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F&I Experts Discuss F&I Basics: The Art of the Deal

February 2009, F&I and Showroom - Feature

by Glenn Roberts

Given our current economic conditions, almost every dealership is looking for ways to increase profit. With F&I’s outsized contribution to dealership profit (46.8 percent of overall dealership profit, according to CNW Market Research), it is natural for dealers to look to F&I to offset declines in other areas of the dealership. However, changes in our banking system are making that a difficult task.

I recently received an unsolicited letter from my mortgage company, which I think really sums up the current lending environment. It read:

• There are no more zero-down payment loans, except for Veterans Administration loans.

• The minimum down payment will be 3.5 percent on Federal Housing Administration loans.

• A minimum credit score of 720 is required for the best rate.

• A credit score below 620 will make it very difficult to get financing.

• Loans for investment properties require a 20 percent minimum down payment.

• A 25 percent down payment and a credit score of over 700 are required for loans where income and assets are not verified.

Basically, my mortgage company was putting me on notice. It was telling me I better get my affairs in order if I wanted to borrow money. They also wanted me to know the party’s over.

So what does this mean for car dealers and for F&I? It means we are back to traditional lending — the kind we had more than 20 years ago. It’s the kind of lending where banks vigorously underwrite the loans and expect all of the information on the credit application to be true.

It means the “Art of the Deal” is back. With fewer customers coming through the door and stricter lending, your ability to sell cars is going to depend on how good your dealership is at structuring deals. Deal structure is going to dictate your ability to hold front-end gross, as well as your ability to sell F&I — even if the deal gets turned down.


  1. 1. Leo Jimenez [ April 23, 2009 @ 10:48AM ]

    I agree strongly with this article. Many times we end up with customers in our office that still need to be closed. When a salesperson has them on the lot, especially in these times, they tend to focus more on the quick close and fail to spend the time to investigate and build rapport with them. I have witnessed my own people get right down to negotiations before they even get a customer statement. When we skip the vital steps needed for a sale, the f&i department becomes a final closing office. We still have to inform the customer of all the additional products and services we offer, while attepting to secure the basic deal. Lack of time and taking shortcuts by the sales team with a potential client is a very bad practice in todays environment. Already the customer enters our dealership with protective shields and defense mechanisims in place. They need a vehicle, but they are still very apprehensive in making a buying decision on the spot. Long gone are the days when salespeople used their training and tools needed to build urgency, get right accurate information, and attempt to close a dael the proper way. Overcoming objections is key, and has always been an attribute of a good salesperson. The close was always my favorite time in the process. We need to stop selling out of desperation, and get back to the basics that make this profession fun and enjoyable.


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