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On the Point

Killing F&I

‘Da Man’ uncovers the hidden motivations behind vendors who advise dealers to let their sales team handle F&I duties.

March 29, 2016

I’ve been writing about this for years. As a matter of fact, I’ve screamed it from the mountaintops until the echoes rang repeatedly around the industry. I’ve watched it gain momentum as a consortium of vendors, manufacturers and other assorted rogues and pirates dreamed and schemed up a plot to assassinate the F&I department.

They’ll sell it to the dealers by promising to reduce the time it takes to complete a sale. They’ll talk about the magical customer experience it creates when the horrible F&I process is eliminated. They’ll tell you any competent salesperson can present and sell the products and make the proper disclosures. You’ll ask who exactly will deliver and disclose the contract and all the documents and get the deals worked. That’s where it gets a little sketchy.

But that’s not even the sketchiest part. Let’s look at the real motives behind this slow-motion trainwreck.

First of all, what they’re saying to employees is not what they’re selling and telling dealers. They’re telling dealers the F&I department has the highest payroll and cost of operation. Get rid of it, they say. You’ll save so much money that it won’t matter if you make a little less gross per deal.

Don’t buy it. The real reason for this push is because F&I is and has always been the one part of the process where they couldn’t automate online profitably — until now. The resistance has been too much for these evil minions with their hidden agendas. Without exception, every one of the big, public, AutoNation-level retailers views car sales as a loss leader to get the financing profit. Their F&I operations are right at or above $1,500 per retailed unit and happy to settle for the manufacturer volume bonus money.

That’s not good enough for the lead providers and other vendors who have consistently taken over every other aspect of the sale. They want to control your profits and charge more than you make on the sale for the privilege of lowering your profits on customers who would have bought from you anyway. These are the same people who are trying to get a piece of your service business and force you to join their online lender referral schemes. They are not your friends.

Let me tell you why eliminating F&I will never work. Let me tell you why dealers who get conned into closing down those offices are going to lose substantial profits. And let me tell you why they’re going to get sued and prosecuted repeatedly and lose every case.

The reason F&I managers are the most highly paid managers in the dealership is because they have studied their profession with more schools and specialized training than everyone but the service technicians. They protect the dealership legally and they understand the importance of compliance.

Excuse me, but you can’t even get salespeople to consistently say “Welcome to ABC Motors” or remember to check in the keys after a demo ride. Most of them screw up the CRM with minimal data input and incorrect information.

The high turnover rate in that department ensures that a large percentage of your sales team will never be trained on correct, ethical and legally compliant disclosure and product sales. They will never sell F&I products with the same passion they sell the car. In our heart of hearts, we all know that’s true. Think about it: How many of your salespeople are scared to death to ask for the money? How many of them sabotage finance because they’re afraid they’ll spook the customer?

Most, if not all, of your sales professionals will give the products away, tell the customers the wrong rates and blow the legal and ethical disclosures. For every great salesperson who might be able to do it correctly, you’re going to have five that get you in trouble. It’s going to be a massive cluster-fiasco.

The vendors and the manufacturers who are promoting this idea do not have the customers’ best interests in mind and they certainly don’t have the dealerships’ best interest at heart. The customer experience chorus is a smokescreen. It’s really all about greed, control and, ultimately, destroying the dealer model as part of an ongoing attempt to hijack our industry. You’ve been warned.

Comments

  1. 1. Robert Moy [ March 29, 2016 @ 03:27PM ]

    From day one...I've been against such lousy, so called business plan that some so called professionals claiming they studied the market and deemed it broken. So, lets charge dealers lots of money and convince them they can save lots of money by eliminating the most profitable department in the front of the dealership. "Business Office" - Finance Office or whatever wants to call it. End of the day, customers still wants better deal than the one price, because often they do not believe that is the best price. You as the vendor to these programs can call it market price or whatever, but when you in your so called expertise is causing dealerships to have high turn over and lost of back end profits...Shame on YOU. Shame on dealerships that been brained washed into such program. In fact, there is large dealer group stating that they are happy with $ 600 PRU, because their customers are happy. I read that and was like.....WHAT THE "F". Dealers are that invest in the technology that are here and coming in the very near future and have TRUSTED vendors that trains their troops to succeed will thrive. Those stuck in the old ways will suffer or will have to pay dearly to catch up. Mr. Dealer...which one you want to be?

  2. 2. Chris Spensley [ March 29, 2016 @ 03:36PM ]

    I am a little confused with the statement that the F&I Manager is the most expensive or the highest payroll and cost within the organization, not sure that pencils when you consider real dealership costs like profit per square foot and profit per head. The F&I office easily generates more profit per square foot than any space in a dealership. The next highest is the technicians lift which even when it is in use all the time cannot even com close to the finance office. The next is the profit per employee, the way nearly all F&I people are paid is commission. In fact I would say 75-80% of the compensation of most managers in these departments is based upon profit earned for the dealership with a large percentage being 100% commission based. That doesn't represent a cost as a lot of departments do. If a finance manager makes a lot of money it means the dealership did too plain an simple and the manager also manages a good portion of the administration and is responsible for protecting the dealerships legal liability. In most cases the jo b is a bargain and delivers the best ROI in the store. I find it hard to believe that this is even being presented as an argument.

  3. 3. Frank [ March 30, 2016 @ 10:35AM ]

    On point again Dawg! Very informative and useful information that will be useful to many unsuspecting dealers.

