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The #1 Bottleneck in Car Sales: Broken Tech Integrations—and How to Fix Them | Sanjiv Yajnik, President of Financial Services at Capital One
The #1 Bottleneck in Car Sales: Broken Tech Integrations—and How to Fix Them | Sanjiv Yajnik, President of Financial Services at Capital One
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About this episode
Sanjiv Yajnik, President of Financial Services at Capital One, discusses the complexities of modern car sales, particularly the challenges dealerships face with technology integration. He emphasizes that while the mechanics of vehicles may simplify, the surrounding technology is becoming increasingly intricate. Yajnik predicts that dealerships will remain central to the car-buying process, especially as electric vehicles (EVs) become more prevalent. He also highlights the need for better integration of tools within dealerships to enhance efficiency and customer experience, while cautioning against the risks of dealer-owned finance companies in a fluctuating economy.
Topics:
dealer owned finance companies
electric vehicles (EVs)
EV markets
internal combustion engines
scrapped cars
tax credit
turbocharger
Today I’m joined by Sanjiv Yajnik, President of Financial Services at Capital One. We cover why tech integrations are still the biggest challenge for F&I, how lenders are anticipating an EV market slowdown, why "6%" is the most important number in dealership leads and much more.
This episode is brought to you by:
1. vAuto - As the industry’s premier provider of end-to-end inventory management solutions, vAuto gives every dealer—from a single point store to the largest groups—the data, insights and tools they need to maximize returns from the new and used vehicle inventory investments.
Known for its game-changing inventory management innovations, vAuto provides AI-powered predictive data science to help dealers see their future and consistently make the right, ROI-minded decisions with every vehicle they appraise, acquire, price and retail. Visit @ https://www.vauto.com
2. WarrCloud - Your warranty claims process shouldn’t drain your profits—or your people. Our award-winning AI technology transforms OEM warranty processing, helping you capture every dollar you’ve earned. Dealers reduce costs, speed up reimbursements, and uncover new revenue opportunities—while consistently improving OEM claim scores. The future of fixed ops belongs to those who adapt. Let’s talk about automating your warranty processing today by visiting @ https://warrcloud.com/get-an-analysis
3. Capital One – Many dealers believe digital tools can help boost sales. But early findings from a recent Capital One Auto survey revealed operational challenges dealers are still navigating and how trust is shaped. Listen for insights as to what’s been uncovered and where the research is headed. Learn more: https://www.capitalone.com/cars/auto-financing/dealer
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Topics:
00:51 Last year's predictions: right or wrong?
02:21 What is the future of EVs?
04:51 Dealerships' role in the EV transition?
07:28 How does tech create transparency?
13:45 Biggest tech integration challenges?
16:37 How to improve the F&I process?
23:13 How do downturns impact dealerships?
29:00 Best dealership tech stack recommendations?
40:34 Top predictions for dealerships' future?
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Filter:
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Technical
Too Afraid to Ask
Term
EV market
"...you sort of laid out this math about the EV market. And note that today we're recording this, it's end of September, tax credit. The EV tax credit is literally going away, imminently."
The EV market is all about electric cars. These cars run on electricity instead of gasoline, and more people are starting to buy them because they are better for the environment and often come with tax benefits.
The EV market refers to the segment of the automotive industry focused on electric vehicles, which are powered by electricity rather than traditional internal combustion engines. This market has been growing rapidly due to increasing consumer demand and government incentives.
Term
tax credit
"...note that today we're recording this, it's end of September, tax credit. The EV tax credit is literally going away, imminently."
A tax credit is money that the government allows you to subtract from the taxes you owe. For electric cars, this means you can pay less in taxes if you buy one, making it cheaper for you.
A tax credit is a financial incentive provided by the government that reduces the amount of tax owed. In the context of electric vehicles, it often encourages consumers to purchase EVs by lowering their overall cost through tax savings.
Term
scrapped cars
"...about 16 million cars each year and about 12 million are scrapped. And your point was basically that even if every single new car sold tomorrow was an..."
Scrapped cars are old cars that can't be driven anymore and are taken apart for parts or recycled. This helps reduce the number of old cars on the road and makes way for new ones.
Scrapped cars refer to vehicles that are no longer roadworthy and have been dismantled for parts or recycled. This process is a significant part of the automotive lifecycle, affecting the overall number of cars on the road.
Concept
internal combustion engines
"...dealerships are even more important when you have EVs than even when we've got internal combustion engines. They're going to be incredibly important because at the end of the day,..."
An internal combustion engine is a type of engine that runs on fuel, like gasoline or diesel, by burning it inside the engine to create power. This technology has been used in cars for a long time, but electric cars are becoming more popular now.
