How Dealers Can Avoid the Friction Caused by Penny Perfect Payments – Pete MacInnis, eLend Solutions

penny perfect payments

Pete MacInnis, Founder, and CEO of eLend Solutions returns to CBT News to discuss more topics on digital retailing and the disconnect that dealers often find with “penny perfect payments”.

Pete says that he believes this disconnect stems from the fact that penny perfect payments were designed to determine costs such as local sales, state taxes, and registration. And while they were perfect for these sort of calculations, as digital retailing continued to grow, these calculations began to expand to actual dealership payments. And Pete says that although they have accurate equations to determine these payments, they don’t have any way to determine the qualifications of the customer, and that is the area which causes a disconnect for dealers.

Pete goes on to discuss different attributes that are significant when determining penny perfect payments as well as the one thing that customers will always be looking for: the best possible car buying experience. To hear more from Pete check out the full interview above.

penny perfect paymentsVIDEO TRANSCRIPT:

Jim Fitzpatrick: Hi, everyone. Jim Fitzpatrick with CBT News. Thanks so much for joining us today. Today in the studio, we’ve got back in the studio, I should say, Mr. Pete Macinnis with Elend Solutions. I know that you know that name, and you know the company. They do a phenomenal job for dealers. Pete, welcome back to the studio.

Pete Macinnis: Thanks for having me back, Jim.

Jim Fitzpatrick: Sure. Last time we talked, we were kind of getting into the discussion about payment, or I should say penny-perfect payments in our previous segment. As you know, we talked about how a lot of dealers believe online payment calculators and self-help desking tools are providing unrealistic or inaccurate payments to consumers. Yet, there are so many new tools out there that are claiming, claiming to deliver penny-perfect payments. I’m sure our audience looks forward to, for us to take this deep dive into this issue. Why is there so, such a disconnect between digital retailing vendors claiming penny-perfect payments and actual deals getting done between consumers and dealers?

Pete Macinnis: Well, I think in general, you think historically, penny perfect terminology was really referencing, is it in reference to local sales, county, state taxes-

Jim Fitzpatrick: Yeah.

Pete Macinnis: Registration, title fees in that jurisdiction.

Jim Fitzpatrick: Sure.

Pete Macinnis: Can we get it penny perfect to those calculations?

Jim Fitzpatrick: Right.

Pete Macinnis: So then when this digital retailing comes along and says, “Okay, well, let’s expand that terminology of penny perfect to actual payments, right?” So they think of it in terms of penny perfect to the payments. Well, let’s add a specific rate and a specific term, and let’s do the math and calculation to make that penny perfect. Well, that penny perfect, it may be from a math equation, but it doesn’t have anything to do necessarily with the qualifications of the consumer, right?

Jim Fitzpatrick: That’s right.

Pete Macinnis: So there’s a disconnect there, and I think that’s where the friction and stuff comes into play.

Jim Fitzpatrick: It was well-meaning. [crosstalk 00:02:00]

Pete Macinnis: It was well-meaning.

Jim Fitzpatrick: But it doesn’t work.

Pete Macinnis: Right.

Jim Fitzpatrick: Yeah, exactly, so what other attributes matter in getting to penny perfect payments?

Pete Macinnis: Well, let’s start with the vehicle, right? So OEM captive lenders have multiple lender programs. So they might have a standard rate sheet program. That’s a national program for all their cars.

Jim Fitzpatrick: Sure.

Pete Macinnis: Then they’ll have a special incentives program, which is basically to move the iron, supply and demand-type issues and certain models and things like that. And then they may have a third rate sheet program that is specific to a region, that may have to do with demographics or specific vehicles or portfolio performance or something. So for example, you might take a Nissan Pathfinder, four-wheel drive. Well, you might price that differently in Newport Beach, California, than you would in Denver, Colorado, right?

Jim Fitzpatrick: Sure, makes sense.

