Stitch by Stitch

Mrs. Marv spent much of 2013 crocheting Afghan-style comforters to give as Christmas gifts to family. It was quite a task considering how many grandchildren we have. And these heirlooms were handmade with love, each one sporting its own unique pattern and color scheme. And by the gasps from those who received one, it was clear her work was breathtaking.

Crocheting is a slow and tedious process that demands close attention. That’s because every change in color or pattern requires a new stitch, and one false step in the process will unveil itself when the work is completed. That’s what happened when Mrs. Marv laid out one of her lovely pieces she’d been working on for days. To her trained eye, the pattern had an obvious flaw. That meant she had to figure out where things went wrong before she could unwind the stitch and correct the error.

What did your year look like when you laid out your 2013 numbers? Did you see any improvements? If you did, then give yourself a pat on the back. Did you spot any flaws? If you did, let’s figure out the cause.

See, when you’re reviewing last year’s performance, it is critical that you look beyond your per-copy average. Yes, our profit-per-vehicle-retailed (PVR) number is how we’re judged: it’s good for our pay plans and our psyche. But you need to delve into the components of that number. I’m talking about your product-per-unit count and your distribution of income. Those two metrics are what define a true F&I professional.

If you see flaws in those two areas, then you need to identify the cause. Was it product penetration on cash deals? Was it credit union or outside lien conversions? Maybe you need to improve your lender relationships. Whatever it was, you need to decide today if you’re going to settle for matching last year’s output, or if you’re going to do something that will take you to the next level.

Mrs. Marv’s new hobby also got me thinking about an old English proverb: A stitch in time saves nine. It simply means that a timely effort will prevent more work later. I thought the saying was appropriate given what our industry could face in 2014.

As we saw, the Consumer Financial Protection Bureau finally delivered on its warning regarding rate markups, ordering Ally to shell out $98 million for violating the Equal Credit Opportunity Act by charging more than 235,000 minority borrowers higher dealer markups than “similarly-situated” non-Hispanic borrowers. The news reminds us that we could lose dealer reserve and with it a significant portion of our portfolio. And there are some in our industry who believe the bureau has a few more arrows in its quiver, so you can bet finance sources are scrambling behind the scenes.

So what do I think? Well, I still maintain that rate participation isn’t going away. However, I do believe that indirect finance sources have a sharp eye on what is yet to come. So what does it all mean? Well, as I’ve written before, living on rate is like a stitch waiting to be unraveled. The focus of your F&I department should be on providing a world-class experience to customers. And to do that, you need a trove of value-added programs designed to enhance and protect their investment.

But the bureau’s targeting of rate markups isn’t the only reason you should want to break away from rate. With the credit market continuing to stabilize and advances returning to prerecession levels, it’s vital we put ourselves in position to take advantage. That means improving our skills through training and practice.

My expectation is that 2014 will be another banner year, and I expect to see the larger dealer groups getting smarter about capturing market share from their competitors. So if you’re at a small or medium-sized operation, you better be working on improving your skills. Hey, one missed opportunity to learn a new closing technique today could translate into tens of thousands of dollars in missed commission by the time December rolls around.

It’s clear Mrs. Marv’s new hobby had a big effect on me. I guess it’s the fact that one false move on her part could mean starting over again. It’s kind of like the razor-thin line we walk every day as we navigate the maze of legal compliance while trying to keep customers happy and deals profitable. With that said, let’s get to work on 2014. Good luck and keep closing.

Marv Eleazer is a finance manager at Langdale Ford in Valdosta, Ga. Email him at [email protected].