Internal combustion engines (ICE) are engines that generate power through the combustion of fuel and air within the engine itself. They have been the dominant technology in vehicles for over a century, but are now facing competition from electric vehicles (EVs).
Concept
electric vehicles (EVs)
"...when you have EVs than even when we've got internal combustion engines. They're going to be incredibly important because at the end of the day,..."
Electric vehicles, or EVs, are cars that run on electricity instead of gasoline or diesel. They use batteries to power an electric motor, making them more environmentally friendly compared to traditional cars that burn fuel.
Electric vehicles (EVs) are cars that are powered entirely or partially by electricity, using electric motors instead of traditional internal combustion engines. They are becoming increasingly popular due to their environmental benefits and advancements in battery technology.
Term
dealer owned finance companies
"...I will share a topic that's been discussed, which is dealer owned finance companies."
These are companies set up by car dealerships to help customers get loans for buying cars. They make it easier and faster for people to get financing right at the dealership.
Dealer owned finance companies are financial institutions that dealerships establish to provide financing options directly to customers. This can streamline the financing process, potentially reducing the time it takes for customers to secure loans when purchasing a vehicle.
Part
turbocharger
"...I dismantled engines and turbochargers and you name it. I've looked at it every which way, putting it together, so on and so forth..."
A turbocharger is a part that helps an engine get more air, which means it can burn more fuel and go faster. It's like giving the engine a boost to make it stronger.
A turbocharger is a device that forces more air into the engine's combustion chamber, allowing it to burn more fuel and produce more power. This results in improved engine performance and efficiency.
Last year's predictions: right or wrong?
What is the future of EVs?
Dealerships' role in the EV transition?
How does tech create transparency?
Biggest tech integration challenges?
How to improve the F&I process?
How do downturns impact dealerships?
Best dealership tech stack recommendations?
Top predictions for dealerships' future?
Select text to request an explanation
At the end of the day, the entire vehicle is not becoming less complex.
Now, the mechanisms to drive it are becoming less complex, but all the computerization
and everything surrounding the vehicle is becoming more complex, not less.
And I will predict that the way in which they need to be looked after is going to be order
of magnitude different from internal combustion engines.
Today, I'm joined by Sanjeev Yajnik, president of financial services at Capital One.
As president of one of the most sophisticated lenders in auto, Sanjeev spends his time
untangling dealer pain points.
And the number one dealership bottleneck he sees today, something that isn't just
killing deals, but could take lenders down with it if a recession lands.
A big thank you to our sponsors for making today's episode possible.
Cox Automotive, War Cloud, and of course, Capital One.
And now let's get into the show.
Sanjeev Yajnik on the CDG podcast.
Sanjeev, welcome back.
Hey, thank you, Yossi.
How are you doing?
I'm doing great.
It's been a year since we got the chat on air, excited to do this again.
We had a pretty jam-packed episode last year, and a lot has changed since then.
How are you doing?
I'm doing pretty good.
I mean, there's so much going on in the industry.
And I really appreciate a lot of the work that you do in keeping people up to speed
on, especially dealerships, up to speed on what's going on, what's changing, news that
is coming right hot off the press.
And I think that's been really great.
And lots of news.
But nonetheless, appreciate you pointing that out.
We're doing our best here to cover everything as it happens and bring value to dealers.
I want to turn the table back on you, though, because a year ago when you were on the podcast,
so I went back and re-listened to the podcast.
I do this sometimes when I've, you know, guessed I've spoken with you from the past.
And you said something that was, you know, kind of caught my attention.
You said, you sort of laid out this math about the EV market.
And note that today we're recording this, it's end of September, tax credit.
The EV tax credit is literally going away, imminently.
And you said, Yossi, 265 to 270 million cars are on the U.S. roads today.
We sell about 16 million cars each year and about 12 million are scrapped.
And your point was basically that even if every single new car sold tomorrow was an
EV or a hybrid, it would still take 15 to 20 years to flip the fleet, right?
Come do a complete recycle.
Now that felt pretty prescient at the time, but you know, fast forward to today, the tax
credit is going away, which changes the economics of this entire industry and what
people should expect from sales.
So I want to start off just general your opinion on that statement a year ago.
You hear it again today.
What do you, how do you see this?
Do you, do you think that has your opinion changed on the industry at large, right?
If you was a particular part of this industry that you were noting last year,
but now given this sort of reversion to the mean or whatever we want to call it,
what is your overall, you know, long-term perspective on this industry?
Yeah. Thank you, Yossi.
Look, you know what?
What I like to do is just look at the facts because there's so much emotion and hype and
other things running around and people are reacting to a variety of things.
I like to look at the data and then try to make predictions of the future.
Just look at the mechanics of the industry to start with, right?
