F&I – The Key to $UCCE$$

F&I – The Key to $UCCE$$

In tough times, the difference between a bad deal and a good one is the profitability of F&I.

Many dealerships are retreating and conserving. Some are even holding their breath. The magic bullet you are looking for is in the shadows of the F&I process. Many dealers view F&I as a paper mill. If a sale is made, great; if not, oh well. At least the paperwork is getting done.

History shows that when sales are soft and customers are scarce, the difference between a bad deal and a good deal is the profitability of F&I. Those extra dollars, and the extra efforts of F&I personnel, make the difference between the colors on the balance sheet.

If you take a historical view of automobile business financial statements, a dealership’s net profit is equal to the gross profit of the F&I department. What does that suggest? It demonstrates the value of the F&I process. I have had many dealers tell me over the years that if it were not for the F&I department they would not be able to keep the doors open.

Well, those times are once more upon us.

While I agree with being conservative with expenses, I do not understand cutting expenses on educating personnel. When you have a critical profit center, you want your best guns armed with the best tools, educated and fine-tuned so they make and sustain the level of production that your business requires.

Once upon a time F&I profits were optional. Now they are mandatory. High levels of performance require education, motivation and compensation. What is your plan to address these areas? You can only retreat so far before you are out of business.


Some dealers ask, “Why train personnel for my competition?” and “Why invest money in someone who will not remain with the company?” As a wise employee once told me, business owners only rent employees, they do not own them. Employers rent them for eight hours a day by paying for their time.

Businesses retain employees by being fair, consistent and providing opportunities for education and growth. We have to work, but where we work is optional. Doesn’t it make sense that those who stay at a job are those who are happy, who love what they do, and feel like a valued part of a team?

Education is the foundation of building a strong team. Education is a journey; it is not a one-time event. When I think of all the changes F&I seminars have undergone, I am in awe. Changes in processes are often brought about by changes in technology or regulations. Education keeps F&I producers prepared for the marketplace’s new challenges.

Education has many venues. There are mentors, seminars, conventions, online e-seminars and peers groups (F&I 20 Groups).


F&I is a department of one or two. And while they manage no one, they answer to almost everyone. Next to service managers, F&I are the most stressed individuals at dealerships.

They are directly responsible for cash flow, managing contracts in transit, and they must make sizable contributions to financial statements. They are on stage from the time they enter the parking lot to the time they get home.

F&I personnel also are the unofficial dealership sounding board for other team members.

Keeping the energy level up is a daily struggle for some.

How do managers keep motivated? Most F&I managers are competitive and measure their production against their peers. The comparison could be within your dealership group, or you could join an F&I 20 Group to measure and benchmark production.

Goals are essential for growth. Set a target and keep it in sight. Implement an action plan that moves your dealership toward the target.

While the RV standard goal for F&I is to have gross profits from the F&I department that equals 6 percent of the sales volume for the store, the big question is how to break that figure down into an achievable work plan.

F&I goals should be set in the form of percentages. Step one is to categorize each product. The finance reserve goal should be a percentage of retail sales. Mechanical protections, like service agreements, Coach-Net, tire and wheel protection, are all a percentage of retail sales. Protective coatings (exterior, interior and windshield) are a percentage of retail sales.

Equity protection policies, such as credit life, accident and health, and GAP, are a percentage of finance deals. F&I producers should forecast in an average profit per retail unit, or $PRU. That means, out of every deal they touch how much money is going into the dealership’s profit line?

Ask F&I producers what they are going to do differently to achieve agreed upon goals? If we want different results, we must do something differently. What changes will be made?

Does your department need help with objections? Do they need products to sell? No one can live on finance reserve and service agreements alone. You must expand your product base.

Where do you search for products? Most vendors exhibit at industry conventions.

Listen to independent insurance representatives who visit your store. Ask your dealer 20 Group members what they sell and through whom. When you find a new product, complete due diligence and make sure the products and policies are insured for maximum protection.

While dealer principals usually set an annual goal, I find it best for F&I managers to set monthly goals. They set the target, formulate an action plan, measure performance, and review the action. They continue with what is working and adjust what is not working.

Then they re-implement the action plan and continue monitoring results. The cycle of setting goals, making action plans, reviewing progress and revising action plans is an ongoing activity.


F&I producers are pay plan driven. When you write a pay plan, think about the message you are sending. Are you only focused on profitability, no matter what it takes? Or are you concerned with building customer retention and maintaining a high level of customer satisfaction?

Some dealers do not care how F&I achieves their goals, as long as at the end of the day they produce 6 percent of the sales volume period. By the way, these types of dealers have a battery of attorneys at the ready.

For those of us who do not wish to keep attorneys on a regular pay check, the how we do business becomes as important as the end results.

To start with, from the general manager down, the payroll should not exceed 30 percent of the department’s gross profit. Sales managers should participate in the F&I revenue stream because they are teammates with the F&I managers. They fill in for one another, and sales managers generally structure the deals for F&I. Many sales managers will quote payments, and by doing such they have a direct bearing on the finance reserve in the deal.