Lithia Motors Inc.’s dedication to training and supporting its dealerships’ finance departments has helped it gain ground in the post-recession economy. In September, the dealer group was honored with this year’s F&I Dealer of the Year award at the magazine’s annual conference and expo.
With 86 stores in 12 states, the Medford, Ore.-based dealer group is one of the largest in the United States. To support the size and scale of its business, Lithia has a dedicated sales and finance operations department. That six-person team is led by Steve Justice, Lithia’s sales and finance operations manager. He is responsible for monitoring, training and maintaining the performance levels of 145 F&I managers.
Justice accepted F&I and Showroom’s top honor during a special ceremony at the F&I Conference. Lithia Motors was one of seven operations named in October as a 2011 F&I Pacesetter, an honor that made the dealer group a finalist for the award.
“It felt really good to be recognized among all the colleagues we had [at the show],” says Justice. “Everything we’re trying to accomplish and achieve was recognized at a national level.”
Walt DeBoer founded Lithia Motors in 1945 as a Chrysler-Plymouth-Dodge dealership in Ashland, Ore. In the five decades that followed, Lithia acquired more dealerships and expanded into several other states. In 1996, Lithia became a publicly traded company on the New York Stock Exchange.
Despite Lithia’s corporate demeanor, all of its dealerships are located in small and mid-size markets in the West and Midwest, which is why Justice and his team are so critical to the operation.
“We’re constantly in contact with our finance departments. Our role is to support the stores in any way we can,” says Justice, who has been at the helm of this department since August 2009. “I’m a 24/7 person to F&I managers. If I get a ring or e-mail, then I know they really need something.”
Justice has four staff members who travel two to three weeks each month to visit dealerships and troubleshoot their finance departments. Two more staff members who specialize in training are based at Lithia’s corporate office. The group also has quarterly conference calls with F&I managers, and offers refresher courses for them at Lithia’s corporate office.
Justice’s hands-on approach has earned praise from some industry veterans, including Don Schober, a Resource Automotive executive. “I would say that Steve, as well as the entire [Lithia] management team, leads from the front,” he says. “They don’t manage from an office, send out a memo and expect to get results.”[PAGEBREAK]
Teaching the F&I Process
Justice and his team set the tone for F&I managers on their very first day on the job. They conduct weeklong new-hire training sessions for incoming F&I managers on a monthly or bimonthly basis at Lithia’s Medford office, depending on the dealer group’s need. Justice uses the opportunity to introduce new hires to the company’s four core F&I products: service contracts, a lifetime oil program, interior/exterior sealants and GAP. He then explains their value and benefits and begins to teach strategies for presenting them to customers.
Justice says the product presentation he teaches is a hybrid of menu selling and step selling. “We don’t start off with a menu. We present the features and benefits of each product and give payment options to the customer,” he says. “From there, we hone in on their specific driving habits and find whatever hot buttons they have.”
Justice says F&I producers are taught to ask customers targeted question designed to uncover which products fit their needs, as well as to set the terms of coverage. From there, the F&I manager will present a customized package offering.
Products are offered on a fixed-price system, which every store must adhere to. However, pricing does vary depending on the type of service contract, term and deductible. Justice believes the system works because it allows F&I managers to focus on selecting appropriate products for customers and selling them without getting caught up in endless rounds of negotiations.
While much of Lithia’s F&I process is standardized, F&I managers can choose their own tools, such as pamphlets, books or spreadsheets. They’re also allowed to inject their own personality into the presentation. “We give them multiple options and let them pick based on their personality,” Justice says. “We try to give them all the options we’ve found over the years that work best.”
Lithia’s new-hire F&I training program is supplemented by a Web-based curriculum offered on “eLithia,” a proprietary Website for Lithia employees. Justice requires all new hires to complete a 14-day pre-training program, which introduces them to Lithia’s computer system, teaches them about the dealer group’s F&I products and how to put together a deal.