Because there's always something, what is, you know, people are very excited about the
latest and greatest.
And when it came to EVs, like you said, even if every manufacturer only built EVs and consumers
only bought EVs, it would take us over 15 to 20 years actually to replace all the cars that we
had on the road and that obviously would not happen.
The other thing about EVs is in general, when you see disruptions happening in any industry,
it normally starts at the bottom of the industry.
So the cheapest product and then it becomes higher quality and then continues to go up.
It's called the left-hand turn.
You start at the bottom, you make things really cheap.
People give that place away.
Companies come in, do it better, cheaper, faster.
And then slowly start climbing up the chain.
EVs have entered the market in a very different way.
They've entered at the top and they're working their way down.
That's a very different kind of a strategy in a very different route.
So it will take time.
What I would tell you is EVs are going to be the predominant way in which, you know,
locomotion is going to happen in the future.
The timeline though is just going to be much more elongated than people
people expected at that point.
You know, I still remember that article that said,
not only will EVs take over and electric vehicles take over,
but it is not only going to be in cars, it's going to be in flying taxis.
And there's this beautiful article that I show my team even today,
but back in 2018 and 2019, they were predicting that there would be flying taxis
that were electric in Dallas and in Dubai.
And of course, you know, we are far away from that.
So the trend is going to be towards EVs and they're going to get better and better over time,
but it's going to be a slower, slower burn.
Okay. So I think as a dealer, I feel pretty good hearing
Capital One, a multi-billion dollar organization is bullish on a dealership model.
We made a prediction that dealerships were going nowhere.
In other words, they were going to be there.
They were going to be in the center and I am predicting today.
And so we'll come back after you turn two years and we'll find out.
We are going to find that dealerships are even more important
when you have EVs than even when we've got internal combustion engines.
They're going to be incredibly important because at the end of the day,
the entire vehicle is not becoming less complex.
Now, the mechanisms to drive it are becoming less complex,
but all the computerization and everything surrounding the vehicle
is becoming more complex, not less.
And I will predict that the way in which they need to be looked after
is going to be order of magnitude different from internal combustion engines.
Now, in internal combustion engines, you've got to do the loophole change
and the X 1000 miles and all this stuff.
It is not that you'll have less mechanical parts,
so you'll have less servicing going on there,
but you'll have way more servicing on the other side
when it comes to the electronics and the computer chips and the cars, etc., in a car.
And so it's both in the selling of the product
because there are going to be a variety of products out there
and customers need to understand what these products are going to do for them.
And then the servicing after the fact,
I think it will change in dealerships, but it's not going to go away.
At one point, people thought that everything will be done by the manufacturer
and then the dealerships will be like managing fleets
and doing some work on the margin.
My prediction is I don't think that is true.
I think dealers are going to be in the center
required for a very, very long time.
So a long time period.
Beyond that, who knows, the thing is going to produce.
And so it was with that kind of a backdrop that we did the survey
because I am intensely interested and focused on dealerships.
And what is the advice for dealers?
Where does the model go?
Is it going to remain the same?
Is it going to be different?
What should they be looking for in the future?
So can you tell us at a high level what were you looking to understand?
Because where I want to get to is I want to understand is where are you investing?
Right? It's capital law and supporting dealerships.
I want to understand as you're aggregating these insights from dealers
who are your partners and people you work with.
I want to understand how it's impacting your direct investments
and what you're focused on.
One of the things that you say I try very hard to do is
to try to keep capital one out of it when we talk about the strategy part.
And then we are informed by where the world is going.
So then we start thinking about what we need to do.
So let me just continue to focus on the strategy part.
So what do I see with dealerships and where does the investment need to go?
Now, Jensen Huang spoke very recently about the state of technology and the industry.
And he is saying what a lot of us have been feeling for some time
that even as opposed to the digital revolution that started a while back
actually and then the internet took off in the 90s and so on.
This current revolution of not only gen AI, not only generative AI,
but also the kind of technology that is coming to bear,
which is apples and oranges compared to the old technology that we had,
is a new industrial revolution.
It is a new industrial revolution.
And I want to remind us what happens in industrial revolutions
is that everyone is impacted and everything changes.
So now the dealership model is rapidly changing from a low volume,
high margin business to a high volume, low margin business.
And most successful dealers understand that, right?
So what do you need in a low volume, high margin business is a particular way of operating.
What you need in a high volume, low margin business is a different way of operating.
And for that, you do need technology to help you make it frictionless,
to make it move quicker, to connect with customers in a different way,
and to kind of go through that flow in a different way.
So what I was very interested in is there was a feeling that dealerships
are fighting against technology because they don't want the customer to see certain things and so on.
