Five ways to enhance your F&I profitability

Your finance department can and should be the most profitable square footage in the dealership. Obviously, most of you are generating your profits using the standard products available in the market as well as earning finance participation where and when it’s possible. These opportunities are fairly abundant and most definitely should be taken advantage of. I wanted to provide you with some ways you can maximize new programs, leverage existing ones and perhaps put a “spin” on the way you are marketing your current offerings.

Alternative financing

Let’s take a look at the first opportunity, alternative financing. The first, and most obvious, are some of the sub-prime lenders that are available in the market. These sources will finance your customers who are unable to obtain financing through your traditional lenders. The upside? You now have a source to move more units than you could before. The downside? Typically these lenders charge a discount (fee for handling the loan) in order to finance your customer. These discounts certainly can vary from lender to lender and may make it a very low margin deal when all is said and done. A savvy dealer will at least submit the application, evaluate the cost and make a decision on whether or not the deal is worth finalizing. You should at least have one of these lenders in your portfolio as an option to move incremental business throughout the month.

Back-end products

Another financing option is the financing of your back-end products on their own transaction. Essentially your customer finances the unit with lender “A” and finances some or all of the back-end products with lender “B”. While your customer will have two loan payments each month, the loan for the back-end products will have a much smaller payment, and since virtually all of them are revolving loans, the terms do provide the customer longer repayment options. The downside? Cancellations will be much higher than on your traditional loan packages, but what have you really got to lose? The loans that don’t cancel never would have existed in the first place, so you never would have realized the additional profit to begin with.

Your second opportunity is to look for new and innovative products. One product that may soon come to market in our industry is protection against “negative equity.” Essentially it works like GAP insurance with the exception that the unit does not need to be a total loss for the customer to make a claim. Your customer purchases a unit from you and also purchases this protection. After the customer has paid down a certain percentage of the loan and returns to your dealership to trade in the unit and purchase a new one, they are reimbursed for any negative equity up to the policy’s maximum limit, perhaps up to $5,000. The benefit to your dealership is that they must return to your store in order to take advantage of the program. It provides you a guaranteed trade vehicle and new vehicle purchase. Like this program, there are always new products coming to market. Keep an eye out for them and consider any that may provide a value to both you and your customer.

Better marketing

A third opportunity would be to better market existing products that you currently sell. For example, many dealerships currently offer some sort of paint protection program. This product is offered in the finance office along with the scores other products.

The advantage this product offers is its relatively low cost for applying it to every unit on your floor eligible for its protection. By pre-applying it on the floor you essentially can “pre-sell” it to every customer and advise him or her that the protection has already been installed on the unit. Customers who choose not to purchase the program are simply never provided with the financial benefit of the product’s warranty. While there is a risk “cost” involved in applying it to all of the units on the floor, many stores have found this method very successful in driving product penetration rates and obviously significant profit growth for your finance department.

Add a ‘Wow!’ factor

A fourth opportunity is to simply better market your current offerings using existing technology. Let’s use GPS tracking devices as an example. Consider installing a unit in one of your shop vehicles that routinely is used for deliveries and other store needs. Your finance manager can easily pull that unit up on her computer and show the customer the device in use. Customers are able to easily visualize how they would be able to track their own unit should they decide to purchase the device. Technology that allows you to demonstrate a “Wow!” factor for the customer always makes for an easier close.

Make it tangible

Finally, our fifth opportunity is eliminating the drawback that exists with many F&I products since they are intangible products. Even if you don’t offer any kind of paint or fabric protection program, consider putting together vehicle maintenance kits for customers who purchase one of your menu packages. These kits can be fully customized for the dealership and are fairly inexpensive to create. Having something that your finance managers can put on the desk to show the customer can have a very profound affect on how successful your department is. People can be reluctant to purchase products that they can’t immediately see or feel. These simple kits have been proven to help provide customers the tangible “thing” they need to make a purchasing decision.

While I fully recognize there are more than just five ways you can find additional income in your finance department, lets consider a couple things. First, I’m writing an article and not a book; try as I might, the PSB editors won’t let me take up a whole issue of a magazine. Second, I need to keep a couple things in reserve for upcoming articles.

Peter Jones is an industry trainer and consultant as well as founder of Peter Jones Powersports and can be reached at or 904/742-3080.



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