The Basics of F&I

The Basics of F&I

Let’s start at the beginning: you already have a sales process, even if it’s just in your head, that you follow because it continues to work for you.  My experience has taught me that In order to succeed at F&I, all you need to do is to expand that process to include a few additional steps that are fully consistent with your current process and with what your dealership is all about.  You must see the offering of back-end products as part of the overall sale, not as some additional chore that disrupts the flow or irritates the guest. Here’s a fundamental step for you as the dealer or manager:  set goals regarding monthly F&I product sales, their profit averages and gross profits, and hold yourself, and your team, accountable for reaching those objectives. So how do we make F&I a seamless part of the process?  Assuming you have already chosen a trust-worthy provider and reputable F&I products, let’s agree that you need to keep things simple, and limit the number of products to what fits comfortably into your sales process.  These normally include Vehicle Service Contracts and Gap Protection, and you may add others to the mix as you gain confidence. As part of your selling process, you are probably mentioning the remaining factory warranty or that it has already expired.  Start planting the F&I seed early, when you are showing the car.   At that moment, just add something like this:  “and, if you decide to purchase the car, we can help you extend (or, restore) that protection, to guarantee you peace of mind down the road.”...
Selling F&I at Independent Dealerships

Selling F&I at Independent Dealerships

If you own or manage a non-franchise dealership, which has no dedicated F&I Manager, you understand the need to start selling more ‘back-end’ products. You already know that this F&I stuff is a critically- important profit source, that will also serve to keep your customers happy and more likely to return or recommend you to others. Of course, your first task, now and always, is to get the iron over the curb. You get all that, but the need remains. Let’s start at the beginning:  No matter how small your dealership may be, you already have a sales process, even if it’s just in your head, that you follow because it continues to work for you.  My experience has taught me that In order to succeed at F&I, all you need to do is to expand that process to include a few additional steps that are fully consistent with your current process and with what your dealership is all about.  You must see the offering of back-end products as part of the overall sale, not as some additional chore that disrupts the flow or irritates the guest. Here’s a fundamental step for you as the dealer or manager:  set goals regarding monthly F&I product sales, their profit averages and gross profits, and hold yourself, and your team, accountable for reaching those objectives. So how do we make F&I a seamless part of the process?  Assuming you have already chosen a trust-worthy provider and reputable F&I products, let’s agree that you need to keep things simple, and limit the number of products to what fits comfortably into your sales process. ...
Pricing and Profit

Pricing and Profit

Do dealerships need a system for pricing F&I products?  I’ve never seen a specific formula, consistently applied to all products in a store, though there may be a few dealers out there who are trying to execute one.  As an agent installing new products, one of the most common questions I am asked by a new account is about where to price those products.  Usually, they just want to know what other dealers are charging, and I use some regional averages as the starting point of my answer – but that’s no answer by itself, and it’s different for every dealership. Profit is good, and it is the means by which we stay in business.  However, the days of old-school auto sales and F&I departments charging ‘whatever the market will bear’ – that is, when that is translated into whatever the customer can be manipulated into paying, by packing payments and other deceptive practices – are over.  Those violations of Reg. Z, Reg. M, etc., are now today’s felonies.  So let’s look at a few legal and ethical criteria for pricing: State-mandated limits on pricing Vendor-imposed limits Lender guidelines Those constitute the obvious starting-place for any pricing strategy.  The next criteria is to determine the immediate competition to your prices:  this is most often faced by customers who insist on arranging their financing at their own bank or credit union, where you know they will be confronted with their lender’s attempt to piggy-back or steal away your sale by simply offering a lower price for that Service Contract or Gap waiver.  So, that adds one more point to consider:...
The Way to Compliance

The Way to Compliance

Voluminous regulations, mostly federal in origin, present auto dealers with an intimidating challenge:  in order to be fully compliant and protect against financial penalties for violations, the job of monitoring advertising, negotiating credit terms, contracting, and record-keeping must be delegated and closely supervised.  Just as dealership employees, who, as agents of the dealer (principal), can no longer be shielded from prosecution, neither can the dealer use ignorance of the employee’s negligence, intentionally fraudulent acts, or infractions as a defense against enforcement actions. Most dealers want to do the right thing, but are faced with regs that are not derived from conventional morality or common sense.  Unfortunately, most of them feel frustrated by the obstacles to doing business which these laws and threats of enforcement actions appear to present.  Accepting the reality that the current regulation boom is here to stay, with few exceptions, the only safe course of action is to take the necessary steps to comply.  Here are a few thoughts on how to make that as easy as possible.   TRAINING First, get everyone up to speed on all the current regulations.  Find a regulatory-competent training agency to do this.  Hold annual seminars for everyone in the dealership.  Consider AFIP Certification for all senior management, sales supervisors and F&I managers; this is an in-depth course on the laws regarding all aspects of their job description.  Subscribe to publications that contain articles about these issues, and insure that they are circulated to all appropriate personnel. IMPLEMENTATION The first line of everyone’s job description should be “to protect the legal and financial welfare of the dealership.” Without delay, delegate...