And I wanted to understand where the dealer stand regards to that,
like the orientation towards certain technology that's not only helping the operations get better,
but it helps the customer see things in a clearer way.
Are they resisting it? Are they going with it? And then what do they need?
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So are we talking about technology or transparency?
Or are you sort of combining them as one?
So there are two types of technology that help a dealership.
One of them is technology internally focused.
So how can I do my job better?
How can I find my inventory, the right inventory?
How can I find what's the cost?
How many cars on my lot?
How many days are they on the lot?
What is the price?
What's the clearing price?
And so on and so forth.
It's not internally focused.
And then there's an externally focused technology,
which is can I help the customer move faster and quicker into the car,
the actual car buying process.
And the leaning of dealerships was always let's solve for the internal piece, right?
I want my internal piece to be done well.
But the transparency I'm not so clear about is it good for the customers to see everything.
And so one of the things I was curious about is,
are they more open to customers getting that transparency?
Because it is going to help them go through the sales process.
How much are they embracing that kind of technology?
And what did you find out?
Well, it is pretty amazing from the last time we were looking,
where dealership said, yes, we need technology.
And there was a little bit of push and pull.
By and large, what is coming back is a very clear signal.
Dealers understand.
Now, dealers are some of the best entrepreneurs we have in the United States.
I've said that all the time.
They understand that their business model is changing.
There has to be a certain amount of transparency.
They can't only focus on tools that are fixed within the dealership.
And they are looking for technology to help them move the sale faster.
When a customer walks in the store, they want to make sure the sale goes through.
Because time kills deals.
And right now, the customer has a very small, I would say, tolerance for friction.
But given the information you just shared,
given dealership tech adoption, which is higher than it's ever been,
there's no dealer that does not use any tech.
That's obvious.
Where are you investing from a product perspective?
What are dealers really looking for right now
to really help them as much as possible within their dealerships?
Or, and this could also be an and, it might be combined with,
they're looking to consolidate.
Because I've spoken about this tech fatigue, where when is it just too many tools
and too many things going on in the store?
And now you have these stores where we had a dealer on the podcast,
or a consultant, OEM consultant on the podcast,
who was testing out a dealer in Florida,
and he submitted a lead and got like 10 responses.
Right?
And that's terrible, right?
Because now you're harming the customer experience.
The dealership looks terrible.
And they have all these different tools responding to one customer.
Now, that's not just the fault of a dealer.
You also have all these OEM mandated tools that conflict with each other.
That's a whole another ball of wax we could talk about.
But when is enough enough, right?
Look, what is the right type of balance with tools and technology?
And how do you view that?
What has happened is probably what happened with the internet in the 90s.
So there's an opportunity and everyone has rushed into that opportunity with tools.
And so I still remember when machine learning was a big thing,
everything was a machine learning tool.
And now that Gen AI is a big thing, everything is an AI tool.
The problem that dealers face is that the tools don't do
all the work that is required for it to do.
And the tools don't talk to each other.
And you would think it's a pretty easy thing for one tool to talk to another tool,
to talk to another tool, and so on.
It is actually pretty hard.
Because each tool, it's both the tool and the data behind the tool.
And how do all of those things integrate?
So for the tools to integrate, each one can be built on a different system or an application.
So it may be really hard to connect up two for them to talk to each other.
And then the business logic may be a little different.
The software and the way in which it is built.
If it is not modular, that may be different.
And then the data is really an important piece of the puzzle.
We're having a lot of data.
It's like being surrounded by water and water that you need to drink, but it's all seawater.
And to make that fresh water, you've got to do a lot of work with things called metadata
and other things that will allow the data to interconnect with each other
so that the tools can actually talk to each other.
So what we are finding is there's water, water everywhere.
There's tools all over the place.
There's data all over the place.
But it is still not reducing the friction.
It's still not reducing the amount of time the customer has to spend in a store.
And dealers get promised a lot.
It's like over promise and under deliver.
And that's going on right across the industry.
And that's, again, what we're observing.
So that's the biggest need right now.
It's not about, you know, should I use technology?
Dealers are basically saying, look, I've got a business to run.
I'm a busy person.
Don't give me a whole bunch of stuff.
I want simple tools that are integrated that talk to each other and get the job done.
And that's not my secret sauce.
The technology is not the dealership's secret sauce.
They've got to work on a whole bunch of things to make their magic happen.
And that's the biggest issue.
And that's what we're finding in the survey as well.
I noted on the survey of the delays in the finance office,
which I actually just spoke with a finance expert a couple of episodes ago,
about the FNI office and getting lending and whites taken so long and some big friction point.
Is that something that you're actively working on to improve how are you doing it?
