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Reality Check

August 2008, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Reality checks are always difficult to swallow. You want to hear the truth, but at the same time you really don’t. That’s what I wrestled with when one of my readers reminded me that F&I is really a reactionary department.

The reader’s name is Marv Eleazer, an F&I professional from Georgia. He’s a regular in the magazine’s letters section. Anyway, he called to ask me a question about our conference next month, which turned into a discussion about his business or lack of business, as he put it.

I told him how the magazine is focused on stories about deal structures and how to overcome tightening advances for F&I products. His response: “I’m tired of reading about deal structures. The problem is our sales department isn’t bringing in enough deals.”

I reminded Marv that our focus is on the F&I business. And he reminded me that a properly structured deal doesn’t matter much if he doesn’t have customers. How could I disagree, especially after sales hit a 15-year low in June?

According to Autodata Corp., the sales rate for light vehicles dropped to 13.6 million units on an annualized and seasonally adjusted basis. While some market watchers still see the industry hitting the 15-million mark, others wonder if the industry is headed for even weaker sales in the second half of this year.

Through April, the National Automobile Dealers Association put average net losses at $136 per new vehicle, compared with a $61 average loss for the same period last year. And that figure includes F&I performance.

There’s no denying how tough it is for sales, but I contend that it’s just as tough to get a customer financed. Throw in a scene like the one on July 13 when hundreds of IndyMac Bank customers lined up to pull as much money as they could from the failed financial institution, and we’ve got one heck of a situation on our hands.

On a positive note, this industry has demonstrated its entrepreneurial prowess throughout its history, and signs of its ingenuity are already popping up on our F&I Forum.

One forum member was quizzing other members about what it takes to become a franchised SmartCar dealer, something his boss asked him to explore.

There was another post discussion on the forum about adding an aftermarket navigation system to a deal. Apparently, the F&I manager had a customer with an 812 beacon score who was upside down $6,500. He was able to get 130 percent (loan-to-value) from one lender, including price, tax, tags and an additional $3,000 for back-end products. However, in order to get the book the vehicle had to have a navigation system, which the vehicle did not. The F&I manager asked if the unit could be an aftermarket version, which the buyer OK’d. In the end, the customer not only got the loan, but also a $225 navigation unit.

“Way to work the angles,” wrote one forum member. “Add another one to my toolbox.”

For dealers in California and Washington where a new hands-free cell phone law went into effect on July 1, it’d be a good idea to study up on hands-free solutions. In fact, I recommend looking at in-car stereos that offer Bluetooth or hands-free capabilities, which would be a great add-on for used vehicles.

Marv is right; we could field a couple of stories on how to increase sales. However, I still think there are plenty of stories to be told about F&I.

Take Jacques Salinas, the lone F&I manager at Bayside Volkswagen in
New York. His store, which is located in a middle to upper middle class town, has been the No. 1 volume dealer for two straight years and is primed to repeat the feat this year. You’d think Salinas would be sitting back waiting for his sales department to funnel in deals, but he isn’t.

Salinas is currently working with his IT guy to develop an HTML version of his F&I menu so he can e-mail it to his customers.

“Being the lone F&I manager, I think there were probably 25 to 30 deals I didn’t even get to touch in June,” he said. “That’s why I’m working on an e-mail-type menu. If I’m off one day and miss a customer, I’ll be able to e-mail that menu out the next day.”

Salinas said he’s taken his cue from his sales manager, William Leung, whose advertising efforts have resulted in 120 more vehicles sold through June compared to last year. He said the key is to focus on what differentiates the dealership from its competitors. For Bayside Volkswagen, the loaner cars offered by the service department separate the dealership from the rest in the area. Leung makes sure every loaner car is outfitted with flyers promoting new vehicle models. He even puts flyers in vehicles coming out of the service department that tell customers the dealership is interested in buying their vehicle.

Attracting customers is definitely a challenge these days, but I still believe the most effective way to survive the market downturn is to effectively manage what the dealership can control. You can’t control consumer sentiment, but you can control the performance of your F&I department.

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