Finance, service contracts and other "soft add" products have long been the mainstay of the finance department. But pressures on paper products, not to mention the skyrocketing popularity of vehicle accessorizing, are making aftermarket products more attractive to F&I offices across the country.

Jeff Anghel, finance director at Phil Smith Chevrolet in Lauderhill, Fla., would agree — so much so that he submitted a proposal last year to the dealership's corporate office explaining why and how the dealership should begin to offer hard adds as a part of the F&I presentation. The corporate office also concurred; as of fall 2004, the dealership was in the process of incorporating an aftermarket product sale program that would be managed by F&I.

Dealerships relying heavily on F&I soft adds should heed Anghel's advice, and also consider the experiences of other finance managers that have enjoyed significant revenue gains as a result of offering hard-add aftermarket products.

Soft Adds Don't Cut It

The core products in the F&I office have some obvious and not-so-obvious limitations.

Anghel recounts the rise and fall of rate spread income. "Currently there are numerous national, legal consumer issues regarding the rate participation dealers have always enjoyed," he says. "You may have fond memories of unlimited rate markup, to the legal limit, in the early 1980s. This soon became a cap of four points. More recently, a cap of three is the norm. Some areas of the country already dictate less. These lurking lawsuits threaten the fundamental profit that the F&I department has relied upon since its inception."

Anghel also raises the point that there are just some types of customers to whom soft-add products don't apply. It's preferable to have something for everyone on the finance menu.

For example, a customer whose trade cycle is less than the manufacturer's warranty coverage would not fully benefit from an extended warranty, according to Anghel. Customers who lease, pay cash or make a large down payment usually don't need GAP protection.

Another drawback of selling only soft-add products is that some lenders have dollar caps on the amount of soft-add products permitted based on their purchasing policy.

"Too often, we can't finance all the soft adds our customers want or need without exceeding the lender's limit," Anghel says. "Gross profit is curtailed because of the limits placed on us by our lenders."

So, aftermarket products are a good bet for rounding out profits in F&I. "The right way to do it is, to present your core products first — your warranty, GAP and so on — and then to present aftermarket products," Anghel advises.

Can't Cancel Hard Adds

One major advantage most aftermarket products have over paper products is the fact that they are non-cancelable, eliminating future chargebacks.

"Everyday, somebody is coming in and canceling a warranty or GAP because they traded the car or the car got totaled, or the banks are calling to cancel it because they repossessed the car," Anghel says. "Even though most dealerships are on a reserve split — so after 90 days they don't get chargebacks on reserve — you get product chargebacks forever."

Also, the growing base of aftermarket consumers would appreciate the convenience of including an aftermarket accessory purchase in their monthly payment.

The Specialty Equipment Market Association says aftermarket vehicle accessories are a $29 billion-a-year business, $17 billion of which comes from the sale of truck and auto accessories. Consumers increasingly want to personalize the look and feel of their vehicles. They spend an average $1,000 to $3,500 annually, after the sale, on products such as specialty wheels and tires, sunroofs and mobile electronics. That's an additional few thousand dollars that the finance department could capture.


These consumers may jump at the chance to get these accessories on their vehicles at the time of purchase. They could avoid the hassle of going to an aftermarket provider and making another transaction.

And as many of these aftermarket products can be installed in the dealership's service department, there is a tremendous opportunity to bring in added income for the parts and service departments. However, the sales, service, parts and finance departments need to partner and cooperate in order to maximize sales of these products.

"The sales department, when requested by a customer, has in the past provided a limited selection of add-on products," Anghel explains. "This occurrence is infrequent and usually results in very limited profit to the sale as it gets thrown in. It seems neither the salesperson, service advisors nor parts counter personnel aggressively offer add-on products. The F&I setting is the ideal forum to offer every customer who buys a vehicle from us every product we offer."

When Mercedes-Benz dealership Fletcher Jones Imports in Las Vegas first started offering an aftermarket radar detector, it was sold casually — as an afterthought — through the parts department.

"If someone came in and asked about it, they would sell it to them," says Maxine Linihan, the dealership's finance director.

Once Linihan realized how much profit the product could bring to finance, she began funneling all radar detector sales and jobs through her department. But she pays out spiffs to sales, service and parts if sales and service employees pitch the product to customers on their ends of the dealership. In one particular month after this policy change, the dealership sold three times as many radar detectors as it had been selling on average, prior to the change.

Many aftermarket products sell themselves because they are particularly suited for certain vehicles or drivers.