Pete Macinnis: And you’re going to want to compete with that Subaru and be real competitive there, so you’re going to have all of these differentiations. This becomes so complex that not even the desk manager or the F&I guy can do it.

Jim Fitzpatrick: You know that contract’s getting kicked back once it gets in over at the bank.

Pete Macinnis: Right. And I can even tell you this, you know, having spent the beginning part of my career in the lending side of the world, a lot of lenders today, the actual loan officers who are involved in some of these automated decisions and conversations with dealers don’t understand how they arrived at those decisions because the black box engine did it for them. They don’t understand. So if the actual loan officer or the lender doesn’t know, and the dealer doesn’t know, good luck having a consumer self-desk his own deal.

Jim Fitzpatrick: That’s right. That’s right.

Pete Macinnis: You’re destined for problems with that. And that’s just on the basic program. Then you throw in things like, okay, is it a new car? Is it pre-owned? If it’s pre-owned, is it certified? Is it certified … Is it a certified car of the brand for that-

Jim Fitzpatrick: That’s right. [crosstalk 00:03:50]

Pete Macinnis: The same car you’re selling-

Jim Fitzpatrick: That’s right.

Pete Macinnis: Because you’re going to have different rates if it’s-

Jim Fitzpatrick: Oh, yeah. For sure.

Pete Macinnis: If it’s your brand or not versus an alternative brand.

Jim Fitzpatrick: That’s right. Yeah, there’s no question. It sounds like digital retailing has a long way to go to meet consumer expectations. What do you recommend dealers do in the meantime?

Pete Macinnis: Be realistic in your expectations, you know. Understanding what you really can do and you can’t do.

Jim Fitzpatrick: Right.

Pete Macinnis: Right? And communicate that. And consumers will appreciate that and respect that.

Jim Fitzpatrick: Right.

Pete Macinnis: And they will understand it.

Jim Fitzpatrick: Sure.

Pete Macinnis: If it’s explained to them appropriately. It’s much better than the whole historical bait-and-switch, let’s just [inaudible 00:04:31] the customer. Just get them in, and we’ll figure it out later.

Jim Fitzpatrick: Because that’s exactly what you’re doing. You’re doing the old bait-and-switch, aren’t you? I mean, when it comes to that, somebody thinks it’s going to be this, and it’s actually this.

Pete Macinnis: Yeah.

Jim Fitzpatrick: And then you’ve got a, you know, a customer that’s not real happy with you.

Pete Macinnis: What most customers really want, they just want a better car buying experience.

Jim Fitzpatrick: That’s right.

Pete Macinnis: Right?

Jim Fitzpatrick: That’s right.

Pete Macinnis: They want to start where they want online and stop. They want to seamlessly transition, and all of their data and information when they get to the store. They don’t want to start over, right?

Jim Fitzpatrick: That’s right.

Pete Macinnis: And they want to be able to move at their own pace. And so from that standpoint, it should be more about that. And for the dealer, he wants to be able to say, “All right, how do I … Everything they were doing online, how do I get that in store and quickly and efficiently and up front so I have as much information about the customer as they do about what they’re wanting to buy?”

Jim Fitzpatrick: That’s right.

Pete Macinnis: If they’re really wanting to just test-drive and deliver and they’re really looking to just validate their expectations, how do we deliver that? And that means removing a lot of those bottlenecked profit leaks and disconnects in that process.

Jim Fitzpatrick: Sure.

Pete Macinnis: And I think from digital retailing, that’s really what it should be. Give the dealer technology that allows him to do what he wants to do that’s most important to him. He wants to sell more cars faster with increased profitability.

Jim Fitzpatrick: That’s right.

Pete Macinnis: There’s so much process involved that inhibits his ability to do that. So let’s not replace what he does best. And that’s selling cars, buying them online. Let’s improve the bottlenecks or the things that inhibit him. The stuff he’s required to do that he doesn’t want to do, can we automate those from a technology perspective so he can focus on those things? And then when that happens, enable that dealer to say, “Okay, now I’m comfortable.” Digital technology enabled me to do a more efficient sales process and transaction, and when I get comfortable and I know that I’m not going to be at risk of profitability in a deal, then what parts of that am I comfortable moving online upfront, into the digital … Can I then move that stuff forward?

