KENNESAW, Ga. — Errors in the F&I office can infuriate
both managers and customers. Volkswagen Credit is looking to a new solution
more than four years in the making to reduce mistake frequency and streamline
processes for efficiency and compliance.

In addition to celebrating 1 million customer accounts
currently in its portfolio, VCI officially launched what it's calling
FinanceSource, a new integrated solution for credit and contract approvals, funding
and digital document storage.

This system is designed to help VW franchised dealers to
further reduce wait time for customers, eliminate the risk of missing documents
and accelerate cash flow for stores.

Company officials decided to hold a special event Tuesday at
Jim Ellis Volkswagen in Kennesaw, Ga. The Jim Ellis Automotive Group originated
the deal last month that pushed the captive finance company above the 1 million
current account threshold for the first time.

The group has a trio of VW stores in its holdings and has
been one of the pilot operations for FinanceSource to help fine tune the
solution Volkswagen Credit is looking to roll out to all of its franchised
dealerships in the U.S. and Canada during the next couple of years.

"The feedback by the dealers so far has been very positive
in terms of accuracy, ease of use, and speed," said Christian Dahlheim, executive
vice president and chief financial officer for VW Credit.

How FinanceSource Is Designed to Operate

VW Credit invited SubPrime Auto Finance News to a special
presentation to explain how FinanceSource came about and how it's meant to
drive the completion of credit applications and processing for lease and retail
contracts.

"It's a fully integrated North American dealer solution from
literally when the customer walks into the dealership door until the package is
funded," said David Wicks, vice president of sales and marketing at VW Credit. "It
will eliminate a lot of the errors that might occur within the F&I office."

One major difference with FinanceSource Wicks highlighted
immediately was the input of customer information. From the time a potential
buyer enters the showroom, all of that individual's information is sent
directly into the tool, rather than the need to be inputted multiple times by a
salesperson and F&I manager. The solution has that capability because it's
integrated into dealer management systems most often utilized at VW stores,
including ADP, Reynolds and Reynolds and Dealertrack Technologies.

"We clearly believe it has to be integrated with the DMS. The
DMS integration makes it more complex, but it also adds greatly to the value
proposition for the solution," Dahlheim said.

FinanceSource eventually will handle each of the four major
chores handled in the F&I office, including:

—Credit application
—Contract validation
—Electronic documentation
—Digital signature

As the F&I manager works with a customer to complete the
process, Wicks explained how FinanceSource is geared to operate similar to
other consumer-oriented online platforms.

"Just like when you're buying something from Amazon and you
put in an incorrect ZIP code or if you put the wrong security code for your
credit card and it won't let you advance to the next screen until you get the
information correct, that's what this will do," Wicks said.

"Right at that time, the dealer and the customer are able to
know that they have a completely accurate credit application that has been
completed and is ready to be submitted to VW Credit," he continued.

Eliminating errors right when they might occur is a point VW
Credit executives emphasized numerous times. The tool is supposed to handle validation
of 170 fields and is integrated with more than 200 business rules, including:

—Over maximum allowable markup
—Excess mileage fee
—Given-up, buy-down miles or purchased miles
—Security deposit
—Taxes and acquisition fee (amount and use)
—Residualized parts and residual discrepancies (buy down/undervalue)
—Termination, purchase option and vehicle return fee
—Special program guidelines

VW Credit pointed out that eliminating just one mistake may
pay the monthly fee for FinanceSource. Here is the hypothetical example
officials shared:

—Residual buy down of $235. Dealer used 52 percent and
bulletin rate is 51 percent.

—Residual buy down of $512.20. Dealer used 55 percent,
and bulletin rate is 53 percent.

—APR buy down of $1,333.20. Dealer contracted A tier on B
tier approval.

—Rent charge and residual buy down of $1,425.62. 

—Contracted .00059 money factor and bulletin .00080.

Existing demo miles were not bought down (3,968 at 25 cents
per mile)

"Each of these scenarios can be avoided if the dealers had the
opportunity to validate their contracts before they sent the packages to
funding. This doesn't account for the cost, both monetary and perception,
of bringing a customer back into the dealership," Wicks said.

It's All About the Customer

While the solution is supposed to make life easier for
F&I managers, ultimately VW Credit is looking for FinanceSource to alleviate
burdens and concerns about the financing process consumers might feel.

To support the potential for the tool, company officials
highlighted that in the J.D. Power and Associates 2012 Consumer Financing
Satisfaction Study, Volkswagen customers rated VCI No. 1 in the retail loan
segment.

"We are proud of those results. It tells us we are already
doing something right in the eyes of our customers," Dahlheim said. 

In 2012, VCI saw an increase of 28.3 percent in all-new
contracts with 404,947 contracts signed. VCI increased the number of new
contracts to 238,400 in the first seven months of this year.

The number of total assets during the business year 2013
rose by 14 percent to a record level of $23.6 billion. 

To support this growth, VCI recently announced the creation
of up to 150 new jobs over the next five years at their service center in
Libertyville, Ill.

And VW Credit executives acknowledge the implementation of
FinanceSource is not "just an overnight system upgrade and a manager has a new
icon on his desk." The captive has been consistently working with its dealer council
to ensure the tool works the best it can.

"They've helped us evolve and make changes as we go. There
were some things that didn't work right in the F&I process so we've tweaked
here and there, and there have been some things that they've gone out of their
way to try for us. So it's gone both ways. We're been very involved with them
through the entire pilot and made changes according to our needs and we've made
changes according to their needs," said Maxine Olson, the FinanceSource
consultant at VW Credit.

Milestone Celebration

Before conducting the presentation about FinanceSource, VW
Credit recognized Linda Gaines, who signed a lease of a Volkswagen Jetta with
her daughter, Kyla Gaines, for the contract that pushed the captive to 1
million active accounts.

As a special gift, VCI is going to cover 12 payments on the
36-month lease of the vehicle.

"The milestone — 1 million customer accounts — is another
example of VCI's ability to support brands of the Volkswagen Group growth
strategy by providing attractive financing solutions and superior service for
our customers," Andrew Stuart, president and chief executive officer VW Credit,
said in a statement.

Also on hand for Tuesday's ceremony was Jimmy Ellis, vice president
and chief operating officer of the Jim Ellis Automotive Group. Ellis proudly
showed off the recently refurbished store that includes VW's latest design
concept featuring a clean, white design with walls of windows to allow plenty
of sunlight to penetrate the facility.

The dealership has enough space for 400 units in inventory
with 20 service bays and the room to utilize 100 employees.

"We were excited to learn that the 1 millionth customer
account came as a Volkswagen Credit customer through our doors," Ellis said in
a statement. "Volkswagen is our flagship brand. We opened our first Volkswagen
dealership in 1971 and now have three locations serving Georgia. We couldn't be
more pleased."

Nick Zulovich can be reached at nzulovich@subprimenews.com. Continue the conversation with SubPrime Auto Finance News on LinkedIn and Twitter.


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