When there is a need, innovative people devise new products, tools and processes to address it. That’s how the F&I menu came to be. It also explains the origins of many of the regulations governing the F&I office. And, if you think about it, a need to maintain profitability and customer satisfaction is what drives us in the F&I office.
See, back in the 1960s, there was no Regulation Z, Truth in Lending Act (TILA), Unfair and Deceptive Acts and Practices (UDAP) and agencies like the Consumer Financial Protection Bureau (CFPB). That’s because there wasn’t really a need at that time. F&I departments were few and far between, so most salespeople shepherded each deal from start to finish.
Little by little, however, dealers started seeing the value of adding another staffer to sell credit insurance. Then Pat Ryan came along and started helping dealers realize the profit opportunities they could capture if they were willing to develop F&I departments. The need was there and Ryan had the right product at the right time.
But those first F&I departments, as well as the finance sources that supported them, had very little to guide them in terms of regulation. That’s when payment packing emerged, a practice where the F&I manager quotes a higher monthly payment in order to add products and services the customer never agreed to purchase. In fact, I can remember when it was still being taught by some trainers as late as the early ’90s. Their motto was, "If they agree to the payment, they’ll buy what’s in the payment."
Eventually, word got out that payment packing was illegal. Then the Federal Trade Commission (FTC) developed UDAP — a legal tool to enforce TILA — and full disclosure soon became the norm.
F&I managers were then taught to "step-sell" their products from the base payment. If you’ve ever tried step-selling, you know how tough it can be and how much time the process gobbles up. You also know how damaging it can be to your CSI.
It was then that innovators such as George Angus began to emerge with a new approach to F&I. Their goal was to shorten the process so producers could process more deals. Ladies and gentlemen, meet the F&I menu.
Many people tinkered with the menu when it was first introduced, so there were a lot of variations on how to use it. It eventually progressed from Lotus 1-2-3 to Excel spreadsheets. Then we saw the four-column design emerge as the industry standard. It worked because the approach addressed the two most difficult issues facing dealerships: customer wait times and less-than-stellar product sales.
Computer technology also was evolving at the time, pushing some F&I people to begin using word processors rather than Excel spreadsheets. Some menus were even pre-printed forms with blanks for the F&I manager to fill in. Problem was, a couple of bad apples began cheating the system by manipulating the numbers, and payment packing was back.
Technology companies got smart, however, and began integrating the menu with their point-of-sale systems. They figured they could stop those unethical F&I managers by allowing the menu to pull deal data directly from the DMS. What they didn’t anticipate was the time-saving that fostered, as F&I managers no longer had to re-enter data into the menu.
The concept stuck, and more and more DMS makers began connecting to F&I menus. But the menu’s evolution didn’t stop there. And why should it? The menu is such an important component of the F&I office, it seems reasonable to continue tweaking it. Well, that need to tweak led to the introduction of the "smart" menu, which allowed management to record F&I transactions. This made it easy to spot and address any downward trends before they became a serious issue.
Sorry for the history lesson here, but I just want you all to recognize how far the menu has come since it was introduced, and how much positive change it brought to the F&I office. Still, no amount of technology can trump a good process and the producer who follows it. I mean, if technology could do it alone, then F&I producers around the country would be maintaining a per-deal average of $1,000. Research, however, proves otherwise.
But even a great process can’t push the meter up without a dedicated individual. Look, as an F&I manager, the name of the game is production. And to satisfy that need, you need to be open to reinventing yourself. Hey, it worked for the menu.