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.


In today’s challenging economic environment, almost every dealership needs more profit. F&I provides the highest profit margin per dollar sold in the dealership, so it makes sense to look to F&I. And by understanding changes in lending and making the appropriate adjustments, you will increase your likelihood of success.

When you get a qualified customer in F&I, you need to make sure you have systems in place to maximize your profit opportunities. These systems will be guided by these six principles.

1. Salespeople will need to better qualify customers

Salespeople will need to be trained (or retrained) on proper qualifying techniques, as fewer customers mean fewer opportunities. Since F&I (or sales) can’t afford misfires or “do-overs,” it’s critical customers are placed on the right car on the sales floor.

2. Cash is king

It’s also queen, prince and princess. Customers with no equity or no cash aren’t going to get financed. The sales department will need to learn (or re-learn) how to extract cash from the customer.

3. Know your customer’s ability to buy before entering F&I

You will want to obtain a credit bureau report at the point of customer commitment. Based upon his or her credit history and down payment, you will want to be proactive in directing a customer to a car for which the bank is likely to approve a loan. (Be careful that you aren’t making credit decisions that require adverse action notices.)

4. Sales managers have to know the science of the deal structure

The role of the sales manager is to ensure that F&I is presented with a viable deal. That means the customer was sold the right car, and the deal is structured so the bank will allow F&I products.

5. F&I can’t make up for bad deal structure

The greatest F&I manager with the best new closes can’t overcome an unqualified buyer, or the deal being conditioned by the bank. Sales managers should have hands-on F&I experience.

6. F&I must have a system to maximize profit from every customer

You need a selling system for F&I. A selling system is what you have for selling cars: meet and greet; qualify; demo; write-up; and close. A selling system in F&I ensures that every customer is qualified properly and shown every product for which they are eligible — every time.

Glenn Roberts is the national training and business development manager for Zurich’s Programs & Direct Markets’ unit. He can be reached at [email protected]