Of course, you're a lender, but there's one thing of being a lender
and there's nothing going into being in the dealership office
and making that process more efficient and quicker.
How do you view that and potentially solving that or kind of reducing the time for consumers?
It is that particular one is a really big issue in general for the industry.
Now, we've developed mass scoring, as you know, which is patented.
I actually personally have a patent on that, but we've developed mass scoring.
We have developer navigator where the dealership and the FNI office can go
and they can play around to restructure their loan without actually having to talk to anyone.
And now we have flowdown, we have other lenders on it as well.
But over time, something like that is going to continue to get developed
and we're going to continue to develop that.
But it is a sticking point and the tension for dealers is
if a customer only wants to put a certain amount of money down and so on and so forth
and the dealership needs to make its share of the profit,
how do you actually structure the whole deal?
And customers don't want to wait.
So what is the danger of letting the customer drive away with the car
without doing the whole thing and making a guesstimate,
but having the danger of having to call the customer back with the car
or if they can work with lenders who can work that really quickly.
Now, in general, capital one is in a great space because we are the fastest on the market,
given our technology and given our analytics and so on.
But many are not and they are finding that.
Okay. So just to, I want to put a pin in this.
I want to make sure we don't miss the primer question, which is,
do you see a path to reducing the time to finance within the dealership
being that it's such a big sticking point?
I want to preface that with some context.
You know, we have our CDG20 group, which is our group chat
where we discuss with really high level dealers about what's on their mind
and everything there is confidential.
So I'm not going to go into too much detail,
but I will share a topic that's been discussed, which is dealer owned finance companies.
And during that conversation, there was a side conversation about the benefits,
you know, the advantages, disadvantages, but something that was brought up was
about the creating a more efficient finance process and how it's integral.
As you mentioned, financing plagues the entire industry.
It's an extremely slow part for the customer,
but creating more ways for dealers to be able to finance customers more efficiently,
quicker, and just, you know, improve the customer experience,
not to mention, of course, profitability.
And so as you think about that, the customer experience, what can we do, right?
What can you do with dealers to continue improving that really difficult
or kind of slow part of the car buying process today?
Yeah. So let me hit the question in two different ways.
There's one part that you talked about was dealer financing.
And dealers are trying to solve a few problems here.
One is speed and get the financing done.
And the other one is it feels lucrative because you can, it's a business that they feel
can generate a whole bunch of profits.
And they've seen that in some dealers who are going into their own financing
and starting their own little financing shops or have had some financing shops.
The caution I would tell dealers is that it is wonderful in the good times
and it will in an instant wipe you out in the bad times.
And I think companies, big companies like GE found the same thing.
They opened a finance shop, they had to get rid of it at the end of it.
But just think about the downside of financing is when a recession hits,
companies get completely wiped out because the leverage factor is so high
that it is unsustainable by any company of any given size.
Now, the problem is since the great recession till now,
we've really not had a big downturn.
And this is one of the longest time periods where I would say the real downturn,
the real when things really turn south.
Fifty percent, we haven't had that yet.
We haven't had that yet.
And when that happens, the lending is a business where the loans are huge
and the margins are thin and losses can easily double and more than wipe out the margins
and the losses can become so huge, you can take on entire huge companies.
So it's a little bit like risky investing and in the good times,
making money and the second something goes completely bad,
it can actually take you in the negative in a way that is devastating.
So it's not an easy game.
If it were easy, everyone would be doing it.
I will say that to your point, the sentiment wasn't too jolly by any means.
This is not like I don't think people that are that are spoken about this are just like,
oh, yeah, like this is money doesn't grow on trees.
I don't think that's the sentiment at all.
I think it's more like an exploratory, there's margin compression.
I want to be smarter, see what opportunities just lie ahead.
And if that means profit or customer experience,
but I think the things you just pointed out are very real and we're discussed, right?
Which is people that have done it and maybe are not doing it anymore or have sort of lowered their
volume echoed the sentiment that you just expressed, which is that it's a very cyclical
type of thing and it's not a primary revenue generator for me.
That was sort of the takeaway that I got from it.
Yeah, it's not only a cyclical one, the companies that are not sophisticated enough,
they get completely wiped out.
If you think about the great recession, the number of companies that just went away
is unbelievable.
There are hardly any left standing if people remember.
And I remember what dealerships went through and many of them turned to me and I,
that's the time we stood by dealerships and we took them through it.
But most players, especially in the subprime, near-prime area,
they went away.
The prime companies, they didn't want to lend any more money because they were preserving capital.
I mean, it dries up very, very, very quickly.
So there are things that we are doing in that regard.
It is a fairly sophisticated business.
The other thing that happens is there are many companies that do a distributed
judgmental underwriting model.
