This feature first appeared in the July issue of Auto Finance News, available now.
Three months into the spread of the global coronavirus pandemic, the auto industry has seen record changes across the board: new-vehicle sales plummeted in light of shelter-in-place orders and store closures, manufacturing ground to a halt, and used-vehicle values sank to a three-year low. And while the industry seems to be on the up-and-up as of July, executives nationwide are still trying to find a foothold to best manage the potential short- and long-term impacts of these unexpected developments.
Enter Kevin Cullum, president and chief executive at Nissan Motor Acceptance Corp. Since the crisis hit, Cullum has led his team through new operation standards, which include acclimating to the ideas of a virtual workforce and social distancing.
In his 31 years in automotive finance, Cullum has worked 19 different job assignments, including 17 years at Ford Credit. He joined NMAC in 2006 as a senior manager of light commercial vehicle lending and has held several positions since. Three years ago, he was promoted as the captive’s chief executive.
A number of auto manufacturers and lenders have felt an obligation to shift from traditional selling methods as customers either delay big-ticket purchases or seek an online purchasing experience. Nissan Motors, for one, saw a 51.6% plunge in April sales to 46,287 units sold as a result of the pandemic, similar to every major OEM. However, while drops in sales have spurred operational changes across the board, Cullum is offering advice to lenders and dealerships alike: stay consistent with the core business model.
To that end, Cullum shared with Auto Finance News best practices for lenders and dealers, and the importance of back office support for consumers. What follows is an edited version of Cullum’s conversation with AFN.
Auto Finance News: What are your goals for NMAC going forward into the next year?
Kevin Cullum: We need to ensure we maintain a high level of customer and dealer support and service levels while protecting our employees from health risks associated with COVID-19. It has been a challenging start to the fiscal year, but Nissan has a number of exciting product launches coming through NissanNEXT, our revised midterm plan. NMAC will support Nissan’s transformation plan through direct alignment of special APR and lease programs while also expanding our online technology to support the growing demand for online financing.
AFN: How have those goals changed since you started three years ago, in light of the coronavirus pandemic?
KC: The goals of providing great service and support for Nissan have not changed, it’s just a matter of how we are doing it operationally. The portfolio and automotive total industry volume challenges the pandemic has caused were certainly unexpected, but don’t change our mission to support the Nissan customer and dealer body the best we can.
AFN: What are some key takeaways that you’ve learned during your career that inform your strategy at NMAC?
KC: The key learning I’ve had over the course of my career is that there is no substitute for a strong operational back office to provide the best service possible to our dealers and customers. This includes a well trained and experienced staff, continued investment in IT resources and leveraging the flexibility that comes with it. Lending money to customers to buy and lease vehicles takes a disciplined and consistent purchase policy to ensure a certain level of performance and dealer support. But without a strong team managing the portfolio and supporting customers throughout their lifecycle, none of the expected performance could be realized and frustration from our dealer partners would ensue. Nothing has reinforced this more than how the team has pulled together during the COVID-19 pandemic to support our dealers and customers through this crisis.
AFN: Customers are showing a propensity for completing some, or all, of the car-buying journey online. Are there any current or future partnerships NMAC is engaging with to help facilitate this change in consumer sentiment?
KC: We have a number of internal projects underway to support the growing demand for online vehicle purchase and financing options. Since the COVID-19 pandemic started, we have seen an increase in activity utilizing online tools and we expect the momentum to continue to grow. We have no new partnerships planned, but are leveraging our existing ones to provide the services that customers are demanding.
AFN: Have you noticed a change in the balance in NMAC’s portfolio between retail and leasing?
KC: No, not really. Aside from the last few months of COVID-19 pandemic dealer closures and the impact to the Northeast, in particular, Nissan has historically been in line with the lease market ranging from 25%-29% of overall vehicle sales being leased. The remaining sales fall into retail and the balance is more between the standard rate and subvened rate business or “special APR” take rate. With a drop in overall interest rates, we have seen an uptick in customers taking 0% financing offers, which is changing the dynamic of our retail portfolio. Typically, customers who take a low APR offer on their retail contract are more satisfied with their financing experience. We expect the lease market to continue to bounce back to normal levels over the coming weeks ahead.
AFN: Ultimately, what advice does NMAC have for lenders and dealerships for navigating these unconventional times?
KC: My advice is the same for both lenders and dealerships regardless of the times: stay consistent to your business model and closely manage your expenses. When lenders and dealers stay consistent with their level of risk tolerance, staffing and investment to support the business operationally while staying focused on continued expense management, the ebbs and flows of the market can generally be managed within expected levels of performance. The current impact of a global pandemic could never have been completely anticipated, but having a team prepared to handle crisis and flexible enough to shift focus to areas of the business most impacted, has proven to be invaluable.
Originally published on Auto Finance News