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The Top 10 F&I profit killers

By Myril Shaw

If you have been reading the industry literature or listening to the "experts," you have almost certainly heard how much your F&I profit center should be contributing to your store's profit – and yet, your results just don't look that way. Why?

When you look around at the differences between the highly performing dealerships and the underperforming stores, there are some consistent differences differences between the two sets of businesses. Let's take a look at the top 10 reasons why F&I underperforms. Understanding these factors will help you make the changes necessary to turn your dealership into an F&I profit leader.

One explanatory note – you will see that all references are to the "Delivery Coordinator" rather than the "Finance Manager." The Delivery Coordinator performs all Finance Manager activities, as well as delivery logistics. There are powerful psychological reasons for making this name change in your store.

10) Sales and finance personnel don't share vision

If the sales team and the finance team are not motivationally aligned, their differences will cause F&I profit to suffer. The sales team must be compensated on F&I profit. Without this motivation, the only focus of the sales team is selling the unit – without regard to the impact that their words may have on finance and back-end sales.

9) Inadequate focus on back-end sales

Back-end sales profit, on any given deal, should be greater than or equal to the funding reserve. If your Delivery Coordinator is not doing a comprehensive, menu-based presentation of back-end products to every customer, and having customers sign a waiver if they decline, F&I profit will suffer significantly.

This points to another very important and often overlooked fact. The Delivery Coordinator position is a sales and not administrative role. This position is not about filling out paperwork correctly. While that is a necessary part of the job, it is not sufficient. The person (or people) in this role must be skilled at value selling and overcoming objections.

8) Boat signs with low interest rates

Too often, the signs on boats quote interest rates of 3.9 percent, 4.49 percent or even 4.99 percent. This happens because of the sincere, but misguided, belief that these signs need to show the lowest possible payments. The reality is that using rates of 5.9 to 7.9 percent will only change the payments in the range of 15 to 25 percent - not enough to cause a customer to stop talking.

The fact is, setting the rate on these signs too low has only one effect – capping the potential reserve on a deal. It is easy to tell a customer that they may get a better rate – and offering a final contract price that is lower than the sign price, while still holding reserve is the outcome win-win outcome.

7) Sales people providing back-end prices

The expectation should always be that a deal will be financed, even if the customer has told the sales person that they will be paying cash (upselling from cash to finance is a Delivery Office function.) The buyer's cost for these products should always be presented in the form of payment first. If the payment is right the price won't matter.

Beyond that, anyone in a selling position has to remember that, "Price only matters in the absence of value." Articulating the value of back-end products is important for both sales and delivery – back-end prices are the purview of the Delivery Coordinator.

6) Allowing sales people to quote rate

The Buy Rate for a given contract can't be known until it is provided by a lender. There is absolutely no upside to guessing at rate. Sales people quoting rate is a behavior that simply cannot be accepted by management.

5) Having salespeople desk their own deals

Wrapping up a deal, negotiating rate, selling back-end and upselling from cash to finance is a part of the sales process that has to be conducted by a dispassionate participant. By the time the customer has told that salesperson which boat they would like, the salesperson is in a mini-Stockholm Syndrome. They have been held hostage by the buyer for a consequential period of time, and their primary interest is in selling the unit. F&I profit is in significant jeopardy when salespeople desk their own deals.

4) Failure to ask for finance business

It is easy to make the assumption that every customer looking at your website or walking into your stores knows that you can offer competitive financing. In fact, a significant number of customers do not know that at all and others assume that dealership financing will be less advantageous than bank or credit union loans. It is critical to have signs and messages everywhere – in your store, on your website, coming from salespeople's mouths – that you do offer easily available and highly competitive financing. You have to ask for the sale on the boat, the same applies to financing.

3) Not putting 100 percent of your customers in front of the Delivery Coordinator

To maximize F&I profit, every customer, cash or finance, must receive a menu-based back-end product presentation. Someone other than the salesperson must try and upsell cash buyers to finance. F&I success will be subpar until every single customer gets in front of your Delivery Coordinator.

2) Lack of clear goals

You must clearly define and present to your team your expectations for F&I success. Are you going to be happy with an average reserve of 4 or 5 percent? How many of your customers do you expect to finance? What are your targets for back-end profits? No team can win if they don't know what winning means.

1) Insufficient management

To some degree all of the previous nine issues are management issues. As the leader of your store, it is your responsibility to ensure that your standards and expectations are being met. You have to ensure that everyone is fully trained and has all the tools that they need to succeed according to your standards. The biggest reason that F&I fails is that you and/or your management has not owned the responsibility for success.

Eliminate these 10 F&I success killers and become an F&I profit leader.

Myril Shaw is the COO of First Approval Source where he leads a team dedicated to ensuring F&I excellence at dealerships. Myril been a champion of profit and success for over 30 years.

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