Stick With the Process

If you’ve ever submitted an article to this magazine, you know I’m not big on relating sports stories to the F&I office. So forgive me for breaking my rule this month, but a story from a struggling F&I manager reminded me of a lesson I learned as a youngster.

See, in high school, baseball was my sport. And as any ballplayer knows, slumps are part of the game. Well, I could feel one coming on one day while practicing in the batting cages. My dad was with me. He watched as my anger began to boil over. After another ground ball, I slammed my bat on the ground. That’s when he demanded that I exit the cage.

“Get out of there, you’re making things worse,” he said. “The reason you’re not hitting is because you stopped believing in your swing.”

That memory came to mind after reading a thread on a Facebook page dedicated to F&I pros. One of the members was venting that, out of the eight vehicles he delivered that day, only one customer opted for a service contract. The problem was the manufacturer’s zero percent financing offer, which he said was turning qualified customers into cash customers who weren’t interested in what he had to offer. Most of them, he added, were looking to pay off their loan early.

I waited anxiously to see what kind of response his post would get, as I could sympathize with his plight. And that’s when the pros amazed me once again.

The first producer to respond wrote that the complaining F&I manager had the wrong approach. He said customers should be excited about paying zero percent interest on F&I products. I didn’t think about it that way.

But the post that really put things into perspective came from Klay Kelso, a sales trainer with The Plateau Group in Crossville, Tenn. Here’s what he wrote: “You’ve had a bad day for sure, but your post reminded me that we can make or break our day by the way we think about things.”

He then wrote about his first experience with zero percent financing. He was a finance director for a large Ford store, and his team was spooked for the same reasons the troubled F&I manager stated. Kelso wrote that he reminded his producers that there are plenty of people who normally finance a vehicle who would love to get 60 months same as cash.

“I did with them as I did with the customers, showing [them] how much money [a customer would save] on the zero percent versus the best rate at the time … Even with the VSC, the payment was lower than the payment with the best rate possible at the time.”

Kelso said that simple change in mindset pushed his team to a record profit per retail unit (PRU) for the month. His message, much like my dad’s message to me 21 years ago, was believe in the process.

In fact, believing in the process is how AutoNation execs said the group’s F&I operations achieved $1,381 in F&I PRU in the second quarter, a $99 increase from a year ago. Training and rigorous certification were cited, too. As for concerns over the Consumer Financial Protection Bureau (CFPB) possibly eliminating dealer participation, Mike Jackson, AutoNation’s chairman and CEO, said it wouldn’t be an issue.

“If lenders were to transition to some sort of flat fee, I don’t think it would be much of an issue for the big public companies,” he said, adding that F&I product sales account for 66 percent of the company’s F&I revenues, which were up 28.8 percent in the second quarter vs. a year ago. “However, if you’re a retailer where your model is dependent on a wide range of markups, you’re going to struggle.”

AutoNation wasn’t the only publicly traded dealer group living above $1,300. Group 1 posted a per-unit average of $1,351 for the quarter. As for the CFPB, the group had this line in its quarterly presentation:  “Discrimination evidence has yet to be found.” Underneath that the group added: “Area under CFPB discussion represents $425 of $1,335/unit.” Under that line was this: “Flat markup already covers $200.”

I got a kick out of Craig Monaghan’s response to questions about the CFPB during Asbury Automotive’s investor call. The group’s president and CEO confirmed finance sources are in “anticipation mode” regarding the possible loss of dealer reserve, noting some banks are already placing caps on spreads that are even lower than the group’s internal caps. “Spread and yield is like a balloon in our mind,” he said. “You can push in one place and it’ll expand in another place.”

Last year, a reader e-mailed me with a question. He asked if I thought it was a good idea to get into F&I, especially after we had published a few articles that questioned the future of the profession. Well, based on those numbers, I think you have my answer. Swing away.