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Published on: AutoTalk Magazine | By Robert Barry on September 2022 Edition, pages 15 – 16 | Read the article on AutoTalk here.


Using finance to drive revenue at your dealership


In a recent conversation with Michael Clarke, general manager for the Retail and Data division at Cox Automotive, Autotalk dug deeper into the topic of finance and how dealers are navigating post-pandemic days and the effect of the rules to improve car finance practices introduced by ASIC almost four years ago.

The Cox Automotive finance and aftermarket platform provides dealers with a software package that integrates with a wide panel of lenders and aftermarket providers, allowing them to increase finance penetration and manage regulatory compliance.

When Autotalk asked Michael to identify a customer experiencing outstanding results using the platform after the new rules were introduced, and this is what he told us:


Keeping the dealer’s name off the record, can you tell us a bit about them?


They are a dealer group with a nationwide presence playing in the new and used car market.


How many months/years have they used the finance platform?


Three years


What’s the finance penetration using the platform?

When this group first started, they were achieving 32% penetration, which is an expected result. They then introduced a recommended strategy of engaging the sales floor to promote finance from the enquiry. The data started to show a direct correlation between finance quotes (finance score) and finance penetration.


As the team engaged more, the finance penetration continued to climb. For the past 12 months, they have averaged 39% finance penetration across the group in what has been a challenging market. To put that in perspective, every 1% increase equates to roughly $12,000 additional revenue per month, so this result equates close to $85k more profit.


Can you comment on the percentage savings in rate discounting?


Again, applying best practices, they saw a rate discounting average of 0.25% below the allocated profile rate.  They were discounting 0.70% on average prior, and the national average across our network is around 0.86% discount. This difference works out to be about $400-$500 per contract. Given that this business signs over 250 contracts a month, that’s another $100k per month.


Can these numbers also be translated into time? Considering that your platform is integrated with more than 30 lenders and aftermarket providers, are time efficiencies achieved at the dealer level because of the average time saved per application?


The numbers around time savings are harder to quantify as it depends on the financier, insurers, and the integrations we hold for that dealership. However, on average, the breakdown is that when we integrate the dealership’s dealer management system through to settlement, dealers using our platform can save, per customer:

  • seven minutes transferring data from the vehicle contract to the finance application.
  • eight minutes transferring that data from a manual application into a financier platform.
  • six minutes transferring data through to insurance provider.
  • four minutes inputting data to warranty provider.
  • four minutes saved transferring into Schmick.
  • seven minutes reconciling log.

Given that not every dealership will be integrated with every supplier, if we take a conservative view of 15 minutes and a Business Manager submitting, on average, 30 contacts (including declined or don’t go ahead), that’s 7.5 hours saved per business manager, per month, or one full day of productivity gained, per Business Manager.


Also, it is worth mentioning that insurance warranty and Schmick can be sold to cash customers too, so there are more potential time savings on customers who don’t finance.


So, in post-pandemic days, when we know that foot traffic has decreased at dealerships and with the shortage of stock that we are currently experiencing, how does a dealership advertise or promote their financing options to achieve such results?


Mainly through the sales team. However, every dealership in this group manages its marketing spending differently.


Some do physical campaigns on finance, but most of it is about driving traffic to their website and getting customers to engage with digital tools, such as finding their credit score, which is a free service included with our platform.


Can you tell us more about the overall results when dealers actively advertise their finance options?


We noticed that when dealers advertise finance, they get a much higher engagement rate from customers with finance leads, adding up to 32% of all leads. In the case of the dealer group we have discussed, that’s 12 leads on average per website per month. After speaking with the dealer principal, he said that when they advertise finance options, the leads they receive per month is more than the number they previously received organically on their website in an entire year.


We also see that these customers convert to sales at 42% and that finance penetration on these customers is closer to 70%, again demonstrating what we already know, customers are arranging their finance earlier in the process and we need to get on their shopping list.


Published on: AutoTalk Magazine | By Robert Barry on September 2022 Edition, pages 15 – 16 | Read the article on AutoTalk here

Learn more about Finance and Aftermarket here.