
Why F&I drives your dealership's profitability:
Presented by
Hector
Bosotti
National Trainer & Consultant, Wye
Management
President,
f-iresource.com
The late Ted
Rogers had a word that he would not tolerate to be spoken in his
boardroom. That word was...”CAN’T.”
“The ‘one-on-one’
training I that I've started has allowed me to increase my average
gross profit per unit from $1,200 to almost $2,000 and my warranty
penetration has soared from 38% to over 75% in just 3
weeks!”
"I've done 20
TO's so far and averaging $1400 per copy. I couldn't have realized
this without your help.”
"My numbers have
more than doubled since the course and I still have many ideas to
implement.”
"I started using
a MENU and my average has gone up $400 per unit. What was I waiting
for?"
"I used to sell
just 3 or 4 insurance policies per month. I sold 14 in June and 19
in July closing at 60%."
These Business
Managers didn’t accept the word “can’t” and prevailed — so can
you!
Our mission
here today is to provide you as a Dealer or General Manager with
foresight and inspiration to improve your Business Office
profitability and how to begin.
Who is
overseeing your Business Office?
Your Business Manager?
Your Sales Manager?
Your Creditor Insurance
supplier?
Are you as
interested and involved with your F&I Department as you are
with your New and Used Vehicle Sales Departments?
If I told you that you could double
your new vehicle gross, but it would require some changes to your
current processes, would you consider it?
If I told you that you could double
your F&I gross, but it would require some changes to your
current processes, some involvement on your part and some
marketing, would you consider it
Which of the 3 departments
represents the greatest opportunity for growth?
Let’s find
out together.
Let’s
examine the current lay of the land:
The Internet has profoundly impacted
the automotive industry - it’s made used vehicle pricing
transparent today.
Factor #1:
With new
inventory management tools like V-Auto and AAX, pricing used
vehicles more aggressively has become a reality placing downward
pressure on front end gross profits.
There are 5 Used Vehicle Business
models that are easily identifiable:
1 —
Independent Superstores:
·
SAVVY VEHICLE BUYING
PRACTICES
·
LARGE 300+ UNIT VEHICLE
INVENTORIES
·
SUPERIOR ON-LINE PRESENCE AND
MARKETING STRATEGIES
·
DIRECT MAIL ADVERTISING
·
MARKETING CONSULTANTS
·
REGULAR SALES AND BUSINESS OFFICE
TRAINING
·
LOW PRICES
·
NO HAGGLE PRICING
·
MINIMAL ADDED VALUE FEATURES &
BENEFITS
·
MINIMAL RECONDITIONING
·
30 DAY INVENTORY TURNS
·
LOW FRONT END GROSS
·
SUPERIOR F&I GROSS
2 — Large
Independents:
·
SAVVY VEHICLE BUYING
PRACTICES
·
100 to 200 + UNIT VEHICLE
INVENTORIES
·
STRONG ON-LINE PRESENCE AND
MARKETING STRATEGIES
·
DIRECT MAIL ADVERTISING
·
SOME MARKETING
CONSULTANTS
·
SOME REGULAR SALES AND BUSINESS
OFFICE TRAINING
·
AVERAGE TO LOW PRICES
·
NO HAGGLE PRICING
·
SOME ADDED VALUE FEATURES AND
BENEFITS
·
COMPLETE RECONDITIONING
·
30 DAY INVENTORY TURNS
·
AVERAGE FRONT END GROSS
·
HIGH F&I GROSS
3 —
Franchised CPO Dealers:
·
REACTIVE VEHICLE BUYING
PRACTICES
·
UP TO 100 UNIT VEHICLE
INVENTORIES
·
MINIMAL ON-LINE PRESENCE AND
MARKETING STRATEGIES
·
MINIMAL DIRECT MAIL
ADVERTISING
·
MINIMAL USE OF MARKETING
CONSULTANTS
·
MINIMAL REGULAR SALES AND BUSINESS
OFFICE TRAINING
·
AVERAGE TO HIGH PRICES
·
ADDED VALUE FEATURES AND
BENEFITS
·
SUPERIOR RECONDITIONING
·
60 — 90 DAY INVENTORY TURNS
·
AVERAGE FRONT END GROSS
·
AVERAGE F&I GROSS
4 —
Franchised Non-CPO Dealers:
·
REACTIVE VEHICLE BUYING
PRACTICES
·
UP TO 100 UNIT VEHICLE
INVENTORIES
·
MINIMAL ON-LINE PRESENCE AND
MARKETING STRATEGIES
·
MINIMAL DIRECT MAIL
ADVERTISING
·
MINIMAL USE OF MARKETING
CONSULTANTS
·
MINIMAL REGULAR SALES AND BUSINESS
OFFICE TRAINING
·
LOW TO AVERAGE PRICES
·
MINIMAL ADDED VALUE FEATURES AND
BENEFITS
·
MINIMAL RECONDITIONING
·
60 — 90 DAY INVENTORY TURNS
·
BELOW AVERAGE FRONT END
GROSS
·
BELOW AVERAGE F&I
GROSS
5 - Small
Independents:
·
REACTIVE VEHICLE BUYING
PRACTICES
·
CONSERVATIVE AND RESTRICTIVE VEHICLE
BUYING PRACTICES
·
