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You’ve probably heard of the Bermuda Triangle — a vast section of the Atlantic Ocean between Florida, Puerto Rico and Bermuda — but you may not have heard of the “finance triangle.” Instead of swallowing up ships and aircraft, the finance triangle sinks dealerships.

The finance triangle is formed by three points: the dealer, the finance manager, and the income development specialist. If any one of these points fails, the ship goes down. But if all three points are functioning correctly, your dealership can weather any storm.

Take this all-too-common scenario: The dealer returns from his 20 Group meeting wondering why his F&I team isn’t generating $1,500 per deal. From the wheelhouse, he shouts out his new expectation to his crew. They are more than happy to comply, but they don’t know how to get there, and the dealer simply doesn’t have the bandwidth to handle the minutiae of the finance office. The lack of direction is when the hole begins to form, sucking down one of the three key points the more it grows. 

At the heart of the problem is commitment, or lack thereof. Let’s examine each point, the problems causing them to sink, and the commitment that needs to be made to right the dealer-“ship.”

Point No. 1: The Finance Office

The finance manager carries the greatest responsibility in making sure that $1,500 per-copy target is reached. I can’t tell you how many times I’ve heard the following statement from a trainee: “If I could just say that to the customer like you do, I would be all set.” My response is always the same: “So do it!”

The problem, again, is commitment. As an F&I producer, you need to commit yourself to learning about your products. The goal is to master their features and benefits so you can relay that information to your customers in your own words.

First, you need to understand how your products change the ownership experience for the better (and the worse) in every transaction. You also need to learn how your products will affect lease, retail, and cash customers.

Remember, selling requires emotion. Fancy word-tracks and rote product descriptions won’t cut it. Your customers need to see how your products will enhance their ownership experience, because they need to know they are investing their hard-earned money in something that’s worth it. You can’t do that with hard sales tactics and power closes.

Step into your customers’ shoes for that short moment you’re with them. They will provide all the tools you need to lead them to a decision. Put their needs first and stop looking at them as a means to reaching your bonus level.

Finance managers also need to commit themselves to improving their knowledge and understanding of the paperwork required of the F&I role. Have you ever taken the time to read every single contract you present, and not just the large font type or your product contracts? I’m talking about everything, from the retail installment sale contract to the lease agreement, because each contract represents a tool of our trade. Unfortunately, an overwhelming number of managers who struggle to achieve top-flight production can’t answer a random question about a contract. That’s not the case for top performers.

You also need to commit to investing in yourself and your education. The average finance manager will sign more contracts in one month than the average lawyer does in a year. So learn the laws governing your daily activities and stick to them.

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Point No. 2: The Dealer

With the internet eroding profit margins, dealers are turning to their F&I offices to make up the difference. Unfortunately, their demands don’t often have the desired effect. In fact, they can sometimes result in bad behaviors and processes that put the dealership in peril.

One way dealers work to the detriment of the dealership is by committing to a compensation structure that supports those bad behaviors and habits. Regardless of experience level, every finance manager will analyze and work their pay plan.

Compensation should consist of three elements: It should encourage the producer to sell products that promote customer retention. It should not foster a dependency on reserve. It should encourage the F&I manager to seek training.

A pay plan should also be regulated by two facets: average products per deal (PPD) and average profit per vehicle delivered (PVR). And it should be structured so that the next commission level cannot be attained without the other, and producers should not be allowed to sacrifice one product over the other. Incentives should also be used to drive desired behaviors.

In fact, there are a variety of ways incentives can be used. You could pay a producer struggling to sell vehicle service agreements a $50 or $100 spiff for every contract sold for 90 days, which is about how long it takes for a habit to form. What you’ll find is those struggling F&I managers won’t pass on cash or lease deals, and they’ll be more than willing to step outside their comfort zones to earn that spiff. At the end of that 90-day period, you will have a finance manager who can go into the trenches and come out with a sale, regardless of who is sitting in front of them.