Jim Fitzpatrick: Right.

Pete Macinnis: And I think that’s when that’ll happen. So I think if we can help the better car buying process in the store, I think when that happens, we’ll start to see a lot more of that move online because the dealers will maintain control and comfort level with that, but it’s not going to, it’s not a race to the bottom.

Jim Fitzpatrick: [crosstalk 00:06:50] Pete, what questions should dealers ask digital retailing vendors about credit and finance tools?

Pete Macinnis: Well, in reference to when that vendor’s talking about penny perfect, have them describe and define what that is.

Jim Fitzpatrick: Okay.

Pete Macinnis: I think the correct answer should be things like, does it, penny perfect include local sales tax, county, state, reg, title fees, like that, plus does it also include rate, terms, residuals, money factors, specific to that model ID trim level, right? Because that’s critical in the deal. And then plus in addition to that, do they have access to that raw credit data? Do they have logic to include those additional attributes and underwriting guidelines and advanced guidelines and all that? And it’s okay if they don’t. If they don’t then, are they partnered with somebody who does, right?

Jim Fitzpatrick: Right.

Pete Macinnis: And all those so they can actually connect the dots. So it really, I think for that, it says, “How does my digital retailing tools interact and collaborate and communicate with other platforms within that dealer sales and finance supply chain?”

Jim Fitzpatrick: Yeah. It’s very important, isn’t it?

Pete Macinnis: It’s important.

Jim Fitzpatrick: Yeah, for sure. Your company, Dealercentric, has been serving dealers for 15 years. You rebranded as ELend Solutions a couple of years ago. Tell our audience why you did that.

Pete Macinnis: Well, you know, we were known as Dealercentric forever. We pioneered online interactive credit applications many years ago. Considered best-in-class. We processed millions of those for thousands of dealers. And that was basically, you know, we kind of were proud of the good job we did with that as a widget, right? But now, you know, over time and growth, you mature.

Jim Fitzpatrick: Sure.

Pete Macinnis: As a platform, and we truly became a fintech platform to serve much more than a widget on a website, but really how can we help the industry as a whole, whether that’s better customer experiences, helping auto dealers, auto lenders, OEMs.

Jim Fitzpatrick: Sure.

Pete Macinnis: The supply chain. So our goal was like really from the, to say how can we take our digital finance tools and help a digital retailing fulfill its promise? How do we … We wanted to focus on that and say, “We have a niche here. We have an expertise. We’ve been doing our lifetimes.”

Jim Fitzpatrick: Right.

Pete Macinnis: And how do we incorporate that within the whole supply chain, the whole environment, so that we can help fulfill that promise of digital retail, and we can be a part of that for the industry.

Jim Fitzpatrick: Yeah. In anticipation of today’s interview, we spoke to a couple of your clients, and the one thing that seemed to ring true was your broad knowledge of the industry over the last 15, 20, 30 years even, that helped them in the long run, because you knew both the retail, the finance side, and I think that makes a big difference about ELend, right?

Pete Macinnis: Well, I think our management team from that perspective, our core, and most of our senior technology team, we, prior to this, you know, we got the [inaudible 00:09:55]

Jim Fitzpatrick: Right.

Pete Macinnis: We all came out of the finance lending world together.

Jim Fitzpatrick: Right.

Pete Macinnis: Right? So we built a lot of these tools from a lender’s perspective.

Jim Fitzpatrick: Right. Much continued success to you. I know that that’s what puts you as a leader in your industry and I want to thank you so much for joining us here on CBT News.

Pete Macinnis: Thanks again for having me, Jim.

Jim Fitzpatrick: Thanks.

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