But again, over time, it has been seen that judgmental underwriting most often will
be shut down in a recessionary period.
What's judgmental underwriting?
How do you define that, judgmental underwriting?
In other words, someone says, well, this loan kind of looks good.
It's a one-off human intervention.
I kind of like this and this structure.
It kind of makes sense to the human eye.
The thing you've got to understand, and everyone has to understand,
you'll see is they're not good and bad customers.
All customers are good.
Everyone intends to pay off.
I mean, by and large, there's some fraud, but they intend to pay off.
Random things happen.
Bad things happen to good people.
And so you can't predict that.
It's not predictable.
It is a statistical thing.
And the number of variables you need to look at to make that call is crazy.
Now, we end up being at one of the most sophisticated lenders,
but to make one decision for one lender at one dealership for one car on a particular day,
because prices vary, we have to choose from one in 200 quarter-odd decillion combinations.
Quarter-odd decillion means one in 200 followed by 15 sets of three zeros.
So that's the sophistication we've got to use.
And we are continuing to get more and more sophisticated
because we are trying to help dealers for that deal.
But it is the game of high sophistication.
And I would say I understand what dealers are trying to solve for.
I probably would say this is not the way to go is start your own shop.
There is not self-preservation that says it because we've got a long tail of lenders.
You know, it's a very fragmented industry.
But again, you will check this when we next have a recession
and we are on the podcast.
Let's have a look at that list.
The entire tail will get cut off because this is what happens every single time.
And then new people come in who have not been burnt and this thing goes on.
But it is, you know, the delay is a real thing.
And I think lenders are working on that.
But having people who are pre-qualified is a good idea.
Without any impact to their credit score.
And having people do the test drive, et cetera, while you are running the show.
So the process that dealers use, which is right now sequential,
but the more it can be parallelized, the better it is because customers have to wait less
for that to go through.
So what do you mean by when I read through your server and it spoke about dealers pointing out
integration being a big issue for them in dealerships?
Can you explain to us specifically what they were referring to by integration?
Is it tool-to-tool? Is it tool-to-dealership?
And then I want to get to how we solve that.
But can you just start a pile of a look?
Why is integration such a big problem at dealerships?
Not what I expected to see as the top response here.
We survey dealers all the time here, Cardioship guy.
And you know, this is just not what I expected.
So I'm curious to know what's your thought on that.
Well, there are two types of integration that are troubling to dealers.
And then there's one other thing in technology that's really troubling them from my perspective.
One integration is someone shows up with a tool and says, I can do this.
This can do that.
And they're really excited.
They're okay, why don't we put it in.
And then it takes a huge amount of time to actually put it into the dealership.
Because often the tool doesn't sit on its own.
It has to talk to some data, it's got to pull some data,
it's got to do some of these other things.
So that's one of the issues.
The bigger issue potentially, even after going through all of that trouble,
and the dealership puts it in, one of the big issues is the tool doesn't do everything.
And it doesn't talk to other tools.
So people have gotten fairly proficient at keeping seven or eight or nine screens open.
And they're jumping from tool to tool.
One of the things that is most frustrating for people is re-keying information as well.
I've got this information here, I've got to re-key it there,
then I get that answer, then I put that back here, and then I do this.
And when we talked about it earlier, integrating tools is not easy.
And that is something that we are massively focused on.
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How do you recommend today when it comes to a tech stack for a dealer?
Like, what is your recommendation from, you know, as unbiased as you can be?
Like, how do you sort of view that?
And what's the optimal stack for a dealer today to deploy in their dealership?
And by tech stack, I'm just fancy term for, you know,
what are we actually using in a dealership
to perform as best as we can from a tech perspective?
If I had a dealership, you know, I would be really busy right now
making sure that I have the right amount of inventory and I have the right pricing.
And, you know, the dealership is running well and so on and so forth.
It is very hard for me to disrupt a dealership by getting people to undergo too much training
or to get any major product in to disrupt the operations of my business.
And we are not at a great place right now from the standpoint of the economy is good,
but there's a lot of uncertainties, you know, all the tensions that are going on and so on.
So you can't take your eye off the ball right now as a dealer.
And so things like people talk about DMS and other things, it's just massive,
massive projects that are very hard for anyone to take on at this point.
What I would be recommending to dealers is find the tool that does where you're finding the most
friction, find the tool that is going to get you to alleviate that part of the friction
and you right now the dealership has to live in a digital world.
In other words, some physical, some digital, everything is not going to be digital,
but only choose tools that are built on a modern tech stack.
This is a very important point.
So one of the questions I would be asking is how's your data stored?
How do you take care of your metadata?
What is your technology built on?
How modular is the technology?
How many engineers are working on it versus what's the ratio of engineers to salespeople?
