The F&I Profit Center

In the last issue of Boating Industry, we discussed my background in finance and insurance, I introduced you to my F&I mentor (Steve) and we covered the benefits dealership-based F&I services provide to customers.
Today, let’s talk about what you really want to know — the benefits that quality F&I programs can provide your business. Quality F&I benefits the dealer because it:
• Stops The Shopper — By attending to financial arrangements, a dealership can provide quicker delivery of the customer’s
vehicle. This will transform shoppers into buyers sooner, and
therefore take them out of the buying market.
• Eliminates Third-Party Confusion — By attending to the finan-
cial arrangements, the dealership will reduce the opportunity
for the customer to become confused by a third-party opinion.
• Retains Customers — By providing F&I, the dealership builds
customer loyalty. It’s a fact. Customers who allow the dealer-
ship to attend to their financial situations will come back to
the dealership more frequently than customers who pay cash
or make their own credit arrangements, and while they are
there, they may look for accessories for their boat.
• Strengthens Lender Relationship — A successful business office improves your position with your lenders. By sending good credit customers, you give the lender greater incentive to accept customers with marginal credit.
• Creates Extra Sales — If your financing rates are competitive,
or your customers find it easier to obtain dealer financing, you may close sales that you would not have closed otherwise.
• Improves Cash Flow — The F&I department improves your
cash flow. It not only generates cash, but also eliminates waiting for the customer’s own credit source to cut the check.
•  Provides Extra Income — It will generate extra income to help you keep a full line of model inventory.
•  Builds Bottom-Line Profits — F&I has the potential to generate more net income than any other department in the dealership — more than the parts and service departments combined! It has been said that F&I stands for “found income.”

Selling F&I Is Very Profitable
Perhaps the best reason of all for promoting F&I is that it can be very profitable — adding hundreds of dollars in profit to each unit sold. F&I requires little or no overhead. There is no investment in inventory (other than office supplies such as forms and pens). Also, there’s little increase in salaries because only one or two employees are involved.
In many dealerships, the F&I managers will even work on a commission-only basis. As a result, the gross profit nearly becomes net profit.
F&I is a win-win situation for everyone. Your dealership has an opportunity to profit through customer satisfaction. When we make the customer happy, it pays big dividends.
Cover The Fundamentals
Steve was very strong about certain F&I fundamentals. He had a clearly defined opinion on how to run a business office. He was excellent at establishing standard procedures and sticking with them. You might say he was a disciplinarian.
Here are some of the policies and procedures that our dealership followed:
• Use The Proper Terminology — Steve never allowed the salespeople to call him anything other than the business manager, especially in front of customers. He disliked the title, F&I manager. Here is his rationale: No customer wants to go to an F&I Office to get “F&I’d!” It sounds much more professional and appealing being introduced to the business manager in the business office. This is especially important for cash or bank and credit union customers, who may resent talking to someone who is called a finance and insurance manager. Additionally, I need to clarify the term aftersale. In most parts of the country, aftersale refers to parts, protective chemicals, anti-theft deterrents, etc. I combine everything that is sold “after-the-initial-vehicle-sale.” This, of course, includes dealer financing, credit insurance, extended protection and other insurance products.
• Separate The F&I Profit Center — Steve looked at the business office as its own profit center. It should stand alone, just as the parts and service departments are separate profit centers. While the sales department and the business office must depend on each other and work together, they must also be separate if they want to maximize profitability. Therefore, Steve answered directly to the general manager … not to the sales manager. This seemed to work well for our dealership.
• Recognize Your Profit Priorities — Most business managers feel they are unjustly losing F&I profits to the sales department. Steve had a different attitude. He actually believed that the vehicle sale and gross profit should take priority over F&I income. You see, Steve and I were paid not only on what happened in the business office, but we also got a portion of the entire sales department’s profit. The reasons were simple: The sales department’s No. 1 priority is to deliver vehicles to satisfied customers at the best gross profit possible. This does not mean that the gross profit should suffer in favor of F&I. The gross profit on a vehicle sale is usually permanent in that it can’t be charged-back (reversed). However, the F&I profit can be charged-back (i.e., loss of profits due to early payoffs, cancellations, etc.). F&I means “found income,” not income in place of the vehicle gross profit.
• Emphasize The F&I Bottom Line — F&I success is measured on the net result. What good is it to sell F&I and have excessive charge-backs? A business manager has not only wasted precious time and money, but has also created dissatisfied customers. Therefore, F&I successes should be based on net results (after charge-backs), not on initial F&I gross profit.
• Upgrade The Business Office Environment — Steve was very fussy about how the business office looked. He emphasized how important it was to have a professional business environment. A professional business environment reflects on the dealership, and it’s where you live 8-to-14 hours a day.
• Maintain 100 Percent Coverage — My first F&I job was as assistant to Steve. I was promoted because our dealer knew that every vehicle sale could generate hundreds of dollars in F&I income. He felt the dealership couldn’t afford to be without F&I coverage for a moment. He also insisted that our sales manager become the back-up F&I person. This strategy proved invaluable, especially during peak business times, days off, illnesses, vacations and so on.
• Keep Pace — The time that a business manager can spend with a customer is limited for several reasons. It may be that the customer is fatigued after working with the salesperson. Or perhaps other customers are waiting to get into the business office. Whatever the case, the vehicle sale must never be jeopardized by the business office consuming too much time with F&I. To conserve time, many dealerships believe that most accessories should be sold by the sales staff, not the business manager. Some dealerships even introduce the customer to an accessory manager before visiting the business office.

Introducing The Customer At The Point-of-Sale
The business office is an important (and valuable) profit center. Steve felt that if a dealership is to maximize its profit opportunities, the following must be strictly enforced. “At the point-of-sale” means at the time when the customer and sales management gain final agreement and the deal is consummated.
Customers must never be allowed to check with their bank or credit union before the business office has had a chance to counsel with them. If business managers are paid on commission, the opportunity to present to the customer is critical to their income potential — not to mention the dealership’s profits.
After the salesperson closes the deal and makes the required disclosures, they should say, “Congratulations, Mr. Customer, on the ownership of your new vehicle! I need to check with our business manager so that we can get the paperwork squared away immediately. Wait just a moment while I see if she is available.”
One method to ensure 100-percent introduction to the business office is to have all money (i.e., deposits, down payments, etc.) receipts processed by the business manager.
When it came to getting cooperation, no one messed with Steve. He had a “help me” or “hurt me” outlook. Either a salesperson was a help or a hindrance. Salespeople who chose to be a hindrance were only hurting themselves. If they were smart, they didn’t cross Steve. He was the one that made the deal happen. Without him as a business manager, our salespeople would have lost a lot of deals.