While franchised new-car dealerships have been mining F&I gold for more than 30 years now, their used-car counterparts have been slow to follow suit. There are reasons for this, of course. At smaller independent dealerships, there is less distinction between job duties, with one person often wearing the hats of many. However, by failing to take advantage of the benefits associated with this vital profit center, these independent dealers have been limiting their own potential income.
By adding an F&I Department, or at least introducing and integrating the proper policies and procedures to the car sales process, these dealers could be generating significant additional income, improving lender relations, gaining a higher percentage of lender approvals and ensuring the timely funding of contracts. The Finance Manager could also convert a percentage of cash and outside finance customers to dealership financing programs, thereby capturing otherwise lost income associated with finance and aftermarket product sales.
The key to this is adhering to established F&I practices on each and every deal. Doing so doesn’t mean it has to cost the dealership an arm and a leg. Generally, a Finance Manager’s compensation package is performance-based, relying mostly on commission. This leaves the independent dealer with little or no exposure to additional expenses. For example, if a dealership were to pay a Finance Manager 30 percent of the gross F&I profits – and that is high-end by industry standards – the dealership will have earned 70 percent of that previously unearned gross income. It doesn’t take a mathematical wizard to understand that 70 percent of something is better than 100 percent of nothing.
There are ancillary benefits as well.
A well-trained Finance Manager will also ensure that all legal and financial paperwork is correct, that all mandated disclosures have been delivered properly, and that the dealership’s customers are satisfied when they take delivery. This will result in fewer complaints, not only to the dealership itself, but to such regulatory bodies as the DMV and Department of Consumer Affairs. Should the dealership be forced to go to court over returned down payment checks or other issues, a detailed paper trail that documents complete and full compliance will provide the necessary evidence to win cases.
Most of the products that are offered in the F&I Office protect the dealership as well as the customer’s credit and finances. For instance, the purchase of a service contract could save the dealership a considerable amount of turmoil – and legal expense – should the customer’s transmission blow a few months after he takes delivery of his vehicle. The same can be said if a customer purchases credit life and/or credit disability insurance and then fails to make his monthly payments due to sickness or accident. What a pleasure it will be not to worry about recourse or extending the dealership’s loss ratio with the lender. Depending on individual state law, customers who purchase the Global Guard Security System or other GPS product and skip can be tracked via satellite. This will save both the dealership and the lender from unnecessary grief.
Finally, consider this:
By putting the customer first – and certainly, providing the customer an opportunity to protect his investment is doing just that – the dealership is building CSI. Repeat and referral business is a yardstick for measuring any dealership’s success, but for an independent used-car dealer, it is staff of life.
on June 22nd, 2007 at 5:29 am
Good stuff. Keep up the good work!
on April 7th, 2008 at 6:37 am
How about Payment protection services Such as “OnTime” Profits could go higher when credit challenge customers can be approved for a car, with a system that manage their lifestyle.