Carla Williams, business manager at Mercedes-Benz of Nanuet (N.Y.), says it's clear which customers radar detectors would appeal to. "It's mostly the individual driving style and the vehicle they're purchasing," she says.

According to Williams, radar detectors are a natural fit for high-performance Mercedes-Benz vehicles such as the AMG models or other high-powered, low-profile vehicles. It's also a good fit for customers who like to drive fast.

Communication Always Required

While it could be very advantageous to offer customers hard-add products, merely adding the products doesn't guarantee a boost in finance income. F&I managers need the ability and thoroughness to make the sale effectively. They must clearly explain the value of both soft adds and hard adds to all customers.

Steve Phillipos, dealer principal of Steve Peters Chevrolet in Homewood, Ill., believes adding an assortment of aftermarket accessories to his dealership's F&I product offering might hinder the finance manager from fulfilling the 300 percent rule.

"We won't sell aftermarket in F&I," Phillipos says. "Because when you give a finance person too many options, he picks the things by what he feels is most important or what you tell him is most important."

The most successful finance departments anticipate the customer's needs and can present the products in such a way as to help the customer.

"Whether the products are tangible or intangible is not as important as the finance manager's ability," says John Dalpe, finance director at Neighbors Cadillac/Pontiac in Costa Mesa, Calif.

"I could have every bell and whistle — and I've been to some finance departments where they have alarm systems on the wall and the lights go off and everything — but if the finance manager is not able to communicate those needs to a customer, all the bells and whistles in the world are not going to make a big difference," Dalpe says.

SIDEBAR: Incorporating an Aftermarket Sales Program

By Jeff Anghel

Your dealership is convinced of the benefits of selling aftermarket products and accessories in the finance office. So what do you do next? Here are some possible next steps.

Select products. You should offer a selection of products that is diverse enough for customers to have several interesting choices. Ideally, the products would come from your parts department and be easily installable by the service department.


Any outside vendors you work with should be well established, professional and prompt. They should offer competitive prices and be focused on customer satsifaction. Scrutinize their track record for reliability and quality of work.

The products you choose should have manufacturer warranties when possible and have minimal, if any, dealer liability.

Include parts and service departments and vendors in the decision-making. During product selection, communicating with key people from these parties is critical. Issues to discuss include: product availability, compatibility with vehicle models, pricing, dealer liability, installation process, customer use and warranty claim procedure.

Find the right pricing and costs. Fair cost commitments with internal departments and outside vendors are important to the overall success of the program. Customer pricing structures should allow for package discounts and a margin for negotiation.

Achieve a unified F&I sales strategy. Hard-add sales must harmoniously coexist with the present F&I process. It shouldn't conflict with or sacrifice current product sales volume, product sales profits or retained rate reserve. It shouldn't compromise customer satisfaction. But it should increase CSI and profit.

The F&I process should still include the menu presentation. The F&I manager should still offer existing soft-add products to the customer efficiently and present a monthly payment. The hard adds should be presented only after all the soft adds have been maximized.

At that time, you can ask the customer for just a few more minutes to present the accessories available for that vehicle. Each vehicle model can have a corresponding Accessory Offering Sheet listing the potential sale items. The list should include product features and benefits.

Partner with other departments. To reinforce marketing to customers, accessories should be displayed in a boutique in the sales showroom. The display will create awareness and need. F&I will coordinate any accessory installations. F&I's responsibility will be to make sure that accessories are paid for prior to installation.

Develop forms. Accessory Purchase Orders should contain verbiage that limits misuunderstandings and dealer liability. Consider programming to include the accessory sale amount on the printed Buyers Order.

Jeff Anghel is the finance director at Phil Smith Chevrolet in Lauderhill, Fla.

SIDEBAR: For More Information

Here is a sampling of companies that partner with dealerships to sell aftermarket products in the finance office.

ECP Inc., (800) 323-3521,

Express Systems Inc. (800) 705-4001,

F&I Institute of America, (800) 824-7896

Identity, (877) 443-3684,

Innovative Aftermarket Systems (IAS), (800) 346-6469,

K40 Electronics, (800) 323-6768,

Life of the South, (800) 888-2738,

LoJack Corp., (800) 698-8022,

Magnadyne, (800) 638-3600,

Networkcar, (866) 227-7323,

Safe-Guard Products International Inc., (800) 742-7896,

Simoniz USA, (800) 227-5536,

United Development Systems Inc., (800) 282-1154,

Visteon Corp. (800) VISTEON,