Where Is The Income In F&I?
The profit streams in F&I are once again changing. There is a lack of reserve and the lenders are limiting the traditional, F&I products and services. This can be traced to lack of cash down payment and the fact that a good portion of customers are suffering from a negative equity position from the beginning of the financial transaction. These problems, however, are not insurmountable.
There is nothing wrong with the level of income in F&I that more cash involvement from the customer cannot cure. Who needs to ask for this investment? The line of communication between the dealership and the customer begin with the sales consultant.
Thirty years ago when the finance department was young, the sales consultants were all educated to work the customer for cash down. In fact the sales department profit was defined by the amount of cash down the sales consultant and sale manager were able to obtain. The rule was simple; the gross profit of the deal was equal to the initial investment by the customer.
Time is the catalyst that brings about new strategies. In the auto industry, those changes were zero down, long-term financing, which created huge amounts of negative equity for many customers. Along with the importance of cash down, the products of the F&I office have changed. Credit life, accident, and health insurance are almost non-existent, those dollars were switched long ago to protective coatings that maintain the appearance of the vehicle.
The F&I office will become the accessory center.
In addition to the financing being tighter, deals are fewer, and the importance of maximizing the transaction has never been greater. Customers are still looking for dependable transportation. The heyday of SUVs is over. American customers are looking for fuel-efficient vehicles, but that doesn’t mean they don’t want to accessorize their rides. We are accustomed to having high technology, convenience, and stylish looking vehicles and we will spend money for things we want; and we want bells and whistles.
A great use of those first few minutes in the F&I office could be to give the customer a simple one page sheet of things that could be included in the financing as approved add on items, such as cargo organizers, DVD players for the back seat, iPod/MP3 player recharging stations, special wheels, pin striping, tinted windows, and enhanced security systems.
Make up one page for sedans, one for trucks, and one for SUVs. Use different color paper and keep the list limited to the most commonly requested items in your market place. The first step in capturing these accessories dollars is to recognize that your customers are already making these purchases, they’re just doing it elsewhere. Accessorizing is big business!
This is a great way to use those first few quiet minutes when the customer and the F&I professional begin the F&I process. The list could be viewed as the F&I professional is entering the deal information or checking the spelling of the names.
Selling additional accessories must be done after the commitment to purchase the vehicle but before the financing is arranged. Keep in mind that nothing will be added to the vehicle until the funding is secure and the dealership is paid. You can work out those details between departments.
In these times flexibility is the key to growing the income and building happy, loyal customers. Keep the process simple and keep the customers coming back by becoming a one stop shop for all the things that make a fun driving experience.
Dealer Marketing Magazine, January 2009, P. 28