September 24, 2007 – F&I guidance

Editor’s note: Mary Dunkus is like so many other small dealership owners in rural America: she and her husband Bill run a small store that does not currently collect a penny in F&I profits.
Unlike most small dealership owners, however, Dunkus is reaching out for help. In a recent letter to Powersports Business, she wrote: “My husband and I own a small motorcycle dealership in Rolla, Mo., called Interstate Motorcycles. Our present attempts at financing customers consist of faxing their application into GE and local lenders, and we do not receive any income from this.
“I was wondering if you could give me any advice on the best training for this endeavor. I really have no idea where to start or where to get the information.”
We took Dunkus’ request and forwarded it to five individuals who play key roles on some of the largest F&I companies in the powersports industry. Here are their thoughts on how a small dealership should start an F&I department and if the latter should include training, what specific aspects of training should dealer principals look for.
Jimmy Atkinson
Vice president, sales and marketing for the Automotive and Recreational Vehicle Services, Assurant Solutions
The F&I department can represent the highest net profit center in the dealership and provides many other benefits to the store, such as tying the customer more closely to the dealership for parts and service plus each visit represents opportunities for accessory sales, repeat business, etc.
For a store just beginning an F&I department, they need products, lenders and training. I would suggest choosing an F&I provider company that offers training and ongoing support in addition to F&I products. They also can assist with pay plans and processes. Your F&I provider, as well as other dealers in the area, would be a source for discussing potential lenders to begin an indirect relationship with. The manager should attend an F&I training class that covers the basics of running the department, teaches a menu-based selling system and provides access to information on compliance. Next I would suggest contacting the Association of F&I Professionals to go through its certification process. It’s an excellent way to fully understand all of the legal and compliance issues affecting your F&I department and dealership. You then need to begin preparing your sales and management team for the changes in handling customers that will now include a referral to the F&I department. While this can seem to be a daunting undertaking, the good news is that there are a lot of resources to help you, and the profitability will more than make it worthwhile.
Gregory Pierce
Vice president and general manager, GE Money
With the right planning and forethought, F&I can be a significant source of customer satisfaction and dealer income.
GE Money recommends a dedicated F&I resource or team at every dealership to capitalize on the opportunity to increase profit-per-customer by up to 100 percent. If introducing a new F&I position into your dealership, look for subject-matter expertise and bring in someone with an auto or recreational lending background. If you are simply moving existing employees into an F&I role, commit to having the new F&I person(s) attend a regional F&I seminar.
The first order of business for a new F&I function should be to review all OEM-sponsored consumer financing programs and promotions for brands on your dealership floor. OEM promotions are often advertised nationally to drive traffic into your dealership. A common misconception is that OEM programs are not designed to be profitable. In reality, many OEM programs provide dealer reserve opportunities.
F&I functions should be equipped with a full suite of tools for the job, offering both installment and revolving consumer financing. The perfect payment, rate and term might be different for every customer. Carrying a full suite of financing products ensures you can meet the unique needs of every customer.
Lastly, partner with reputable, consistent lenders who are committed to the powersports industry. Working with an unreliable lender can be disruptive to your business model and might create headaches for your customers, which reflects poorly on your dealership.
Ed Menken
Vice president, director of marketing, Sparta Commercial Services
The challenge of establishing in-house F&I activity, especially for small- to mid-size dealers, is a significant one. Owners must first decide how much beyond the basic vehicle financing function they want to pursue, and whether they’re willing to invest the time and financial resources necessary to establish a department — even manned by only one person — that can generate the additional income available by selling extended service contracts, GAP, pre-paid maintenance and the like.
Obviously, absent any prior experience with F&I, a good training experience is absolutely necessary. And, in order to learn all there is to know about the potential for an F&I profit center, one of the several powersports consulting or service companies that specialize in this type of training should be considered. Again, the question of cost versus benefit could be an issue, in which case a dealer might also consider one of the growing number of remote F&I companies that specialize in providing that service, who share in the profit generated from the various products sold, in addition to whatever dealer reserve is available from lenders through the financing contracts.
I would urge any small- to mid-size dealer who is considering the establishment of an F&I department to carefully explore the options available, review the abundant information on the subject that’s printed in the trade publications and speak to other dealers who faced the same challenge earlier.
Julia McCarthy
President of MMCS Inc., the administrators of Aftercare
Solving the F&I challenges faced by the powersports industry is multifaceted. Training is one, but not a universal, solution to improving F&I sales. The size, location and financial strength of your dealership as well as your ability to hire and retain talented labor will all play a part in coming up with the best approach for your dealership.
Dealers of all sizes can begin to develop their own path toward F&I success by answering a few questions. Instead of focusing on how your dealership can capture the F&I income that is being left on the table, why not ask, “How can we be sure that each and every one of our customers is introduced to all of the lending options available?” (the F) and “How can we be sure each customer is offered the products designed to protect their investment?” (the I).
Ultimately, it is the commitment to ensuring your customers receive these benefits from your dealership that will make a successful F&I department.
The first step is to make sure you — the dealer — understand what it is you are aiming to accomplish. Then explore all the options available. Once you choose an approach, make the commitment — both time and financial — to implement that approach. The cash will follow.
If you determine that hiring and training is right for you, make sure your culture and compensation package are designed to retain your employees, otherwise the auto dealer down the street might be thanking you for training his next superstar.
Brian Weaver
Vice president of sales and marketing, The McGraw Group
My first rule of thumb is to consider what makes the most profit to what makes the least profit from the ancillary products. Most F&I salespeople consider this to be back-end profit. Try never to decrease the front end but always look to maximize the back end. In cases where the salesperson becomes the F&I person, it’s sometimes harder to hold both front and back-end profit. This person could ask companies that sell ancillary products to come to the dealership and spend time training and educating them on certain sales approaches and delivery presentations that have worked for others.
As for the average to big dealers, they usually can support a full-time F&I person. In these cases, it still requires similar processing from the sale to the F&I person, but usually they are stronger at the close, due to a different voice, different person and most often more aggressiveness due to their income usually being 100 percent tied to the back end of the deal.
Lastly, in today’s modern era, I would strongly look at menu-selling software programs. This helps with the back-end products and profit. psb

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