Inside Automotive with Jim Fitzpatrick, powered by CBT News

Pete MacInnis Breaks Down the $4.7B Opportunity in Dealer Finance

• Jim Fitzpatrick • Season 1 • Episode 38

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Mismatched payment quotes are costing dealerships billions, and on this episode of Inside Automotive, Pete MacInnis, founder and CEO of eLend Solutions, breaks down new data highlighting the financial impact on both front-end and back-end operations. He explains how credit application approvals that don’t align with dealer quotes are creating lost revenue, extended sales processes, and reduced customer satisfaction.

Discussion highlights include:

  • Less than 60% of dealer-submitted credit applications are approved, with only 32% matching the original quote
  • Monthly payments can increase $32–$36 when approvals don’t align with dealer offers
  • Widespread deal rework, with 95% of dealers adjusting agreements to meet lender terms
  • Reduced front-end gross profits, with 56% of dealers adjusting profit by $300+ per deal
  • Back-end finance delays adding 30–45 minutes per transaction
  • How eLend Solutions’ Dealmaker platform aligns quotes with approvals, restores lost revenue, and streamlines operations

MacInnis emphasizes that addressing payment discrepancies is a significant opportunity for dealers to improve efficiency, increase profits, and deliver a better customer experience.

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Announcer:

Thanks for watching Inside Automotive with Jim Fitzpatrick.

Jim Fitzpatrick:

Hey everyone, Jim Fitzpatrick. Welcome into another edition of Inside Automotive right here at the CBT Automotive Network. eLend Solutions just released a new finance report published right here on CBT News, uncovering a 4.7 billion, that's right, billion dollar opportunity for auto dealers if mismatch payment quotes are solved. So joining us now with more on this is Pete MacInnis. You know him, you've seen him here before on CBT News. He's the CEO of Elend Solutions. So Pete, thank you so much for joining us on the show. Boy, I know we've got some dealers' attention right now when you mentioned $4.7 billion opportunities. Not a dealer out there that isn't interested in getting some of those dollars, right?

Pete MacInnis:

Yes, sir. So thanks very much for having me on the show again, Jim.

Jim Fitzpatrick:

Sure, sure. So talk to us. Uh give us a little bit of the background of the report.

Pete MacInnis:

Yeah, so we started out what we did is we looked like we looked at application data. We looked at thousands of credit application submissions from dealers to over a hundred different lenders. And then we looked at those same uh loan decision responses that came back from those. And um, a couple of the statistics that we found was that 60% of the credit applications plus were not approved. I think the number was only 32% were approved on that deal. Um, and then we also um drilled in a little bit and says, okay, of looking at these approvals, what percentage of all applications were actually approved, as is.

Jim Fitzpatrick:

You guys did conduct a dealer survey. Obviously, we just talked about that to find out if the finance study data matches the auto dealer's experience and what the impact is to sales and front-end and back-end gross profit, as we know it's going to, that's going to have some sort of an impact. And also the FI presentation. Share with us some of the findings from the finance survey.

Pete MacInnis:

Yeah, Jim. And again, to your point, what you just said is very important to us saying, Well, we were looking at this data, it was sample data, but we're thinking, okay, it's not all dealers, all lenders, every application in the industry. It was a it was a segment, it was a small sample. So we wanted to see is that sample data match up with deater sentiment? Because it's very important that uh that we're in alignment with the dealers. We we don't want to put out data and the deaters are saying, no, this is crazy, this doesn't make sense.

Jim Fitzpatrick:

Yeah, true.

