Inside Automotive with Jim Fitzpatrick, powered by CBT News

Your Dealership Loses Money Every Time Payment Quotes Change

• Jim Fitzpatrick • Season 1 • Episode 14

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Pete MacInnis, CEO of eLEND Solutions, reveals shocking data about payment accuracy in auto retail and the significant financial impact on dealerships when quotes don't match approvals.

• Only 1.6% of all credit applications are approved exactly as submitted by dealers
• Average payment on approvals is $32 higher than quoted on new cars, $36 higher on used vehicles
• 76% of survey respondents agreed with the payment discrepancy findings
• 55% of dealers report losing up to 5% of vehicle sales due to payment disconnects
• 86% of respondents stated front-end gross profit was reduced 5-20% to resolve payment friction
• 53% reported finance gross profit reductions of 1-10%, with another 34% seeing 11-20% reductions
• Current siloed approach creates poor customer experience when terms change after negotiations
• Solution requires bringing true lender finance approval terms to the front of the sales process
• eLEND Solutions offers connected retailing products to address these issues

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Announcer:

You're watching Inside Automotive with Jim Fitzpatrick.

Jim Fitzpatrick:

Hey everyone, Jim Fitzpatrick, thanks so much for joining me on another edition of Inside Automotive right here at the CBT Automotive News Studios. Today, providing accurate payments to consumers shopping online from your dealership's website is a top priority. No longer can we just dish up our guess on payments. Consumers are demanding that we get this right. To discuss this very important issue a little further is Pete MacInnis, who is the CEO of eLEND Solutions, and I think he's got the solutions for this very issue right, Pete? Thank you so much for joining us in the studio.

Pete MacInnis:

Jim, thanks for having me on again. I appreciate that.

Jim Fitzpatrick:

This is great.

Jim Fitzpatrick:

We got a lot of great feedback last time you were in. You guys conduct such great surveys in this area to get the pulse and to feel the pulse of the dealers out there that are really struggling with this right. I mean, here is Amazon, where they give you a payment and the consumers really rely on that to say this is what the product's going to run us, and it can't be an estimate. It can't be. Well, we didn't have all the information. Well, we're around that number. Today, consumers just don't accept that right. I mean it's unacceptable.

Pete MacInnis:

We've talked about that for so long so much, especially with all the affordability issues going on today.

Jim Fitzpatrick:

Oh, yeah, you also told us that eLEND Solutions was about to conduct an industry finance survey to determine if sentiment matched the finance study that you had done and we asked our audience to participate in that. But before we jump into that - the survey results. For that, please recap some of the highlights of the finance study for our audience that might have missed that segment.

Pete MacInnis:

Yeah, well, the finance study actually triggered the finance survey. So what we did is we did this finance study around. We looked at thousands of credit application submissions to lenders, to over 100 different lenders, and then we looked at the responses to those and so in the finance study we looked at it and we said, okay, well, 32% of the credit applications were approved of all those submissions. So then we drilled down into the approvals and looked at those and say, okay, of those, how many of those were approved as is - as is submitted? Those were approved as is, as is submitted as meaning when the dealer submitted on behalf of the customer, we wanted this payment, at this term, with this down payment. Did the lender's approval come back, matching those? You know the same. And it turned out only 1.6% of all applications were approved as submitted and requested by the dealer on behalf of the customer

Jim Fitzpatrick:

1. 6%?

Pete MacInnis:

1.6%, that was it right.

Jim Fitzpatrick:

Oh, my gosh, that's crazy

Pete MacInnis:

Right. So that number was that low, yeah. So then we drill into a little deeper and says, okay, so what were those responses? What changed? Sometimes it had been the payment would change or the term. In most cases the term didn't change on the lender, it was almost like 98% of the time, the term was accepted on the approval but either the payment or the down changed. They either wanted more down or the payment changed because the rate was different. And so we looked at that and drilled into that and said, okay, on new cars, the average payment on an approval was $32 higher than what was initially submitted.

Jim Fitzpatrick:

$32? Per month?

Pete MacInnis:

Yeah, wow. And on used vehicles, on a retail deal, it was $36. Okay, so we looked at it. You start looking at that.