If you have more salespeople and just a few engineers working on it,
that means you're selling me, you're more interested in selling me
than you're interested in building the thing that is going to be incredibly good.
And then there's one other question I would be asking.
What happens after you sell me this product?
How long will it take for you to fix it if something goes down?
Because it's my livelihood as a dealership.
I'm not, you know, I can't go down for four hours or five hours
while customers are wandering through the store.
You know, I can't afford that.
So what redundancy do you have?
What does your cybersecurity look like?
If you get hacked, if someone does the, you know, has cyber ransom,
is my dealership going to get impacted?
So I've got a whole bunch of questions that I could put together.
And maybe I should for dealerships to ask the provider.
Yeah, I think I should do that.
Because you really could think about it.
You build the tools, right?
So you naturally know what to look for, where the skeletons are, you know?
And I think that's actually a very important part because,
look, we get at this point, I mean, every day we get leads from AI companies
who are, you know, interested in advertising or doing some sponsorship.
And we obviously say no way more times than we say yes,
whether it's duplicative of another, you know, partner of ours or, you know,
many other reasons or it's too small or blah, blah, blah.
The point is though, you mentioned this is there's sort of this rush
into the space now, especially amplified by AI.
And I think where dealers are getting burned, in many cases,
is these products that are kind of, you know, fly by night companies, they're out there, right?
But at the same time, a dealer is not a tech or a software engineer.
And so I think having a proper resource, which by the way, we'd be happy to distribute
of what to look for is really, really important when there's a record number of AI and or tech
companies that are just approaching dealers to try to help them, you know, sell a car,
service car in a better way.
So yeah, I'm just taking a note down because I can totally do that for dealers.
I just want to remind you, Yossi, as well, that, you know, and I want to say this directly to
the dealers who are watching this podcast, I'm not interested in, you know, trying to oversell
Capital One products. I'm not interested in nickeling and diming anyone, just not interested.
And, you know, people can say the words, but I'm showing it with my actions.
I don't force you to finance with Capital One when customers are coming through Auto Navigator.
You know, you get the choices. What is right for the dealership? I walk through,
you know, as I go around the country and I walk into dealerships and I meet up with
the dealer principles, I tell them all the same thing.
Do not do a single thing that hurts your dealership.
And I want no pressure of buying a Capital One product.
I want to earn the right to come in the store.
If you think it's good for your store, you're going to buy it.
If not, don't do it because I want vibrant dealerships out there into the future.
And I want all the dealerships who work with us to be incredibly successful.
And we will earn our way into the right products and we will never do all the products.
You know, there'll be others. The other thing I would like to do,
and I'll be already working with many of the partners here, is work with the current
providers of products so that we can make your products better
by integrating into your products in the things that we do really well.
So there's a bunch of things that we want to do and I think the suggestion of putting together
a checklist of what should dealers look for when they're looking for a tool.
An unbiased checklist is not biased towards Capital One.
I think it's a great idea and I think I should do that.
I think so too. So Sanjeev, before we wrap up, I want to understand from an ROI perspective,
look, margins are going to continue compressing.
That's my opinion. You could tell me if you think differently.
But I think if you look at Q4, especially let's talk near term,
EV tax credit going away, that is going to price some customers out of the market.
I had a dealer text me and he said that we have on average, get this, on average,
he told me we've added $663,000 of down payment per month using the used EV tax credit.
Pretty freaking incredible, right? That's all gone. All that down payment disappear.
It's going to impact sales. No doubt about it. It's going to impact affordability.
And not to mention we are at the trough of the use car shortage from the
under production of vehicles in the early 2020s. So all this stuff combined,
we should expect barring other crazy stuff. We should expect to see more margin compression.
What are the highest ROI options for dealers from a tool's perspective?
I've spoken to lots of deals about inventory tools, marketing tools.
People want to get time to line faster. They want to market the vehicle better, etc., etc.
What do you see as the highest ROI options available today?
I wish I could tell you something really profound here, but it all comes down to
what are the tools to buy the cars at the right price? Now this one,
because it is a high volume low margin business, is done.
The dealers, this is secret sauce. This is Capital One going to do nothing here. People
can give tools and all this stuff. But there is a feel for what is the right inventory for me
and to get as much information about the real time information. But at the end of the day,
you got to make the call. By the day is one thing that Capital One can help in.
We've got a massive amount of data and we already have a tool out there where we can
tell dealers what is happening in their market yesterday. There's no other tool in the market
that can say it's literally real time showing the flow of inventory. But they've got to pick
that up. That's a very high ROI. The second is generating leads and in marketing their product,
but generating leads, most dealerships who I meet up with, they basically say, I have no idea
which one is doing what. I know I have to get leads. So I'm just going to put a little bit
of my eggs in so many different baskets. We do have a product that gives you an attribution model
and it actually cracks all this stuff. So that would be a very high ROI product.