Pete MacInnis:

Um, and and we didn't want it to be challenged, so we wanted to see if we could get aligned. So we followed up with the deater survey. So some of those initial responses were like, as I mentioned, when we said that less than, you know, uh 60% of the applications uh were not approved, so we asked the dealers the questions, and 82% of the dealers agreed that less than 40% of the credit applications submitted to their auto lenders received the credit approval decisions. And 83% agreed that the lender finance approval decision, monthly payments for new vehicles was on average $32 a month higher than the initial offer to the customer. So, you know, in the finance data, we did that analysis and we said, all right, what's the difference in these approval of payment terms that are are different? And we came up with that number of $32 on average of the thousands of applications, and then the one subset of 1.6 for approval. So it was $32 average on higher. So we said, hey, dealer, does this match your experience? 83% said yes. And 88% said that on average it was $36 per month higher than that initial quote to customers for used vehicles. So the dealer audience overwhelmingly was agreeing with the finance data. And one last starting point on that was 95% of the dealers said that those vehicle deals had to be reworked because of initial quote to lender mismatches between initial quote, lender decision, et cetera. So of that segment of those 95, two in five of the dealers said that 30% or more of the new vehicle sales had to be reworked because of that problem.

Jim Fitzpatrick:

Did the dealer survey reveal financial impact of the dealer's front-end gross profit?

Pete MacInnis:

Absolutely yes. Like for used vehicles when that approval decision was on average $36 higher than the initial quote. Wow. 56% of those dealers said it was over $300, it was $300 or more that they had to adjust that front-end gross profit to solve that issue. It reduces front-end gross profit on those deals somewhere between 11 and 20% on average. And uh last stat on that question was um 93% of the dealers said that yes, they did lose sales. So we using like a 5% lost sales ratio based on some of the answers, um, we took that number times the average front-end gross profit per vehicle on average for a dealer. Yeah. And so we multiplied and estimated that out to be just on the front end, probably about $237,000 lost opportunity per dealer per year in trying to resolve those discrepancies between initial quote and lender final payment terms.

Jim Fitzpatrick:

So now let's that's the front end. Now let's talk about the back end and the impact that it has in back end gross profit.

Pete MacInnis:

So yes, the answer was yes. 40% of the dealers said revolving the payment term discrepancies adds 31 to 45 minutes or more to the sales and finance process. And 78% estimated that the finance penetration could increase by 11% or more if that initial payment quote matched lender decisions before they got to the F and I office.

Jim Fitzpatrick:

Right, right. Yeah, because they're also once they get that information, now they're online. Whether it could be they're sitting in your showroom and this is online and they're checking with their credit unions, they're checking with their banks to see what the rates are, to see what the, you know, put pulling up the payment calculators and such. So that opens a whole new door now if you're going to be quoting payments that are not in alignment with that first number, right?

Pete MacInnis:

Correct. Absolutely. So when you look at that finance penetration, uh where they can pick it up, you know, 11% or more, we took that 15, we used a 15% number and to increase finance penetration, and then you took that times the average gross backend profit per dealer uh on a deal. That turns into another $278,000 and lost opportunity per dealer, just trying to resolve that type of that problem.

Jim Fitzpatrick:

Sure, sure. So let's talk about that issue. What's causing the disconnect between the initial payment from quotes and the lender loan decisions?

Pete MacInnis:

Yeah, so Jim, the you know, we look at this, it's happening in store as well, but let's let's focus on the digital retailing credit model pricing. You know, the things that's on the dealer's website, the digital retailing, everything remotely. Sure. They're they're almost all of them are using these payment term estimators, calculators to quote a payment. And they're they're relying on a single attribute such as a credit score tier. And then based upon that tier, they assign an interest rate to that and then calculate the payment on it. And and so today almost all are using that, but yet those are such outdated tools using that single attribute to quote customers' payments. Um, so they're doing that, and that's not even how things are done today. And what's even more um interesting about that, most of those tools don't even have access to the customer's credit report. So they're quoting something off of a credit score tier when they don't even know what it really is.

Jim Fitzpatrick:

Right, right.

Pete MacInnis:

And so it's setting up friction right up front.

Jim Fitzpatrick:

Oh, yeah, for sure.

