May 3, 2010: A $50,000 reason to begin a policy on F&I?sales

These articles recap some of the opportunities uncovered by our GSA powersports consultants during actual consulting visits. These are followed by recommended actions that address these opportunities. Our goal is to provide you with ideas to help improve your dealership.

This small dealership is in a market area containing around 150,000 people within a 50-mile radius. This number increases considerably during the summer months due to the large number of seasonal lake homes in the area. They sold just more than 200 units in the past 12 months.
The current owners are powersports enthusiasts who were customers of the original dealership. After the buyout, they built a new facility on a state highway with good traffic volume. They also acquired an additional major powersports product line.
Since they are not visible from the freeway, they have used billboards located near the freeway off-ramps to help draw additional business. They have sold their other large, successful (non-powersports) business and have good capital to back the dealership.
In the first two parts of this series on this dealership, we analyzed the entire store’s operations and the sales department. In this edition, we’ll report on the F&I department.

The sales manager is the only person in the dealership with F&I training. He has not been doing much in this area, however.
Here is a real chance to significantly improve income. Dealers should average at least $250-plus gross profit per unit sold in F&I. For the 200 units sold in the past 12 months, that could have brought in an additional $50,000 in gross profit.
There is very little finance penetration. They say they simply can’t convert customers from cash or credit union financing, but in reality very little effort is actually taking place to accomplish this. Even when they know this is the case at the start of the sale, little effort is made to introduce these buyers to the sales manager early in the process so he can attempt a conversion.
They are not turning all customers over to F&I following the closing of the unit sale. Consequently, they are selling almost nothing in this key profit center. Their best salesperson is not turning most of his customers over to F&I, so those profits are being tossed away. These should not be negotiable procedures. The process must be enforced.
They do have the Red Flag compliance packet completed. However, they do not have a store privacy policy. It was recommended they complete one and post it on their Web site. Customers completing credit applications must receive a privacy policy from either the lender or the dealership. Credit aps and unit jackets are kept in the sales manager’s office. They need to ensure that either the office or the file cabinets are locked when the office is unoccupied.
They have very few F&I products available. There was a discussion about adding all the products, including an aftermarket extended service supplier to cover used units. They need to become familiar with the state laws regarding insurance products and determine if they want to become licensed to sell these or if they can utilize an insurance broker.
They can vastly improve their potential here by implementing three essential procedures:
1. Turn all customers over to F&I after the unit sale is closed.
2. Improve conversions to dealership financing. Involve the sales manager early anytime it looks like the customer is planning to use outside financing or cash.
3. Offer every F&I product you can to every customer.

Action Items
• Ensure 100 percent of the major unit purchasers are turned over to the F&I department.
• Ensure the F&I office is locked (or file cabinets locked) whenever it is not occupied.
• Work hard to improve conversions to dealership financing.
• Acquire and sell every F&I product that is available to your dealership.
• Utilize a menu system to present all products. Exposing every customer to all the products will result in some sales even if they are not presented correctly.
• Acquire additional financing sources by setting appointments to visit prospective lenders face-to-face.
• Keep the F&I log up to date and use it to follow up on missed opportunities. Call customers prior to warranty expiration to attempt extended service contract sales.
• Develop an incentive program for the sales team based on a percentage of F&I gross profit.

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