And then how do you actually market your vehicle? Many use very small kind of vendors,
but looking for the right vendor to be able to market your product will be a good idea.
Especially what has been found is the actual image of the product is incredibly important.
And so that image enhancing technology, now it so happens that we've developed that.
So we have a product for that, but whichever product they look for, that is really important
to try to find it in. And then to your high velocity point, let's remember in the CRM system,
you've got tens of thousands of leads. Of course. Of all the leads that a dealership
pays for in a year, guess what percentage will actually buy a car? Of the leads they pay for?
Wow. Yes. They have got tens of thousands of leads, okay, they pay for.
Low single digits. It's 6%. Yeah. Okay, so you pay for 100%.
6% are going to buy a car, not at your dealership. They're actually going to buy a car somewhere.
And imagine trying to get your salespeople charging of trying to contact 100% of the leads,
when 6% are going to be looking for the car, looking for a needle in the haystack.
Finding tools that find you that needle in the haystack is incredibly important. That's very
high ROI because you can then, if you can find the people who are actually looking for a car,
you could convert some of them and bring some of them in the stock.
I was going to end with your prediction for digital adoption, but I think what I'd rather end with
is what is on your mind for this next 12 months? What are you thinking about?
Where are you sort of treading or heading in this environment? Given all the circumstances that
we're in in the current market, what's on your mind? I like to look, try to envision in a picture
format what the future of a dealership will look like because that will inform everything that we
do. What is the future of dealerships? And from a lending perspective, consumers are going through
economic downturns, upturns, downturns, etc. So I just want to put that aside because there'll be
ebbs and flows. But what will a dealership actually look like? Will it look like what it looks like
right now? Will it look like what it looks like right now and just a little more efficient with
some tools? Or is it going to look very different from what it looks like right now? And there's
been a bunch of articles written about EVs and how dealerships will change. I don't think that is the
story at all because there's going to be servicing, there's going to be people looking for cars,
people are connected to the brand, they will want to come and touch and feel the car.
Dealing ships, no matter what the vehicle is, dealerships are going to be around and customers
are going to come in. But it is going to look different. It is going to be a much more efficient
dealership, much fewer people per car sold a different way of informing customers
and a different way of operating so that the operating costs of the dealership will go way
down compared to what it is today. Per car, I'm not saying it's letting people go, it's just
dealerships are going to be selling successful dealerships will sell more cars for the same
footprint. They may have the same people but per person in the dealership there will be way more
cars. And I also predict that right now dealer principles pay a lot of money for kind of tribal
knowledge of this lender does this and that lender does that and this thing does this and I know
that stuff is going to get simplified massively. So the secret sauce cannot be I know this about
this particular lender or this particular thing is going to be way more about understanding your
inventory, understanding the trends, customer service, marketing, attracting people in the
physical layout, how does people move through and move through in a very rapid way. The dealership
is going to look different and I'll just end with one quick analogy here. You'll see. Please.
I started my career designing and building ships. Okay, I was an engineer and not only designing and
building ships because I was passionate about engineering and machinery and all this stuff.
I also worked on the ships as an engineer. I dismantled things, I dismantled engines and
turbochargers and you name it. I've looked at it every which way, putting it together,
so on and so forth and operating the ship also on a ship operating it till I became a chief
engineer with Mobile On. When I started in shipping, a ship to do the work had approximately,
I think it was 120 to 150 people on board. When I left a ship more than 10 times that size
had about 25 to 30 people. All I'm saying is per person when the big changes happen,
the efficiency becomes way different and the kind of work you're doing becomes different.
Just the knowledge of which logbook to put things in and which thing and what is the procedure,
that you don't need anyone for. What you need is for the soft skills, you need it for the
real knowledge of how do you run a dealership. So my advice to dealerships right now is look
into the future and don't say give me a tool that fits in with the way I run the dealership right
now. At every increment, think about how you're going to make your dealership more efficient
and you're going to have a tremendous amount of success because you're going to beat out all
your competition and everything that I'm doing in Capital One right now is building backwards from
that eventuality because that is going to happen. Well said. Sanji, I want to thank you for coming
back on and recapping from what we spoke about last year until today, including your survey
and where the industry has had it. So always appreciate your insight. Sanji Vyajnik from
Capital One. Thanks for coming on the podcast. Hey, thanks so much, Josie. See you next time.
All right. Hope you enjoyed that episode. Please give the podcast a rating. Consider
subscribing to the show and check the show notes for links to what we talked about.
Thanks for tuning in. I'll see you guys next time.
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