Know Thy Market

Having launched a social networking group for F&I pros last year, I have come to realize that every market presents unique challenges and opportunities. I bring this up because I recently read an article published in a competing magazine that referenced the top six dealer groups in the country and their profits per vehicle retailed (PVR), which ranged from $979 to $1,144.

The insinuation was clear: If your averages are not in the same neighborhood as this group, you should overhaul your F&I operation to ensure you do. I disagree. There are many dealers in isolated markets who face challenges more complex than this simple statement assumes.

That brings to mind another article I read in this magazine a couple of years ago. It was titled, “Achieving $1,500 PRU is not easy, but it ain’t rocket science!” Well, if that’s so, then why aren’t the largest groups in the country averaging those numbers? The answer is obvious.

You see, there are dealers who operate in cash-rich communities and offer vehicles appropriate for that type of market. Then there are dealerships that compete in areas with an abundance of aggressive banks and credit unions that advertise unrealistic rates.

Some markets are compact and have few outside forces affecting their finance efforts. We own a General Motors store in a very small market that averages 85 percent finance penetration. There’s simply not much competition, so it’s easy for them. I also know of a F&I manager in New York whose penetration hovers in the 75 to 80 percent category. Running $1,100 PVR has become the norm for him.

What about the person who works in a store where credit unions eat his or her lunch daily? How do you combat that? You can trot out all the reasons not to do business with them, but that will eventually anger your customers. I recently went head-to-head with a credit union that kept slashing its offer until the customer said “No,” no matter how low I got. My only question to the customer after the bloodbath was, “Why didn’t they offer you this low rate right out of the chute?”

I know a director in Michigan who finally decided to stop fighting credit unions and join forces with them. He sat down with the CU managers and formulated a mutually beneficial plan. In essence, he agreed to paper the deals on their contracts in exchange for product consideration and small flats. It eventually worked and now they all get along well.

See, while media experts and statisticians use data from large dealer groups to make comparisons, they are by no means the standard. I believe the standards we should be judged by are our own local markets. This begs the question of how to understand our markets and the dynamics that affect them. Now, based on those dynamics, are you doing your best? Here are a few questions to consider:

■ How many aggressive credit unions operate in your area?

■ What are their lending guidelines?

■ Are you aware of their advance policy?

■ Do they price their loans using FICO scores?

■ Are you “in bed” with one or two banks, or are you seeking other opportunities?

Based on your answers to those questions, it may be time to adopt alternative action plans to overcome whatever is challenging your dealership. It worked for my colleague in Michigan, as his plan to partner with the local credit unions is a classic example of adapting and overcoming.

Listen, each market has its own unique anomalies. There are too many variables at play for a one-size-fits-all approach to training. Explore every avenue of opportunity and constantly monitor your processes and actions. Evaluating yourself during down times is a good starting point.

Once you’ve identified those problem areas in your market, build upon your strengths — don’t languish in the things you have no control over. We will never be able to take advantage of every finance opportunity, but to succumb at the first sight of blood is weak. Hold yourself accountable and rise to the occasion.

Your strengths are your professionalism and knowledge. Use them to your advantage. Do not allow some inexperienced kid at the local bank to outsmart you. Take back your territory while demanding excellence of yourself. Know your market and capitalize on it!

Marv Eleazer is the finance manager at Langdale Ford in Valdosta, Ga. He can be reached at [email protected].