Growing the pie with F&I

Keep your customers captive, offer more services and make money by outsourcing finance and insurance

Justin Ogg is an aggressive salesman. After switching jobs and landing at Chopper City in Fridley, Minn., six months ago, he had a goal of drastically increasing the store’s recent sales performance, which had hovered around 200 units per year for the last few years.

One of Ogg’s first moves at the small, one-salesman dealership on the north side of the Twin Cities metro area was to add an outsourced finance and insurance provider as a way to attract and retain more customers. From Ogg’s experience at other stores throughout his motorsports career, he knew all of Chopper City’s potential customers could just as easily buy their next Polaris or Boss Hogg at any number of competing dealerships in the area — most of which offer in-house or outsourced F&I services. Furthermore, due to the smaller dealership’s size, adding a full-time finance manager wouldn’t be a profitable possibility.

“It was a no-brainer to bring [F&I] over here just to have an extra way of getting somebody financed,” Ogg said. “You want to try to capture the excitement and emotion when they’re here and ready to go.”

Whether it was the changing of the guard or the addition of F&I, Chopper City has sold 130 units within the last four months, almost double its historic sales volume. And, with a deal that splits F&I revenue 50/50 with its partner, Web Finance Direct, Chopper City has also added an another source of income to its bottom line.

“Most small-town dealers don’t want to do anything with financing, because they don’t know what it can do for them,” Ogg said. “It can be very tedious, time-consuming work. People that have been in it a while, they don’t know what they’re missing.”

Dotting the I’s

Peter Jones has a thick motorsports resume. He’s a partner at IBSG Dealer Services, which provides consulting, training and resources to powersports dealers across the country. Part of his IBSG work has included F&I training for individual dealers and the industry as a whole, including a seminar at the upcoming AIMExpo. Currently, Jones is serving as the acting general manager at Tousley Motorsports, a large-format dealership in White Bear Lake, Minn., also on the north side of the Twin Cities.

While Tousley is big enough to have two and a half finance managers on site, Jones has worked with dealerships of all sizes, and advocates that everybody offers their customers some form of F&I, whether from inside or outside the store’s four walls.

“Outsourcing is a realistic idea for a smaller store where they don’t do enough business to justify having someone dedicated to it,” Jones said. “I think it is a much better alternative than … just having the salesperson do it, and the reason why is because there are so many compliance issues that even larger stores have trouble staying on top of what’s required.”

In the wake of 9/11, the Patriot Act and additional Great Recession financial regulations, Jones spends a lot of his time explaining the importance of immaculate legal compliance to dealers. Adding complicated finance and insurance work to a salesperson’s job is risky because of the dangers of non-compliance, as well as the reality of pulling that person off the sales floor to draft paperwork and communicate with lenders.

Adding an exclusive F&I manager to the payroll is a difficult proposition for small or mid-size stores, especially when such professionals are expensive and difficult to recruit. Jones estimates that a store should consider such a move when it is selling 60 or more units a month.

“Once they hit about 60 to 70 units a month, I think they should have a full-time F&I manager,” he said. “At 60 units, that’s $24,000 a month (assuming $400 in per-unit F&I profit); that’s more than enough to cover the expense of a finance manager.”


In choosing an F&I provider, Jones recommends stores conduct thorough due diligence by reviewing the company’s reputation online, and also talking to other dealer clients. The priority, he said, is making sure the firm will be a true partner in ensuring physical compliance, like computer security, video and audio recording and properly storing confidential financial information.

Turnkey profits

As the owner of a firm that provides F&I to the auto, marine, RV and powersports markets primarily in the Upper Midwest, Charlie McConkey has plenty of experience making the case for the services provided by his firm, Web Finance Direct, out of La Crosse, Wis.

Beyond consumer financing, Web Finance Direct provides and services extended warranty and GAP coverage, as well as handling all paperwork, contracts and titles for its customers.

A typical $20,000 sale — think of a side-by-side with a healthy dose of accessories — can often bring in more than $1,200 in profit through the financing reserve and any warranty coverage added to the sale. Split between Web and the dealer, that’s a $600-plus jump in incremental income with no additional staff or dealer costs.

“We work on a split on the back end with the dealership, so they get all of our resources; we handle all the logs, all the cancellations; we handle all the claims on any warranties on products sold, so we’re really turnkey for them,” he said.

While many similar firms avoid the powersports market for its smaller margins and, in general, shakier credit than higher-dollar markets like RV or marine, McConkey said the increasing price of off-road vehicles is changing the powersports market.

“If you look at used cars, there are probably a lot of dealers out there … [where] the average car sells for $5,000,” he said. “You look at the powersports industry now and … you buy a Polaris RZR for $14,000, good snowmobiles are 10, 11, 12 grand — the actual financed amount on a lot of that stuff is higher than older used cars.”

Aside from the basic services, Web works to establish local lenders throughout its territories, as they often can be more forgiving of past financial troubles in an effort to court future mortgage or auto loan business, for example.

“They’re more aggressive because they want to get that deal and gain a customer,” McConkey said. “That’s something unique about us — I try to build on those local relationships.”

Given the choice between offering no F&I or outsourcing with a firm like his, McConkey said the debate often gets no farther than asking dealers if they want to keep their customers captive and make more money at the same time.


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