Build-to-order vehicles unlikely to circumvent in-store F&I

Asked about the prospect of automaker build-to-order emphasizing captive finance and products, and costing dealers an F&I opportunity, the National Automobile Dealers Association said the transactions still end up at the dealership.

“Even in a build-to-order or reservation system, customer orders are still placed by the dealership on the customer’s behalf, and the customer sale itself still takes place between the dealership and the customer,” National Automobile Dealers Association spokesman Jared Allen wrote in an email. “As a result, customers are still able to benefit from a wide range of possible financing options, either obtained on their own or through the dealership.”

Elliot Schor, JM&A Group vice president for sales operations, said he felt build-to-order was more done “out of necessity” because of the limited inventory and rare from a customer demand perspective. He also doubted dealers would lose the opportunity to sell F&I products should automakers focus more on the order bank model.

“Most roads still end at the dealership,” Schor said of build-to-order sales. Even if automakers seek to bring the ordering process further online, he didn’t anticipate they would take F&I out of dealers’ hands.

“The dealers need to be viable,” Schor said. And dealers would have a “significant problem with the manufacturers” if F&I performance fell because of an automaker’s practice.

Noren said questions remained about what role the retailer will play under a future with more build-to-order sales. That role could even be different by make or model, she said.

However, franchise laws are “very hard to get around,” and she doubted dealerships would be eliminated from the sale.

“Retailers still play a critical, critical role” in both the sales and ownership experience, Noren said.

Brian Finkelmeyer, senior director of new vehicle solutions for Cox Automotive, said he felt attempting to cut out the dealerships would engender an “extraordinarily high degree of strife.” He doubted automakers would pick that fight.

He also pointed to the experience of a Ford dealer with whom he had spoken. Despite trends such as online retailing, few of the dealer’s customers had engaged in build-to-order transactions, according to Finkelmeyer. It was far more likely that customers simply requested one of the vehicles the dealer had ordered but not yet received, he said.

Thus, it would be “financial suicide” for Ford Credit to undercut that dealer on the minuscule percentage of sales conducted using build-to-order, Finkelmeyer said.

The dealer would just say, “ ’knock yourself out,’ ” and retaliate by funneling the overwhelming proportion of volume remaining to an indirect third-party lender, Finkelmeyer added.

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