Pete MacInnis:

And yeah, so that that's kind of the origins of the problem, why we're having such a big big gap between you know what the expectations are. And so what happened is you know, and so and we asked the dealers, I said, you know, well they said that 87% of their lenders um are stopped are are stopped providing lender rate sheet bulletins, you know. And 54% of them said that over 50% of their lenders have discontinued that practice. So think about it. You got a digital rate sheet that everybody knows historically, that's what we go offer. What's your credit card? What's your gear? Man, we're gonna price you at that. Lenders have been uh are abandoning that, and dealers are acknowledging that they're no longer doing it in a small subset, but that you still have digital retailing going there and quoting these things where the lender is saying, we don't do that anymore. Right. And and so what's happened is is the the lenders have moved away from that credit score tier buckets and moved to this dynamic lender pricing model. And what it is, is it's much more than a credit score. It's AI models. They use so many more attributes, and it's all different by lender. And so, for example, instead of just setting up a credit score tier, they might use credit history, number of trade lines on the bureau, the high credit, revolving availability. Do they have a previous auto loan? What's their minimum income? Debt to income ratios, payment to income ratios, loan to values, residence, employment history, front end, back in advance, new youth certified, loan terms, mileage, existing customers, and who knows how many different attributes they may consider in their proprietary loan decision engine, right? So they're using all of that, which is completely absent from the dealer customer negotiation process, whether it's online or in store. Right. It's just gone. And so when you think about the advancement that lenders have made in the technology, it's really good for them and they're going to have a better performing uh performing portfolio, but it is not part of the dealer customer experience at the front of the sales process. Right. And that's where there's a big problem to have today.

Jim Fitzpatrick:

Yeah, yeah, for sure. This the this problem, you know, has got to be costing the average dealer at least a half a million dollars in lost opportunity, for sure. So uh, folks, you can you know see that full report right here at cbtnews.com. We'll have a link right below the video that you're watching right now to check that out, which I highly encourage that you do. Um, you know, E-Lend Solutions FinTech platform is launching uh deal maker that that solves the really the debacle uh documented in this finance report. So, Pete, we want to bring you back to talk about that because I know that at the end of the day here you've come up with a solution at ELEN Solutions to address all of this, right? And uh it's 2025. I mean, why are dealers still having to deal with this issue, right? It's crazy.

Pete MacInnis:

Yeah, it's something that I think a lot of people uh uh companies are working on to help solve this. This isn't unique to us. Everybody knows this is an issue. Everybody's working on it, or a segment or a piece of it of a component on it. And we've been very fortunate because we've been doing this a long time. Yeah, we've connected a lot of the dots and the whole workflow in the process, yeah. You know, from shopping to buying, from lead gen to deal gen, uh from finance tools and desking tools to, you know, Ola app processing. So we've tied it all together and we really look forward to showcasing that with you on CBT News real soon. Thanks, Jim.

Jim Fitzpatrick:

Yeah, we're excited to have you on to talk about this, because I think maybe deal breaker is is, or deal maker rather, is is exactly what the industry needs. I mean, the timing is right. The indust the auto dealers don't want to give up any gross profit, and especially in this area where you know, if you've come up with a solution, it seems like a no-brainer. This this is something that every dealer needs to take a look at. Because sometimes I think that, you know, business goes on, uh, dealers run their lives, they run their businesses, and they don't realize that in in instances like this, where the payments aren't matching up and you're getting customers that are it also affects your CSI, by the way, at the dealership, because it's not you're not living up to what the customers' expectations are. It doesn't seem transparent, although every dealership out there wants to be more transparent with their customers and deliver a better product and deliver that product on the payments that they say they're gonna do. So uh we're anxious to hear all about uh deal maker from from Elon Solutions and uh we're we'll we'll schedule that that next uh show just as soon as we can. But Pete McGuinness, CEO of Eland Solutions, thanks so much for uh spending some time with us here today to review the to review the the survey. Uh and again, folks, I highly encourage you to click the link below to get your copy of it and to check out these numbers because they're they're astonishing. So Pete, thanks so much.

Pete MacInnis:

Thank you.

Announcer:

Thanks for watching Inside Automotive with Jim Fitzpatrick.