The F&I Express – Station #12 – Watch for Hazards
The F&I department has hazards, and a wise business owner is watchful to stay clear of issues that can derail the department.
NO PACKING PAYMENT POLICY
Many dealerships advertise low prices to sell RV’s, and then rely on the F&I department to turn the low gross deal into a great deal. “Packing payments,” which is the practice of quoting payments at a higher interest rate, or including F&I products without disclosing the products to the customer, has been declared, by most attorney generals, as an unfair and deceptive business practice, not to mention a violation of Regulation Z/Truth in Lending.
In dealership directed financing, the customer should know the correct payment without F&I products and receive a commonly used interest rate. For those who pay attention to how dealerships get in the news, packing payments and lack of proper disclosure are close to the top of the list.
The cautious owner audits deals and views the time stamp on e-menus. A best business practice is to create a separate disclosure identifying the RV payment without F&I products, the items the customer chose with full retail price disclosure, and the new payment. If there is any negative equity regarding the trade vehicle, the forms should identify the negative equity that is included in the amount financed. Many form providers already have a separate disclosure form, all dealerships need to do is implement them.
The goal is to have not have hint of bad behavior regarding disclosure and providing options to the customer.
STANDARD PRICING FOR F&I PRODUCTS
A best practice is to create standardized pricing for all F&I products. When two people purchase the same RV, the same service contract, and terms of coverage, the price should be the same.
Many service contract companies have web-based policies and web-based pricing. The F&I manager goes online, answers a few questions, enters the vehicle identification number, and the policy will be e-rated. The form is then created and printed. This venue provides accuracy in policy codes and pricing, and reduces the chance for errors in coverage. By using web-based solutions, the customer’s policy is effective immediately. The service contract company has all the required information enabling it to provide the customer with world-class service.
PROPER USE OF MENUS
Menus create options for customers, but few dealers use them effectively. Establish value first before there is any discussion about prices. Rather than menu selling, choose menu closing. The menu is a wonderful closing tool for both customers and F&I professionals.
The F&I department usually has a night receipt book. Audit the receipt book regularly. There should be a process in place where the money from the day goes into a safe with two people watching, and two people pulling it out to verify the amounts and sign off on it.
If you do not have a drop safe, invest in one. Once money goes into the drop safe only the owner or office manger with a witness can open the safe.
Sound business practices prevent embezzlement opportunities. Monitor all contracts in transit and the time it takes to receive clear titles on trades. Watch who buys the wholesale pieces and how much they pay for the vehicles. Remember, no one watches your money better than you.
The job is not complete until the money is in the bank and the titles are in the vault. How is your documentation? Have you had an attorney review your purchase orders? How about your menus? Furthermore, have you had the sales department worksheets reviewed? How about the credit applications you are using? How are the adverse action letters that you send out to all customers who did not get approved for loans, or those whom you got a counter offer from the lender?
Your forms and processes should pass your legal counsel review, and be such that the documents close the deal. Secure any legal loopholes and create a positive foundation for the best customer experience.
F&I makes a strong and positive difference in many RV dealerships. I hope the progress continues and I hope the tracks ahead are clear of obstacles.
RV Executive Today, January 08 Issue, P. 30, 34-35