention for two reasons:

First, the comments indicate a high level of awareness about the ins/outs of dealership F&I practices and profitability. This level of awareness will be particularly troubling for dealers who have come to over-rely on F&I income while paying less attention to profit-draining inefficiencies in other departments.

Second, dealers have an opportunity to turn the high level of consumer F&I awareness and dissatisfaction to an advantage. Just as today’s consumers respond favorably to more transparent pricing, they’re likely to have the same positive reaction when they feel comfy and confident with what your F&I managers tell and sell them behind closed doors.

I suspect we’ll see the regulatory debate heat up in the coming months, and it’ll likely boil down to what constitutes a “fair profit” for dealers and what steps they must take to earn it properly.

In this environment, dealers and industry leaders should be focused on defining what a “clean” and customer-friendly F&I department looks like before someone else does.



On Sunday, The New York Times published an article about efforts by organizers of the Electric Zoo Festival, a three-day electronic dance music (EDM) event in New York, to curtail drug use among attendees.

A year ago, the event shuttered a day early electric zoo A Parallel Between Electronic Dance Music and Retailing New/Used Vehiclesafter two people died from apparent drug overdoses. In more recent weeks, six drug-related deaths occurred at EDM festivals in Canada, Maryland and Nevada.

I was drawn to the article both as a parent of a teenage son who listens to EDM, and as a curious fan of music of all types.

The article includes a quote from Robert F. X. Sillerman, a media mogul whose SFX Entertainment now holds a significant financial stake in the Electric Zoo Festival:

“Electronic music is the soundtrack for this generation. In my day, music was a series of short stories, with a beginning, middle and end. But what’s fascinating about Electric Zoo is that what you see are 10,000 kids dancing in unison, without a narrative, and not all hearing the same thing. The paradigm has changed. The Internet has created a collective mind-set of individuals. The audience is now in charge.”

I wasn’t expecting the article to offer any insights about retailing new/used vehicles, but there it was—today’s vehicle buyers are definitely in charge, and dealers who embrace this new reality will fare better than those who resist it.



One-Price Dealers’ Time Has Come

by dpollak on 08/15/2014 · 2 comments

Below is a comment and my response to a recent blog posting, questioning the success of one-price dealerships. (if you’ve read the initial conversation, there’s more below.  Scroll down to “Additional Thoughts”)

Good afternoon Dale

I had the pleasure of reading one of your articles today. I found it interesting. However, it would be also interesting to go back through the history of this one price concept and see how many dealers have either gone completely out of business or had to abandon this noble concept.

Over the past 24 years I have witnessed many dealers try this, some have succeeded of course, but many, many more have failed or at least from my memory. 1980 lambo One Price Dealers Time Has ComeIt sounds great and there are a few of the used car outlets that have claimed to have success with this, but I can only name a couple that have lasted and each one of those had a gimmick that helped the process of one pricing. The one price model was not the sole basis of why people purchased from these dealers.

But, thank you for putting out an article that was easy to read and was not a direct attack on the rest of us. Have a great afternoon


It is true that one-price automotive retailing as we know it today has been around since the 1980s. To be clear, however, the selling environment has changed considerably over this period. I believe initially those dealers that tried one-price selling in the 1980s had the right idea, but they were too early. For that reason and others, most failed. It should be noted, however, that a handful succeeded and today continue to thrive as a result of it. Examples include Edmark Superstore in Boise, Idaho and the Marsh Auto Group in Traverse City, Michigan. These retailers had a notion that there was a better way to buy and sell cars and they had the operational and executional discipline to prove the case. No doubt their road was difficult, and many others failed along the way.

Today, however, the selling environment is very different and continues to change. One major characteristic of this change is the emergence of Gen Y that are now just entering their car buying years. Every bit of research on Gen Y buyers indicates that, unlike their parents and grandparents, they are not intent on getting “the best deal” but rather a fair deal with the least amount of effort and time. For this reason, I believe firmly that the justification for one-price selling is very strong, or put another way, its time has come.

Having stated this conclusion, I must note that even though the time has come for one-price selling, it remains extremely difficult for most dealers. This is because true one-price selling is not just about eliminating negotiation but rather instilling the culture throughout the dealership around an experience that meets the needs of consumers who desire fairness, speed and ease. Visits to the aforementioned dealerships are very valuable and enlightening because, unless you see it and experience it in action, it is hard to grasp. It comes only through a religious-like dedication to a particular way of doing business.

Finally, I think it also needs to be noted that every dealership is on their way to one-price selling. Specifically, every dealer is on a journey of enlightenment to the understanding that unless they price vehicles competitively, they will not see enough shoppers, to make enough sales, to justify their investment. Some dealers, like one-price dealers, are already there, others on their way, and still others kicking and screaming and/or in denial, but all are truly on their way. Simply stated, if a dealer does not ultimately arrive at this conclusion, they will not remain in business. Once a dealer reaches this point of enlightenment, they also must come to the realization that they cannot discount or discount as much as in the past. So if you haven’t noticed, the spread between asking and transaction prices in the industry are narrowing and will continue to do so over time. Given this unstoppable phenomenon, I would strongly recommend to you and others that you learn the discipline of rational pricing and selling with little or no discount. I can personally attest to the fact that when it’s done right, the financial and personal rewards for the dealership, customers and employees are enormous. To state it simply, the question is not if, but only when…now or later.