During the next 90 days, attach that spiff to another product. By the end of the year, you will have a well-trained, confident, present-all-products F&I team. Now let’s look at three pay plans that would have the opposite effect:

1. Straight Commission on Department Gross: Under this pay plan, the finance manager is not required to do anything but generate money anywhere possible, usually at the expense of CSI. Reserve will be high, as will GAP and service-contract sales. In fact, GAP and service contracts will be the only products the F&I manager makes any effort to sell — even if those products are wrong for the customer.

This may be the shortest path to a high-gross transaction, but it’s also a good way to lose reserve and spur cancelations. And the resulting CSI damage means the customer will never set foot in your store again.

2. Paying Out of the Gross of Different Departments: On the surface, this pay plan seems great because it encourages a team atmosphere. But it will cause damage before you realize. At a minimum, it will stunt the growth of your finance team.

What happens is the sales department will begin accepting lower gross to move a unit, leaving it to the F&I office to make it up on the back end. But if the sales team sends F&I a high-gross deal, the finance manager may accept a low-gross back end. You may get both departments to work together to generate the most money possible at the beginning, but then your producers will realize they are paid regardless of their performance level. The result is inconsistent gains and drops in production.

3. Adding Duties Outside the F&I Manager’s Role: This is often a fact of life in smaller operations. The finance manager may have more time to complete non-F&I tasks since they’re delivering fewer units, but they still need to sell.

Since many tasks that don’t require salesmanship can be distributed to administrative staff, I suggest you consider each task for what it is and what it can generate in terms of dollars. Then assign those routine, non-sales-related tasks to administrative or non-sales roles whenever possible. As your finance team’s performance increases and stabilizes, you can slowly redistribute small portions of those tasks. But be sure to monitor production and adjust accordingly.

Committing to the right pay plan will allow the dealer to safely monitor the dealership and control the crew from the wheelhouse. The finance department will have the freedom and ability to take their own corrective actions with minimal input. From time to time, the dealer will need to inspect the finance team. That’s where a development specialist comes in.

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Point No. 3. The Development Specialist

The development specialist’s job is to be the eyes and ears of both the dealer and the finance team. These individuals observe and work with finance managers and relay what’s happening to the dealer. This happens in a manner that allows the dealer to take commanding action without leaving his or her post, because leaving the wheelhouse can put the dealership at risk.

The development specialist also takes responsibility for the finance team’s training and development. He or she ensures each manager is receiving the support they need to be successful in their positions. The best part of a properly trained development specialist is they are in and out of many stores and see a wide spectrum of customers, processes, and managers. That means they can make solid recommendations that will help positively change the course of the dealership.

However, there are several ways this point of the triangle can fail. For example, the dealer could fail to prioritize the development specialist’s recommendations, allowing whatever problem he or she identified to fester. 

This point of the triangle can also fail if F&I managers are allowed to decide if they will participate in development and training activities. If an F&I manager is not averaging $1,500 per retail delivery, it’s not because of a lack of effort. More often than not, they just need a plan and additional support to improve their performance, which is why the dealer needs to ensure his or her F&I team participates and completes whatever activity the development specialist recommends.

Lastly, this point can fail by choosing the wrong development specialist. This individual needs to be committed to the dealer and to improving each F&I manager. In fact, if your development specialist isn’t up late at night worrying about your business, you have the wrong specialist. To be effective, the specialist must have a thorough understanding of the laws governing the F&I office, be adept at handling sales, and must always be looking for new ways to do business.

Surviving the finance triangle is easy if you don’t overthink it. F&I managers simply need to commit to themselves, their customers, and their professions. The dealer must commit to the right pay plan and the best available development specialist — who, in turn, must commit to everything above. And if everyone does, that $1,500 per-deal goal will quickly become $1,600, or even $1,800. 

About the Author

Dale Patten serves as an account development executive for Great Lakes Companies, an income development company based in Portage, Mich. Contact him at [email protected].