The Visionary Creating Unusual Profit Opportunities in Automotive

Welcome to another episode of the Car Dealership Guy Podcast.

Today’s guest is Tony Wanderon, CEO of APCO Holdings/EasyCare, an automotive finance and insurance (F&I) firm. Wanderon shares his insights into the current market landscape, how he creates unusual profit opportunities in automotive, why service claims for EVs are shocking, and the growing cyber threat for cars.

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CDK Global - Empowering dealers with the tools and technology to build deeper customer relationships. Learn more at cdkglobal.com/dealership-xperience-platform.

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Easycare - Easycare offers the industry's only MOTOR TREND Certified VSC, GAP, Tire & Wheel, KeyCare, SelectCare, ETCH, Select, Dent Repair, Scheduled Maintenance, Appearance Protection, RV and Commercial Vehicle coverage. Learn more at easycare.com.

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(3:14) - Tony’s career

(5:50) - How do all the companies you’re involved with impact the auto industry?

(7:23) - What growth are you seeing in the RV and powersport market?

(14:32) - What are you seeing with Dealer profitability trends?

(19:17) - Why is the pause in EVs a good thing?

(20:52) - What’s driving the 5x increase in claim values?

(23:56) - Where’s the opportunity for EVs?

(27:24) - How are you working to create the most profitable system while maintaining a great customer experience?

(35:02) - Are there any new products on the horizon you’re anticipating?

(38:39) - How do you continue to scale your company?

(40:24) - Creating more product shelf space

(45:46) - How do you measure risk for someone who didn’t buy a VSC at the point of sale but wants one now?

(51:09) - Is there a benchmark for running an automotive warranty company?

(53:54) - GAP Reinsurance

(59:36) - What’s exciting to you these days?

1. The advantages of diversification.

Tony discusses the RV and powersport business and how both saw an increase in demand during the COVID-19 pandemic. He attributes this to a shift in consumer preference, which saw buyers search for less-crowded room-and-board options and take more opportunities to travel outdoors. In certain regions, Tony estimates that sales jumped as much as 100%. Investing in diverse opportunities like RV and powersports can help dealers enhance the sophistication of their operations, making them a good investment even when economic challenges like interest rates impact sales.

2. The benefits of consolidation.

Consolidation across the industry is helping drive cost-efficiency and profitability for dealers. Mergers and acquisitions give dealers opportunities to improve performance at multiple rooftops without the costs an individual storefront might face. However, while the retail automotive sector is becoming more efficient, it is not without its challenges.

3. The strength of fixed-ops and F&I.

Interest rates and used car depreciation are making it difficult for consumers to afford new vehicle purchases. This has placed pressure on many dealers’ front-end earnings. However, Tony notes that while car sales are less profitable than they were previously, back-end operations, such as fixed-ops and F&I, are seeing a massive surge in profitability. Focusing on these areas can help dealers negate the impacts of economic headwinds.

4. The costs of servicing an EV.

Electric vehicles present fixed-ops challenges that dealers didn’t need to consider with ICE cars. Tony estimates that the average repair bill for an EV is around $11,000, while a typical gas-powered car claim ranges from $1,500 to $2,000. Aside from the high service costs, dealers also have to factor in unique variables when assisting an EV customer, such as the length of time it takes for part shipments to arrive. Since the supply chain for EVs is less efficient than it is for ICE, buyers may become frustrated when their vehicles takes too long to repair. Ultimately, Tony urges dealers to consider the long-term impact selling and servicing EVs could have on their brand.

5. Invest in your customers.

Tony urges dealers to invest in their consumer relationships above all else, since loyal buyers outweigh all other opportunities in terms of long-term profit. To do this effectively, they must consider each relationship on an individual level, molding their approach to the specific situation rather than approaching every conversation with a cookie-cutter process. Tony also reminds dealers that employees are a form of consumer, meaning that investing into one’s own staff is essential for long-term success.

6. The risks of an unhappy customer.

Failing to recognize the importance of customer relationships can irreparably damage a dealership’s prospects. Due to social media and the internet, the customers of today have a much bigger voice than they used to. Treating one buyer without the utmost respect can lead to a domino effect, deterring other prospective consumers from shopping at your dealership. Furthermore, Tony also notes that dealers spend exorbitant amounts of money getting people into their store, through investments such as advertising and marketing. All that money goes to waste when the customer leaves unhappy.

7. The leadership advantage in F&I.

When it comes to introducing new F&I products, dealers have limited time to take advantage of their innovation. Tony explains that retailers at the top level tend to offer the same products to stay competitive. In other words, if a dealer launches a solid offering, sooner or later their rival will introduce something similar. This means that dealers have to exploit their leadership advantage as early as possible. One area where Tony expects to see more innovation in the years ahead is digital security. While a variety of internal risks, such as part failures, are covered by current F&I products, external threats, like malware and hacking, are largely left unanswered by the retail automotive sector, even though modern cars are becoming increasingly vulnerable to cyberattacks. 

8. The power of after-sale.

Tony urges dealers to prioritize their after-sale offerings, noting that many overlook this critical component of their F&I business. For example, at many storefronts, only 40% of customers buy a Vehicle Service Contract (VSC), a highly-profitable product for dealers and an affordable solution for consumers. Emphasizing the importance of VSCs and other F&I offerings, not just during the transaction but also later in the service bay can help dealers drive more profits on the back-end.

9. Weighing the risks of a VSC.

There are still many individual factors to consider when offering a VSC. For example, offering a service contract to a customer who didn’t buy one at point-of-sale comes with inherent risks. Tony recommends that dealers in these situations assume that the car has a pre-existing condition, unless the consumer has provided a vehicle inspection. If the owner hasn’t provided an inspection, then offering a VSC with less coverage will help minimize risk to the dealer. Other factors, such as local credit scores, can help dealers estimate their loss ratios when gauging the effectiveness of their VSCs or other F&I products.

10. Looking forward .

In the years ahead, Tony is excited to see dealers continue working collaboratively on projects that improve the customer experience and drive the retail automotive sector forward. He notes that the car industry is full of opportunities for business owners, workers and consumers; taking advantage of all the sector has to offer will ensure long-term success and profitability.