Additional thoughts:

Good evening Dale,

Thank you for taking the time to write back to me. I see that you are very dedicated to the cause of One Price Selling. You do have valid points, but I do have to ask a question about Generation Y. Since studies seem to prove that Gen Y are not really interested in vehicles and currently the majority of the buyers are over 45, why should we move to sell a product to a generation that will not be buying the product that much?

But as for One price selling, I am all for it. Then it would come down to who provides the best customer buying experience and who has the best trained staff. But I think that there are/will be laws violated when this process becomes as popular as you believe it will be. I know in the past dealers have been slapped on the hand by the feds for trying to use one price pricing on new vehicles as a locked in process.

But Thank you again for writing back. Best of success to you.


I really appreciate all of your thoughts. I would, however, like to make a few points regarding some of your assumptions. First, I almost never recommend to dealers that they convert to one-price. For the reasons that I stated, I believe that it is the most efficient selling model, and ultimately where our entire industry will end up. Even with these beliefs, I recognize that very few dealers actually understand or are prepared to do it properly, and for that reason, I do not prescribe it.

Also, you state that when the one-price environment becomes the norm, it comes down to who has the best customer experience and trained staff, and I completely agree. I also believe that there is yet one more very important differentiator, and that is, who has the most efficient operation. Since one-price selling necessarily entails thin margins, expense control and operational efficiency (i.e. processes throughout the dealership) will be yet another key differentiator.

It should also be noted that one-price selling is not illegal unless the various one-price sellers collude in setting their single price. This is not something that I would ever advocate or anticipate occurring.

Finally, I need to correct your statement that most Gen Y buyers are not interested in buying vehicles. Fortunately or unfortunately, vehicles are a necessity for most people whether they have a high or low degree of interest. I’ll acknowledge that previous generations of America had a love affair with the automobile, and the Gen Y population seems to be much less infatuated, but the fact remains that at least for the time being, car ownership represents the most viable form of transportation for most Americans.

Again, I just want to thank you for the quality of your thoughts and commend you on your curiosity. Asking the right questions is the first essential step to understanding the environment.



Two Bright Stars Shine In East Tennessee


My travels this week took me to East Tennessee to visit two dealers, Daniel Johnson, GM of Johnson City Toyota and Dustin Walters, GM of Friendship Hyundai. The visits were part of a larger Cox Automotive program that aims to help dealers earn financial rewards from their investments in, Manheim and software companies like [...]

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Dealers As Hunter-Gatherers Or Farmers—Where Do You Stand?


Here’s a question that’s had me thinking: Has the evolution of the automotive retail business reached a point where dealers need to stop hunting and start farming? The question came to mind during a conversation with an industry analyst. He offered an anthropologist-type view of the industry—some dealers are hunter-gatherers, while others appear to have [...]

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A Closer Look At The Evolution Of Used Vehicle Inventory Age Benchmarks


It wasn’t too long ago that dealers routinely kept used vehicles for 90 days as retail units. More recently, dealers have adjusted this retail timeline to account for rising price competition and transparency spurred by the Internet, as well as the always-increasing costs of keeping cars in retail-ready condition on your lot. It’s now common [...]

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Dealer Discovery: Why “Total Gross” Matters Most In Used Vehicles


I had an e-mail exchange with a Chicago-area Honda dealer the other day that I think is relevant for all dealers, especially those who have adopted the Velocity Method of Management. The dealer asked two important questions—What’s the optimal percentage of used vehicle inventory that should be maintained under 30 days of age?, and, What’s [...]

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vAuto Dealers Shine On AutoRemarketing Top 100 List


It made me happy the other day to peruse AutoRemarketing’s Top 100 (Franchised) Used Car Dealers for 2014. As I was going down the list, I kept seeing familiar names—stores where vAuto has played a role in helping dealers take their used vehicle operations to the next level. All told, we counted 43 vAuto customers [...]

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Forecast Alert


Numerous reports are filtering in from across the country citing geese delivering root beer. Sightings have confirmed that these are not drones, but in fact real geese. Consultation with forecast analysts confirms the fact that there is a 100% chance of root beer delivery from coast to coast. Experts advise all affected populations to immediately [...]

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Are You Asking The Wrong Question About Used Vehicle Reconditioning?


I received a note from a Velocity dealer asking for guidance to trim $100 to $200 from his reconditioning costs, part of a broader effort to increase used vehicle profitability. It should be stated that this dealer is a smart operator who’s already wrung significant costs out of his reconditioning processes. He’s reduced mark-ups on [...]

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