UP TO 50 UNIT VEHICLE
INVENTORIES
·
VIRTUALLY NO ON-LINE PRESENCE AND
MARKETING STRATEGIES
·
VIRTUALLY NO DIRECT MAIL
ADVERTISING
·
NO USE OF MARKETING
CONSULTANTS
·
NO SALES AND BUSINESS OFFICE
TRAINING
·
LOW PRICES
·
NO ADDED VALUE FEATURES AND
BENEFITS
·
NEXT TO NO
RECONDITIONING
·
60 — 90 DAY INVENTORY TURNS
·
BELOW AVERAGE FRONT END
GROSS
·
INFERIOR F&I GROSS
Factor #2:
Competition
Large
independent used vehicle operators with massive inventories and
minimal reconditioning have placed pressure on dealers who have a
different business model to more aggressively price their vehicles
to remain competitive thus minimizing front-end gross
profits
Factor #3: Price
Adjustments
Many
manufacturers have made significant pricing adjustments over the
past few years minimizing the available front-end gross
profits.
Factor #4: Access to
Inventory
With many
manufacturers having curbed lease incentives and with production
cuts from most manufacturers over the past few years, the shortfall
of available inventory has forced dealers to pay premium dollars
for what they can get. This has reduced the available margins as
well.
Factor #5: Trends
/Circumstances
- High percentage of cash deals (i.e L.O.C.)
- High percentage of lease transactions
- Longer factory comprehensive or powertrain warranties
- Factory CPO programs
- Limited or no finance reserves
- Restrictive pricing on manufacturer aftermarket protection plans
Summary - 5 factors driving the need to improve Business
Office profitability:
1.
Internet & technology
2.
Large Used Independent Operators or
Superstores
3.
Reduced margins on new vehicle
pricing
4.
Access to Inventory
5.
Trends / Circumstances
These
factors and perhaps more have placed a negative impact on front-end
gross profits forcing dealers to more heavily rely on Business
Office profits to make up the difference. If you have fallen victim
to these factors or simply wish to improve your F&I profits,
why not develop an action plan to implement upon returning to your
dealership?
Improving
the profitability of your Business Office is the single most
cost-effective initiative that you can undertake that will yield
you the most rewarding and immediate results.
What should a dealer aim for in
terms of average gross profit per used vehicle? $1500
+
SUCCESS
STRATEGIES
All of the
successful dealerships that we work with today have a documented
sales process that their sales teams follow to ensure high closing
ratios and gross profits. When it comes to most Business Offices
however, we often find no process whatsoever. Other common
observations for poor performance:
> limited product knowledge
> poor presentations that do not
create a need for loan or vehicle protection
> Lack of dealing with common
objections
> Not presenting 100% of the
products 100% of the time to 100% of the customers (just to name a
few)
This is a
result of a lack of formal training or no support or maintenance
training during their career.
The
following are some examples of some proven success strategies that
you can take back to your dealerships to improve F&I
performance:
1 - Setting up the
customer:
The first
step to improving performance is to change how the
Business
Office / Financial Services Office / the Customer Delivery Center
is perceived by customers. Here is an example:
“Mr. and Mrs. Johnston, now that
we have our agreement in place, I will be introducing you to our
Business Manager Jane Whiting. Jane will take some personal
information from you to set up your account with one of our
lenders, review the remaining factory warranties on your new
vehicle, provide you with the documentation that you will require
for your insurance company and set up a delivery date and time. It
should only take 10 to 15 minutes.”
2 - How customers perceive
Business Managers and their roles:
Business
Managers don’t sell warranties, they register them… Here is an
example:
“In a few minutes, I’ll be
submitting your application to the lenders for approval and they’ll
want to know what level of vehicle and loan protection you will be
securing on your loan today.