Pete MacInnis:

Over 72 months we thought this data, we tried so many different ways to slice and dice it and we couldn't come up with an alternative answer to that. So we thought wouldn't it be neat if we actually did now, took that data and really put a survey out to the industry and get their sentiment Basically, do you agree with that or do you not that type of stuff? And then look at some of the impacts on that. So that was really the origin and the genesis of doing the survey. To see is does the marketplace agree with that data that we analyzed or are they in agreement with it? Sure, so we can. So that was the purpose of that.

Jim Fitzpatrick:

So the finance study was intended to gauge industry sentiment, as you mentioned. Does the finance study match the survey respondents experience and explore you know what they believe to be you know the impact to sales and front end and back end gross profit and F&I penetration.

Pete MacInnis:

Yes, and so the survey is still open. We haven't concluded it yet, but the early results are absolutely in alignment with that. So we asked lots of different questions that were related to the study and then also the impact of this.

Pete MacInnis:

The answer was absolutely yes,

Jim Fitzpatrick:

Okay and that study and survey is available right here at the CBT homepage. Right, that's the same.

Pete MacInnis:

Yes, thank you so much for helping us get the word out and putting that on CBT News on your homepage for people to be able to go to that and complete that before we wrap it and close it up next week.

Jim Fitzpatrick:

Sure, sure so share some of the findings from the finance survey.

Pete MacInnis:

Sure, okay. So I'll give you a few examples of that Okay. So number one first of all 76% of the respondents agreed that the average lender finance approval monthly payments was 32% higher. So 76% of the respondents agreed with that, right. And 81% agreed that it was $36 higher on a used vehicle finance deal. So they agreed that those payments. So the industry was overwhelmingly agreeing with those statistics, right.

Pete MacInnis:

And then some of the other questions were in the respondents and the respondents, like 55% of the respondents, said that up to 5% of vehicle sales were lost due to that dissatisfaction with the lender terms not matching what that initial payment was. So it was up to 5%, according to a majority of the dealers. And then another statistic was we thought this was interesting because we start looking at what's the impact of profitability for the dealer and 86% of the respondents stated that the front end gross profit was reduced between 5% and 20% in order to resolve that friction. So when it's being misquoted, they're having to lower the price of the vehicle, right. And then we drilled in deeper into the questions like okay, by how much per vehicle? Stuff like that. So we won't get into every answer today, but they will be in a full report that we're going to, we'll be putting out A couple of them.

Pete MacInnis:

Ones again finance gross profit 53% said it was reduced by between one and 10% and 34% said it was between 11 and 20. 1 in 10% and 34% said it was between 11 and 20. So we gave multiple choice answers. Was it 1 to 10, 11 to 20? Sure, and in almost every category the number one answer was the one that was the most. You know. It showed some extreme adverse impact on the deal. So what we're seeing so far is all of the answers are correlating very closely to the actual study we did.

Jim Fitzpatrick:

The survey data matches the finance study data to a T.

Jim Fitzpatrick:

Clearly there's a huge disconnect in this right? I mean between sales and finance and the vehicle purchase process. What needs to be done about it?

Pete MacInnis:

Well, first, of all, I think, doing the study, doing the survey, the whole point of that is to bring awareness to the marketplace, so people realize and that consensus is set. This is what we're doing and it's not okay, it's having some major impact. So that was the first part. The second part is we want to get as many respondents as possible to go ahead and fill out this survey, and we appreciate you guys helping us do that because we think it's an important issue. We do too, and the more people that respond, the better the data becomes, the more reliable the data. You'll have less, that's right. You know anomalies in it. So. So the bigger the number, the better for us, and we think that's the good starting point. It's awareness, getting validation for it, exposure to that, so that we can address those issues and how to move forward. That's right.

Jim Fitzpatrick:

And folks, if you're listening right now to us have this conversation, this is a very important issue. It's 2025. This is an area that we should, by now, get correct. Consumers are demanding it. OEMs are demanding it. How come we're not, at the dealer level, making a bigger deal over this? It is a big issue that costs us gross profit. If you haven't already completed the finance survey that is right on our homepage, it's also you'll see links in our newsletters that we've sent out as well. Please click onto the survey. Take the survey, because this is the kind of information that we want to gather here at CBT News, so we can give you the actual results and give you the numbers and let you know.

