Many years ago, there was an advertisement for a clothing retailer where it was proclaimed that “An informed consumer is our best customer.” The concept was that a consumer who knew what he wanted, and the price he wanted to pay, would increase sales and loyalty to the merchant. In other words, the consumer was informed about his purchase by the retailer. By educating the consumer, merchants could ultimately be more effective, efficient, and profitable. More than a few questions emerge from this idea:
- Would such a policy inspire confidence in consumers?
- Would this same merchandising philosophy apply to retailing vehicles?
- Does providing information increase sales?
- Does this approach provide legal defenses that could lower costs and increase profits?
- Understanding financing and leasing calculations are the thorniest issues with which consumers contend. Should dealers attempt to help consumers understand these issues?
Answers to these questions are in the affirmative and there are powerful tools in the industry to help answer them. For example, two decades ago the Federal Reserve initiated a consumer education program entitled “Keys to Vehicle Leasing.” This informative brochure can still be found online. The education program was the creation of an industry/government collaboration and explained leasing without bias. Other federal and state agencies, such as the FTC and state attorneys general, offer information about buying and leasing vehicles. In addition, the internet abounds with car buying advice. However, some of the information on these sites is pejorative and underscore the negative aspects about the financing process. On the other hand, there is a website developed just for dealers to inform consumers about these processes: AWARE (Americans Well-informed on Automobile Retailing Economics). Every dealer should link this website to their home page. The result could be that an informed consumer can, indeed, be a dealer’s best customer.
People are often embarrassed to ask simple questions. However, to quote physicist Carl Sagan “…every question is a cry to understand the world. There is no such thing as a dumb question." Dealers can fill this void and benefit themselves by being the source of consumer information. An often-forgotten fact is that dealers frequently provide superior financing opportunities to consumers than consumers can get elsewhere. The AWARE program helps to inform consumers of this type of fact and explain the vehicle procurement financing process.
- The AWARE Website [https://autofinancing101.org/]
The introduction to the website summarizes its benefits to both consumers and dealers:
Recognizing the need for consumer education, automotive industry leaders have formed AWARE … a collaborative industry effort to provide consumers with information, tools, and other resources to better understand the auto financing system.
In educating consumers about auto financing and ways to make informed financing decisions, the group seeks to ensure that financing remains available and affordable to the broadest possible spectrum of consumers. Dealer financing is not only convenient, but it also offers competitive rates for consumers across the country.
The website then guides consumers with fundamental advice as well as access to more involved answers, portals to other websites, and additional forms of helpful information.
Numerous organizations participate and support the AWARE program such as the NADA, NIADA, F&I Management & Technology, American Financial Services Association (AFSA), and the Better Business Bureau, among several others.
The AWARE website is creatively designed and initially provides a search function and four tabs: About AWARE, Auto Financing Road Map, Learning Suite, and Recursos en Espenol (i.e., Resources in Spanish).
These tabs then lead to various subjects including:
- Auto Finance Calculator
- Consumers can calculate their monthly payments.
- Wallet Card
- A sales tool that consumers can use at the dealership.
- Auto Financing 101: FAQs
- AWARE has assembled answers to some of the most common questions asked by consumers. This section is another important tool to help educate all consumers about auto financing. Questions about the APR, credit reports, and co-signers are addressed.
- Fast Facts
- This section provides quick answers to questions relating to the auto financing industry, including those about competition in the marketplace, how consumers research their options, and the scope of options available to all consumers.
- Auto Financing Tune-Up
- A very helpful quiz is furnished to consumers that illuminates issues such as lien holders and late payments.
- Excellent links are presented in this section to other company and government sites, as well as payment calculators.
- Glossary of Financing Terms
- An extensive list of terms and their definitions are exhibited.
- Vehicle Repossession Prevention
- Advice is provided to consumers who experience financial challenges.
- Understanding Vehicle Financing
- This is a booklet that walks consumers through the financing process.
- Understanding Voluntary Protection Products
- One of the best sections of the AWARE website is the discussion of voluntary protection products. These products are broadly misunderstood by consumers and are the foci of the CFPB, FTC, and state attorneys general. If consumers understood them better, they would probably buy them more often.
Avoiding Consumer Complaints
A key advantage of this website is that it could markedly reduce consumer complaints. Consumers who understand their purchases are far less likely to complain. Consumer complaints to government agencies are the most significant reason that regulators take action against dealers. The website does provide information as to where consumers can complain to governmental authorities. Unfortunately, there are a very few miscreants in the industry who may need to be policed.
- Dealer Employee Education: Not only does this website provide information to consumers, it also is a great source of information for dealer salesmen and finance managers.
- Improving Customer Satisfaction Index (CSI): Even marginally improving customer satisfaction will increase CSI, a significant goal. AWARE can assist in this process.
- Compliance is a Tool for Sales: Dealers educating consumers will be seen as dealers attempting to comply with the law in a most positive way. Consumers trust merchants who appear to be ethical and observant of the law. Moreover, should a regulator examine a dealer’s protocols, and identify the fact that the dealer truly informs consumers of their transactions, that dealer will be more likely seen as compliant.
- Increasing the Gross through Compliance: More satisfied customers see their merchants as being ethical and compliant, making them inclined to buy more, increasing profitability.
- Competing with other Dealers: Dealers who are more consumer-centric will attract and maintain customers. Dealers will distinguish themselves in contrast to their competitors by helping consumers understand their financial decisions.
- Getting Consumers to Sign: There is an axiom in sales: Make it comfortable for the prospect to sign the contract. Eliminating ambiguity, doubt, and confusion is one of the ambitions of good salesmanship. AWARE can help, mightily.
Personal Note: As a former regulator who prosecuted dealers, when I settled with them for violations, one of the settlement terms was often to have the dealer provide some form of consumer education. If a dealer had a rogue finance manager, for example, but had already initiated such a program, it was a mitigating factor to assessing penalties by me. Consumer and employee education programs, coupled with an ethics program, can help shield dealers from potential liability. Regulators appreciate these efforts far more than most dealers realize.
Terrence J. O’Loughlin, J.D., M.B.A serves as director of compliance for The Reynolds and Reynolds Company.