Who Is Your F&I Manager Working For?
Follow the Money
Recently, I discovered an arrangement in which a vendor was paying a new finance manager $80.00 for each policy the dealership sold.
I was immediately concerned about whether the dealer had authorized this arrangement and instructed the new F&I manager to ask the vendor for a copy of the dealer’s authorization. The vendor representative informed the finance manager that no dealer authorization was ever secured, and if the new F&I manager did not want to accept the money directly, perhaps the check could be made payable to a spouse or child at home.
Now, if you are a dealer whose initial reaction to this incident is, “so what if the vendor wants to pay my personnel — that’s just less money for me to pay out,” I would ask you to realize that you indeed are the one paying — in fact over paying for a product, policy, or service and the overage is profiting one person, instead of being shared among all dealership management.
Let’s figure it out. Assume the policy remittance is $189.00. When the policies are remitted to the vendor at month end, the dealership completes a remittance register and sends a copy of the policies, the register, and a check totaling $189.00 per policy made payable to the vendor. Now let’s say the dealership sold 100 policies.
$189.00 X 100 = $ 18,900.00 remitted to the vendor.
The payment for the policies is overstated, over paid, over inflated by $8,000.00. Does this calculation have a negative effect on a dealership’s PRU? I think it does. The payment should have been for $10,900.00.
The situation I have described was the result of a change in vendors. The former F&I manager was a good producer, had the dealer’s confidence, and decided to switch vendors for a particular product.
The old vendor was insured, thus minimizing the dealership contingent liability. The new vendor was not insured and paid the coverage back to the employee. The change in companies also increased the dealership’s contingent liability since the new vendor’s policies were not insured.
Cover the Risk
So if you are a dealer looking for ways to improve your profit per retail unit, make it your business to check with each of your vendors to learn if money is leaving your dealership and ending up in the mail boxes of dealership employees. Since checks may be payable to a family member, be sure to make your inquiry all encompassing.
Your next order of business is to make sure the F&I policies your dealership sells are adequately insured in order to limit the dealership’s contingent liability.
When someone else is paying your employee $8,000 plus, is the payee still your employee?
For the integrity of our industry, please make sure that the dealership is the only source of compensation for your employees. It is in everyone’s best interest to minimize opportunities for self-interest.
Dealer Marketing, August 2005, p. 22