Jim Fitzpatrick:

you know what this looks like on a macro viewpoint as well as a micro viewpoint

Pete MacInnis:

And, Jim, what we're wanting to do is not only will we be publishing the entire report of all the survey questions, but we're going to do some analysis of that data and see if we can really measure the true financial impact of profitability to the dealer.

Pete MacInnis:

What's the impact on front-end gross, back-end gross, contract penetration? So we'll look at it and say, okay, so, based upon these response answers, we can then put numbers to it monetarily and say, okay, this is the impact of front-end gross, this is F&I penetration. What are the average dollars based on sales? So we can really maybe put a number to how much positively or negatively this impact could have on a dealership's profitability, based upon how things are happening today, versus what if these issues were solved. And maybe that'll drive. When we look at that, we'll try to put real numbers to it and that'll really give us a chance to analyze that and look at that and say, all right, okay, this is compelling. And what do we do with that? How do we go forward as an industry? That's right. That's right.

Jim Fitzpatrick:

If you had a crystal ball or a magic wand and you said, okay, here's the solution for that. What needs to happen within the industry in order for us to get this correct?

Pete MacInnis:

We've got to bring true lender finance approval terms to the front of the sales process. It can't be siloed, disconnected. Sales happens in the front. When they're all done, send them to finance and they'll figure it out later.

Pete MacInnis:

Hope for the best, hope for the best, and some of the survey results is gonna reveal that. You know how much time is spent in F&I because of that. What percentage of the time does you know does that have to be disclosed to the customer that hey, by the way, the terms changed. You know? Most of that happens in the finance department after the negotiations have been completed.

Jim Fitzpatrick:

That's right.

Pete MacInnis:

That's right so and that that's a really bad experience for the customer.

Jim Fitzpatrick:

So you know and I probably should have started off for the, for the people that are not as familiar with eLEND Solutions that are listening right now, which a lot of people are familiar with you Tell our audience a little bit about eLEND Solutions and what solution you do bring to the table?

Pete MacInnis:

Well, we're very focused on the connected retailing, so we have a suite of products from credit solutions, identification solutions and soon to be launched, finally our finance solutions, and so, between all of that suite, we're really focused around the transactional side of the business. When you've got a customer raises their hands, they want to do the deal, we're getting in early in the transactional side. Let them do more remotely to save time when they get to the dealership. By letting them do so creates more transparency to the dealer to know who they're dealing with and how to qualify and how to put the right customer on the right car with the right deal circuit, because now you know a lot about them. Let them upload documents before they get to the store, if necessary. Identification solutions and making sure, with the fraud that's going on today, we've had you on in a number of times talking about that let's get them through that process, tie it all together, and then the third part of our suite is really bringing the finance solutions to the front.

Pete MacInnis:

You know so, when you can get to a desking tool with your jurisdictional tax, license, registration fees, you've got all your stackable incentives, a waterfall of lender programs, of how they really match up and qualify, and then take that desking and have it interactive with the actual lender decisioning. So as the deal changes, down payment changes, trade-in changes, as it does on almost every deal Right on, like okay, in real time, let me click through, ping the decision response back to see am I still in compliance, is it still going to stick, is it still a fundable contract or not? So that's the kind of stuff we're focused on. All right to this. So when we do studies, we do surveys, it's purposeful to help the industry and expose it, but we also want to make sure that it's also in alignment with. Can we help provide some solutions to solve some of these issues that the marketplace is acknowledging?

Jim Fitzpatrick:

Pete MacInnis, CEO and founder of eLEND Solutions. Please, folks, if you haven't already, it's very easy to get to right here on our homepage. It's the survey. You'll see the eLEND Solutions logo right there. We need the information, we need the data from all of you to help us put this together, give you the data back so you can make some decisions and see where the industry is headed in this very important issue of getting the payments right, making sure that that customer is being taken care of. It's just something we've spoken about so much, but it's still, you know, the issue is still alive and well out there. Right, we got to get it right. So, Pete, thanks so much for coming in.

Pete MacInnis:

Jim, thanks for having me on the show.

Jim Fitzpatrick:

Absolutely.

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Thanks for watching Inside Automotive with Jim Fitzpatrick.