Don't Settle for Poor Performance in F&I

Times are tougher than I can ever remember in the auto industry. Of course, I am not telling you anything you don’t already know. However, for the life of me I can’t understand the mentality of some dealerships. I see stores fighting their competition tooth and nail to get the sale. Margins are cut, promises are made and profitability follows CSI right out the door. The part that amazes me the most is the fact that a good majority of stores in the country are weak in their finance departments. Think about it for a minute. The deal is sometimes worked for a week or more to make what, a grand? A good finance department can make the same grand in 10 minutes.

I was in a store recently where I met with a finance manager who was a little pompous.. In the course of our five-minute meeting, I asked him some very simple questions. One of these questions was, “Do you sell service contracts?”

His answer was, “Not really. The lenders won’t lend money for them, and customers don’t want them anyway.” This is not a good answer in my book, since I am in and out of stores every day and have a pretty good idea of what is actually happening in the market. Needless to say, in my humble, politically correct manner, I basically told him how big of a moron he was and his store deserved to fail.

OK, so that is what I thought in my head. However, the response was a little more along the lines of, “You do realize that your competition down the road is selling service contracts to over half the customers that buy from them, hence lenders will lend on them and customers still want them.” This conversation actually went on for a minute or so with this specific F&I manager sticking to his guns. He told me he was happy with the way things were running and they weren’t about to “stick it” to their customers like the competition does.

I probably don’t even need to tell you more about the store situation, but I will. This was a GM store that is suffering miserably and is on the verge of going out of business. I did not see the financial statement; however, the lack of business, lack of customers, poor conditions of the facility and very poor salesmanship all point to the simple fact that they are on their way out. Just before I left the store I asked him one last question: “Do you know the definition of insanity?” With that remark, I left.

I’d like to say I didn’t give the guy or the store another thought, but the truth is it really bothered me. The whole attitude of “holier than thou” got my goat a little. This guy had actually convinced himself that it was wrong to try to up-sell or make money. This situation made me take a long, hard look at the attitude of some dealers in our industry. Try as I may, I cannot fully comprehend the lax attitude. As business is tough, we must be at the top of our game now more than ever before. Salesmanship is the key! Policies and processes are more important than ever before. Believe me; nobody is bringing any bailout money to the little guys in the world!

If you have to fight and slug to move metal over the curb for a small margin, then at least take a slight swing in the F&I department. This will protect the dealership, protect the customer and generate additional profit. The difference between pushiness and persistence is technique. Your market is not different than everyone else’s and your customers aren’t different; what may be different is your policies and processes.

As a general rule of thumb, you should have over 50 percent penetration of service contracts in a franchise store; keep in mind some stores are much higher than this. Independent stores do vary as they are more limited by their finance sources, but a good independent store will still have high (sometimes even higher) penetration than franchise stores. My advice is this: plan your work, work your plan and never settle!