Justice and his team also have an additional layer of monitoring and training, which they execute at dealerships. “When [my staff] is out in the field, they randomly audit deal jackets,” he says. “They look through the whole structure of a deal and find training opportunities in that. They help stores identify areas that they missed or could improve.”
Justice says the strategy recently helped one of his F&I managers increase his per copy average by $350. “He was sticking to the basic presentation, but not focusing on our core products,” he says, adding that the producer was selling a lot of ancillary products. “It gave us a great training opportunity to go back to the basics again.”
Building F&I Revenue
Most of Lithia’s dealerships have an average of two finance managers per store, which is why Chris Holzshu, the organization’s CFO, is a big proponent of Justice and his team. He says the training they provide also doubles as a networking meeting that allows finance managers to exchange ideas. “We centralized training for F&I to help build relationships and peer-to-peer competition among finance managers,” he says.
Lithia’s concentrated approach to F&I has paid off thus far. Average profit per retail unit reached $1,000 in the second quarter and the dealer group is on track to make an estimated $82 million in F&I revenue this year, Holzshu says. The group’s acceptance rate for service contracts is running at a 40 percent clip. The company’s lifetime oil program, created in 1996 by the company’s CEO, Sid DeBoer, is accepted at a rate of 37 percent, while GAP and interior/exterior protection claim a penetration rate of 25 and 11.2 percent, respectively.
Focusing on its core F&I products also has helped cut down on the time customers spend in the F&I office, which John England says works well for the communities the group serves.
“What [Lithia’s] doing is a customized and focused approach,” says the president of Resource Automotive Solutions, who provides consulting services to Lithia. “Their dealerships are in small and medium marketplaces, which means they have to focus on taking care of the community and the customer. And their product mix makes a lot of sense.”
More importantly, Holzshu says, products such as the company’s lifetime oil change program helps Lithia’s stores retain customers while driving incremental business to service departments. “It’s a win for the store because they get access to a customer for the long term. It’s a win for the service department because they can sell more products when they see the customer. It’s a win for the customers because they will get guaranteed service from the dealership,” he says.[PAGEBREAK]
From Training to Selling
Cate Macpherson, a former attorney who has spent eight years as F&I manager at Lithia Toyota of Medford, is a product of the organization’s training program. “For me, starting out in the industry, I didn’t know the difference between wholesale and retail or Kelley Blue Book or what a car invoice was. To me, it was imperative that I had that sort of standardized training,” she says. “[Lithia] taught us the core products and features, and allowed us to infuse our personality into [the presentation] in a way that we’re comfortable. It’s not a robotic approach.”
Macpherson uses her consulting skills to build rapport with customers, learn about their driving habits and identify potential objections. She says the process helps her manage customers who believe they don’t need any F&I products. “Toyotas are tough F&I dealerships,” she says. “People buy [these vehicles] because they think they will never break.”
Despite the challenge, Macpherson averages $1,100 per copy following the Lithia playbook. Her acceptance rate for service contracts is 60 percent, followed by lifetime oil at 55 percent, GAP at 20 percent, and interior/exterior protection at 10 to 12 percent.
But Macpherson says she doesn’t do it alone. “It’s not a solo act. I have a good team,” she says. “You have to have a desk that knows how to structure deals for the lenders.”
The dealership’s general manager, Steve Philips, agrees. “We button up a car deal tight before it goes to the finance office. There’s no question about rate or interest, and there’s no rehashing,” he says, adding that this provides producers with more time to sell.
The formula at Lithia is simple, but it has helped the group set itself apart for nearly 65 years: Be dedicated to training and the customer. “The main thing is sticking to the core basics: Take care of our customers and sell products that make sense to customers,” says Justice.
Holzshu adds: “We’ve been focused on F&I for a very long time. We’re near the top of our peer group at $1,000 (per copy) and we’re continually looking to improve.”