  4. 4. Jim Ziegler [ March 31, 2016 @ 10:22AM ]

    This article has only been online for two days and already it is exploding. I have received numerous messages, Social media Contacts, and actual phone calls from Dealers, Managers, factory executives and Vendors with hidden agendas.

    These calls and messages go one of two ways. Some are congratulatory and supportive, while others are critical and disputing my position. One thing is obvious to me though is that the people opposing my position and wanting to eliminate F&I OVERWHELMINGLY have not been in retail car business. They don't get it, especially the Factory guys and gals. The vendors obviously have a hidden agenda to get this accomplished which is not in the dealers' best interest.

    If they prevail and eliminate this last remaining dealer profit center, it will greatly damage dealers profitability and increase your liability exposure. Since I train F&I Managers for a living, I should be celebrating because this would create a never-ending supply of new people to train as dealerships turnover is outrageous. Also my friend, Len Bellavia, will have to hire a dozen more attorneys to defend dealers against the consumer and government agency lawsuits against the dealers increases.

    This article is being copied and electronically forward all over the dealer world already and it's just come out. WHY Don't YOU send it on to Car People You Know while it's on your mind. JIM

  5. 5. Jim Dirks [ March 31, 2016 @ 04:00PM ]

    Spot on with this one, for sure. Per man hour, per square ft, name your metric you will find a competent F&I pro, is your highest ROI in the store. Why any business owner would buy into the notion of eliminating their best return, defies logic.

  6. 6. Robert Moy [ March 31, 2016 @ 06:14PM ]

    With the way consumers do so much research online prior to visiting 1.2 dealerships. And dealers (all) have pricing online for their entire inventory, am I mistaken that by default that makes it to be a ONE PRICE dealer? Hope no dealer have one price online and sells the vehicle at a different price when customers comes in to purchase it.

    On my prior post, all I was leading to is. Train and provide all the tools which enables the customers getting the best purchasing experiences. There are dealerships using selling tools like UpValet that reduces the time for customer to purchase a vehicle. Salespersson uses the program on an Ipad, completes the entire purchase of vehicle, in most cases not even having to go back and forth to the sales desk to obtain payment quotes. As we know the evolution of mobile menus, such as Itap Menu and others enables Financial Services Managers to engage customers with greater customer experiences and at the same time most often increasing product sold per customer.

    Bottom line is...Invest in Training and Technology. Dealers are already selling vehicles ONE PRICE virtual of the INTERNET.

  7. 7. Real Deal [ April 04, 2016 @ 09:32AM ]

    Well coming from a dealership who has never had an F&I Department over the last 40 years, I will definitely say I do believe in the system and would not even think of adding F&I to our store.

  8. 8. Andy Gross [ April 06, 2016 @ 08:40AM ]

    Curious to learn your opinon on companies like MarketScan.com. Thank you.

  9. 9. Subaru Al [ April 06, 2016 @ 01:25PM ]

    Show me a dealer not averaging $1000-$1500 backside and I will show u a dealer struggling financially. And that's not counting all the deals not getting approved and closed that also will bury a dealership.

  10. 10. Jim [ April 18, 2016 @ 04:39AM ]

    Since I wrote this article I've had the displeasure of meeting some of the Alleged Consultants who are talking dealers into abandoning their F&I Departments. I am ashamed that anyone would listen to five minutes of this dribble without realizing we're talking to some really weak sucks who give away all of the profit in the deal needlessly.

    I am sure there are some dealerships without F&I departments in small underperforming stores who are quite proud of themselves BUT; their numbers tell me the true story.

  11. 11. Jim [ April 18, 2016 @ 04:39AM ]

    Since I wrote this article I've had the displeasure of meeting some of the Alleged Consultants who are talking dealers into abandoning their F&I Departments. I am ashamed that anyone would listen to five minutes of this dribble without realizing we're talking to some really weak sucks who give away all of the profit in the deal needlessly. These are people that couldn't make it in a real dealership.

    I am sure there are some dealerships without F&I departments in small underperforming stores who are quite proud of themselves BUT; their numbers tell me the true story.

  12. 12. Jim [ April 18, 2016 @ 04:40AM ]

    Since I wrote this article I've had the displeasure of meeting some of the Alleged Consultants who are talking dealers into abandoning their F&I Departments. I am ashamed that anyone would listen to five minutes of this dribble without realizing we're talking to some really weak sucks who give away all of the profit in the deal needlessly. These are people that couldn't make it in a real dealership.

    I am sure there are some dealerships without F&I departments in small underperforming stores who are quite proud of themselves BUT; their numbers tell me the true story.

  13. 13. Will Slattery [ July 13, 2016 @ 09:58AM ]

    Thanks Jim, here in Canada we have a few 'minion' echoing the same rhetoric about doing away with the F&I Office. I even know one individual in particular that was considered a very weak F&I Manager when he worked the office. Those that lisen and follow through with the advise I have a quote for them; "Just remember when you make your bed, you will also have to lie in it."

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Author Bio

Jim Ziegler

President & CEO of Ziegler SuperSystems

Jim 'Da Man' Ziegler joined the magazine in 2011 to deliver his On-the-Point message about the car business to dealer principals and store managers. He'll offer strategy advice on everything from sales and F&I to marketing in the digital age. Catch him every month at www.fi-magazine.com.

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