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Turn Up F&I Profits In a Down Market!

July 2009, F&I and Showroom - Feature

by Ronald J. Reahard - Also by this author

When the car business is good, it’s great! Right now, however, all we’re talking about is survival. Two things happen when business is bad. First, a down market separates the survivors from the victims. Second, it creates tremendous opportunities for the survivors. In times like these, survivors don’t give up, make excuses, or have pity parties. They get up every morning looking for ways to turn every challenge into an opportunity to become better at their craft.

Survival of the fittest is the ageless law of nature, but the fittest are rarely the strongest. The fittest are those endowed with the qualities to adapt, the ability to accept the inevitable, conform to the unavoidable, capitalize on changing conditions, and turn those challenges into their advantage. When business is good, anybody can succeed. But in every business downturn, there will be survivors and there will be victims. Which will you be?

Suddenly, we have fewer customers walking through the door, subprime lenders who have disappeared, and more compliance flags than you can possibly wave. We have primary lenders who won’t consider anyone with a credit score of less than a 700, finance longer than 60 months, or look at a deal with a loan-to-value ratio of more than 90 percent. We’re seeing fewer finance customers and more cash customers. Credit unions have become both primary sources and major competitors. So how can we take advantage of a tough market?

Be Easy To Do Business With

The first way to take advantage of today’s market conditions is to be easy to do business with. Is your F&I process treating customers the same way you would treat your mother? If not, then you need to change your process! Selling is not about outsmarting customers, it’s about helping that human being on the other side of the desk. Customers appreciate having someone help them make an informed decision.

Remember, every customer still has to buy you first. You must be enthusiastic about the outstanding value of the products you offer, and share that excitement with your customers. Every salesperson, every manager, and every customer has to know that you are genuinely excited to have an opportunity to help customers.

Have fun with your customers! It ought to be fun to buy a car, and it should be an enjoyable experience in the F&I office as well. When they leave your office, every customer should have a smile on their face, and be glad they had a professional take the time to review their options and help them make the right decision.

Being easy to do business with also requires that you not fall in love with your process. Processes don’t sell products, technology doesn’t sell products, and menus don’t sell products. People do!

F&I Must Operate Separately

To turn up F&I profits in a down market, the F&I department must be a separate department, not a secretarial service for the sales department. In many dealerships, salespeople take the credit application, the sales manager submits the deal to a lender, negotiates the down payment, monthly payment and the rate before an F&I manager even talks to a customer. Then the F&I “secretary” is responsible for typing up whatever the sales department negotiated. That’s not a department, that’s a secretarial service for the sales department.

The commitment to F&I as a separate department starts at the top, with the dealer or general manager. Every dealership needs a checks-and-balances system to ensure the information on the credit application is correct, and what is being submitted to a lender is correct. Someone must check every deal to make sure no one is coaching customers, doctoring credit applications, or power booking vehicles just to get an approval. Inflating a customer’s income or adding imaginary options to increase the amount a lender will advance on a vehicle is not fudging the figures, it’s a felony.

There are also new rules and risks when it comes to quoting payments. Customers are entitled to accurate monthly payment quotes. When they don’t get them, it’s deceptive and unlawful. So, what’s in your deal jacket? Do the payments on the deal sheet or worksheet bear any resemblance to reality? Who’s making sure no one is packing payments or creating a legal liability by promising customers they’ll get the best rate possible?

No deal should ever be submitted to a lender until a F&I professional confirms all the information on the credit application, and has interviewed the customer regarding his or her credit history. Prior to submitting the credit application, a F&I professional has to learn the circumstances and details surrounding any adverse credit information disclosed by the customer or revealed by the credit bureau report. Every customer has a story, and it’s the F&I manager’s job to hear it, document it, and then paint a picture for a paper buyer as to why he or she should buy the deal or change a tier level.

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