There are four elements with
vehicle financing that lenders are concerned with
today:
1. Protecting clients from
unforeseen and uncontrollable circumstances
2. Maintaining the resale value of
the vehicle when it’s time to trade or sell
privately
3. Minimizing the costs of repairs
and
4. Protecting your valuable
credit
I’ll review what you’re eligible
for so you can make an informed decision. Let’s start by reviewing
the remaining manufacturer’s warranty…”
3 - Modernize your sales
process:
There are
5 popular sales processes being used by Business Managers today and
changing your Business manager’s sales process or modernizing it
may produce the immediate results you are seeking. They
are:
1
— Step Selling:
- many Business Managers like how
they can focus on one product at a time
- allows a payment to be built up
slowly
a
X Not
all protection plans & products are always presented
X Tendency is to not
stop and offer rebuttals as it is confrontational
X Customers get the “What
else?” attitude
X Turn overs are
longer
X Not customer
friendly
2
— Menu
Selling: (Menu Tables or Software)
- Turn overs are shortened
- 100% of the protection plans and products are presented appealing
- 1 round of closing and/or objections
- Customer friendly
- Improves profitability
X
Most BM’s never
get around to develop one
3
— Sandwich Selling:
Step-sell 1 product (i.e. disability) and then menu the other
protection plans / products wrapping up by step-selling 1 other
product at the end. (i.e. life insurance)
4
— Staggered Turn Overs:
Involves selling tangible products at the time of sale and sell
intangibles at the time of delivery.
- Terrific for busy periods (2/3 sales consummated at the same time)
- Sale events
- Minimizes held offerings
- Customer & dealership friendly
X
2 turn overs are required
X
coverage issues unless you pool commissions
5
— Load, lock & fire: (SHOCK & RELIEF)
The customer is given an option to customize the payment to suit
their budget and needs or they can submit their application fully
secured to see what the lenders will say.
- Promotes ‘home-runs’
- Allows to ‘peel & strip’ the payment to suit
- 1 round of closing and/or objections
X
BM’s are fearful
to disclose a significantly higher payment
A modern approach might be to combine 2 or more of these strategies
to suit the turn over or circumstance. In either way, utilizing a
more customer friendly strategy is advisable. (i.e. menu insurance
options and then step-sell an extended warranty and vehicle
protection products)
A Business Manager needs to adopt a sales process to ensure that
they keep their oath:
I will present ...
100% of my products to
100% of my customers
100% of the time,
with 100% enthusiasm.
4
— Don’t rush turn overs:
How long is your average vehicle sale? How many Business Office
products are you offering? How long is your average turnover? If
doing the “complete job” to sell a vehicle for $1,500 gross profit
takes 2 - 3 hours, how is a Business Manager supposed to take to
generate the same in just 20 minutes? Does your sales process match
your Business Office financial goals?
5
— Business Managers’ presentation
may need to be tuned-up.
Each presentation should accomplish the following
objectives:
- Create a need or curiosity
- Provide a solution
- Detail features and benefits
- Close with options
Most Business Managers use minimal P.O.S. materials which only
include the suppliers’ brochures or literature. Adopting more
graphical tools and P.O.S. materials will create a more engaging
presentation and will better stimulate a need.
6 — Start pulling credit reports:
>It positions the Business Manager as a CREDIT MANAGER (an
expert), as opposed to a high pressure salesperson.
>It tames the “wild customer”.
>It builds more rapport and trust.
>It creates customer curiosity.
>It prepares a customer for other product sales.
>It manages a customer’s expectations.
For credit challenged customers:
>It promotes not to fuel false expectations.
>It allows the Business Manager to paint a vision of a brighter
future for the customer.
>It further obligates the customer.
>It often prevents the customer from shopping.
>It increases approval rates. It increases Business Office
profits.
On that note, let’s not forget about the gross profits that the
Business office sends to the Fixed Operations. As a dealer or
General Manager, we must not forget the gross profit contribution
from Business Office products. While vehicle protection products
may represent a small percentage of gross profits to the fixed
operations, gross profits generated from extended warranty claims
are substantial. The sale of extended warranties is also far more
reaching…
NADA reports on Dealer Service Retention that service drops to
1—15% after the factory warranty expires and only 14% of customers
will return to purchase another vehicle. A whopping 76% return if
they do their service at the dealership. This is also evidence that
a dealer loyalty or rewards program should be
implemented.
7 — Secure ‘buy-in’ from the staff:
How many of your dealership staff would register protection plans
or have vehicle protection products applied to their personal
vehicles?
If you sell them on the need and value of them, they’ll be the best
supporters of the Business Office.
>Conduct a half-day workshop for your entire dealership
staff!
8 — Inhibiting factors:
- High percentage of cash deals (i.e. L.O.C)
- High percentage of lease transactions
- A longer factory comprehensive or powertrain warranty
- A factory CPO program
- Limited or no financing reserves
- Restrictive pricing on manufacturer aftermarket protection plans
Cash deals hurt everyone — create an action plan for this
challenge.
1
Your BM needs to learn modern and effective strategies for
converting ‘cash’ from savings, ‘cash’ from investments and ‘cash’
from a line of credit to dealer plan financing.
