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People, Process, Pay Plans

Top F&I mind says there are nine components that need to be in every F&I pay plan. Not only do they provide the right motivation, they can be the key to retaining top talent.

July 2014, F&I and Showroom - Feature

by John Lovin

A dealer recently asked me to help him turn around his F&I department. He had just returned from a 20 Group meeting and his finance department was performing well below others. So I quickly realized the main issue was the store’s F&I pay plan. Most successful operations align their pay plans with their corporate goals. For example, if a dealership wants to send more paper to its captive lender, the store may include that as a portion of its F&I pay plan.

But pay plans are definitely a touchy subject. In order to attract the right talent, you have to pay fair market value. And you don’t want to pay too little, because you will get what you pay for. Here are few items to consider when creating an F&I pay plan:

1. Pay a percentage: Some dealers think certain people in the dealership should earn a certain dollar amount. But does making sure F&I producers are paid $60,000 to $80,000 a year really benefit the bottom line? Using percentages instead of a dollar amount will, as finance managers will be motivated if they know they can earn more than that.

2. No salaries or guarantees: There are three jobs in a dealership: selling something, fixing something and counting something. Finance managers are technically salespeople who need to be on an incentive-based pay plan, because salaries and guarantees do little to inspire them to increase the dealership’s bottom line.

3. Pay sales managers and salespeople like the dealer gets paid: Pay can be a major source of friction between the sales and finance departments, especially in today’s margin-compressed environment. Take a customer who is upside down on his or her trade. Unless the finance source comes through with the required advance, there may not be any front-end profit on the deal. That’s why some  dealerships are paying sales personnel 15% of front- and back-end gross vs. only 25% of the front.

4. Minimize rate effect: The No. 1 reason customers refinance their vehicles is they believe they were charged too high of an interest rate. So to decrease chargebacks — and maybe improve CSI — minimize the importance of rate in F&I pay plans.

5. Put the focus on product: F&I products provide a lot of value to today’s customer. Take road hazard protection. It’s a relatively inexpensive product that provides great value to customers, especially when you consider that replacing a tire and wheel can cost more than $1,000. Just make sure each product stands on its own in the pay plan.

6. Include compliance: Today’s pay plan must reflect today’s regulatory environment. And by that I mean it must include a compliance component. For example, some dealer groups won’t pay finance managers unless there is a signed menu in the deal jacket.

7. Include product caps: Many large dealer groups list in their pay plans the profit finance managers can make on each product. They know that charging $3,000 for an etch policy is the quickest way to land on a regulator’s radar. And you’ll be glad you have caps in place should you face a regulatory audit.

8. Include CSI: Dealer groups are having a lot of success by including a CSI component in their pay plans. If their dealership is above region, the finance manager gets a bonus. If they are below, they can only earn a portion of their commissions.

9. Make employee retention a component: Holding back 10% to 20% of the pay plan to be paid as a Christmas bonus is not only happening a lot more these days, the strategy has proven to be a solid employee-retention tool. Finance managers like it because they have money set aside during those months when volume isn’t as robust, allowing them to treat their families to a nice holiday season.

Remember the three most important components when managing a finance department are people, process and pay plans. Get one of those items out of order and the department won’t function as efficiently as it should.

John Lovin serves as vice president of Chrysler Capital Consulting. Email him at


  1. 1. RJ Malone [ July 23, 2014 @ 06:27AM ]

    #9 sounds like a bad idea. What quality F&I Mgr is going to agree with their dealer holding back 20% of their pay (along with the fed govt, state govt, local govt, SS tax, Medicare tax, benefits co-pays being "held back" of their pay)? How is it a "bonus" if it's money an F&I Mgr earned in January that they finally receive in November? Is the dealer going to pay interest on this "Christmas club" account? This sounds more like indentured servancy rather than a retention plan.

  2. 2. Craig Giovani [ July 24, 2014 @ 07:01AM ]

    Great article as always John. Keep the articles coming.

  3. 3. BETTY RITTER [ August 07, 2014 @ 10:08AM ]

    Great article. Now what is a great pay plan for more than one - - say two or more F&I Managers? Should chargebacks be split between two or more F&I Managers or should they all be hit with the total chargebacks? Hope someone has an answer!

  4. 4. art [ August 16, 2014 @ 08:08AM ]

    I think #9 is against the law, in Texas. Most f&i people always complaint because mist dealers sales manager do not comply when they give a payment. The fi person needs to be involved at the start. Jim Moran was the best at this in his stores.

  5. 5. Jacqueline [ August 16, 2014 @ 08:12AM ]

    Very good. Right to the point and helpful for those who need to get on track.

  6. 6. LARRY SALCEDO HOYFOX VW [ September 12, 2014 @ 03:33PM ]



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