2
Educate the sales staff
3
Address ‘cash’ buyers on your website (“why paying cash from
savings or your line of credit might not be your best
option”)
4
P.O.S. materials planting a seed for financing
5
Incentivize customers to finance: (WalkAway™ programs, navigation
systems & other ideas)
6
Quoting payments to cash buyers 100% of the time when making a
proposal
7
On-Line mortgage savings comparison tools
April 2007: Money Sense Magazine
“Canadians are far better savers than our US counterparts; we only
spend 120% of our disposable income.”
April 2012:
“Canadians are now spending 152% of their disposable income up from
120% just 5 years ago out-spending our neighbours south of the
border. The main two reasons: low interest rates and lines of
credit.”
CONSUMER ALERT BULLETIN: Disadvantages of using lines of
credit
·
UP TO 3% PRINCIPAL REPAYMENT RESPONSIBILITIES
·
USAGE CHARGES
·
TENDENCY TO PAY INTEREST ONLY
·
REVOLVING CREDIT
·
ANNUAL REVIEWS
·
POOR UTILIZATION OF A CREDIT LINE
Once you have identified any of these challenges, it is likely that
you will be unable to overcome them or you would have done so
already.
An investment in training to acquire the most effective strategies
to overcome these hurdles is what is prescribed here.
9 — Product offerings:
- Partial payment protection for illness or loss of employment
- G.A.P.
- Nitrogen programs
- Tire & Rim warranties
To research what products are available and the benefits for your
customers, visit f-iresource.com.
10 — f-iresource.com:
provides information, resources and tools for dealership Business
managers to improve Business Office performance. It’s free to use
and requires no log-ins or passwords.
11 — Start using slide shows and video:
- Consistency
- Professional
- Engaging
- ‘Dummy-Proof’
- Increases profitability
12 — Market your F&I department:
It is estimated that more than 80% of consumers today will use the
Internet to research their next vehicle purchase. Most dealers do a
great job of addressing these basic questions:
Who should buy our products
What to buy
Where to buy
When to buy
Why they should buy
But forget to answer this question… how to buy?
Here are the areas where dealers need to start to do a better
job:
In the showroom
Service department
Customer lounges
On the Internet
13 — Is your Business Manager a Manager or an
Administrator?
>Start conducting Business Manager meetings with an agenda that
include individual performance reviews of each BM and your
salespeople.
>There should be a training component in each meeting addressing
areas of opportunity or weakness.
>You can’t manage what you don’t measure. Use statistics to
assist you.
Does your Business Manager have the required skills?
>Most Business Managers know very few rebuttals to common
objections.
>We have over 130 catalogued rebuttals and recommend that
Business Managers learn at least 2 or more effective cost and value
rebuttals for each of their product offerings.
>See how effective your Business Manager is at fielding
objections when you get back to your store.
>Is your Business Manager treated as a ‘manager’ or as an
‘administrator that also sells’?
>Do they attend manager meetings?
Start treating them like managers and they will start acting like
managers.
Priorities of a Business Manager:
1.
ENSURE THAT SOLD VEHICLES ARE DELIVERED BY SECURING FINANCING FOR
CUSTOMERS
2.
ASSERTIVELY SELL BUSINESS OFFICE PRODUCTS/SERVICE
3.
MAINTAIN EFFICIENT, ACCURATE AND LEGAL PAPERWORK
4.
EDUCATE THE STAFF
5.
RESEARCH NEW PRODUCTS THAT WILL BENEFIT CUSTOMERS AND LEARN NEW
IDEAS AND STRATEGIES TO IMPROVE BUSINESS OFFICE
PROFITABILITY
14 — Tap into the Special Finance market:
>Up to 30% of consumers will not qualify for a prime
loan
>Less than 10% of franchised dealers market to credit challenged
individuals
>70% used to 30% new mix
>Any franchised dealership can deliver 15 non-prime deals per
month
>Can you afford to move forward marketing to only 70% of your
potential market?
Let’s put some numbers together:
Average gross profit per non-prime transaction is 3,850 x 15 units
= $57,750 x 12 months = $673,000 gross profit infusion
15 — Run the numbers to see what impact a $500 gross profit per unit increase will do for your bottom line.
16 — Health Check:
As humans, we regularly have health checks with our doctor, dentist
or optometrist - when was the last time you had any type of a
health check on your Business Office department?
17 — Using this template, create an ‘ACTION PLAN’ upon returning to
your dealership.
Your Business Office produces the highest gross profit per square
foot in your dealership. Customers are spending time in this office
and you are entertaining them here. In many dealerships it is the
smallest; most cramped and cluttered space in the entire
dealership. Should this not be a showcase for the dealership and a
pleasurable environment?
Take care of this prime piece of real estate and it will reward
you!
Get behind the wheel and start driving your F&I
profits!
www.wyemanagement.com
Toll Free: 1.888 .993 .6468
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