Bringing a Vision of F&I

The name Ron Martin is well known in the automotive F&I arena. Through his books, training and two companies, Martin was one of the main reasons why the auto industry embraced finance and insurance. Now he’s looking to bring his F&I expertise to powersports.

PSFI: Ron, can you tell us a little bit about yourself?

Martin: My passion for the last 20 years or so has been to bring profit solutions to F&I departments. I have done this from my experiences in the automotive, banking, and insurance industries as a consultant, trainer, lender, and broker of insurance products to powersports and auto dealerships.

I’ve seen the F&I business transform into a single dominant point for consumer financing for powersports and automobiles, where compliance took a backseat to a more self-regulated F&I department. I think we are really positioned for good things for F&I. As I always say, “There has never been a better time to be in the F&I business than today!”

PSFI: How would you describe the current market conditions?

Martin: It’s no secret this is the most trying economic time of most of our lives. That holds true for F&I as well. I do believe that we will all learn from the pain we are now experiencing. It will lead to change, which is at the heart of human creativity.

It is now necessary for an F&I professional to be more creative in how he or she approaches a deal. You can no longer assume you’ll find a lender that will take the deal. We need to go back to the basics of selling the customer to the lender based on his or her demographics, such as time on the job, type of job, residence status, income, and credit history. No longer can you simply rely on a credit score. The finance person has to position the deal with the lender to put it in the most favorable light.

PSFI: Do you agree that dealers who had the right processes in place during the good times will be the ones who survive today’s economic downturn?

Martin: I think there is some truth to that, but I also see some dealers who think they have it all figured out and are less receptive to change. It’s time for people to challenge themselves. I’m seeing F&I numbers dropping at a time when you would expect them to go up. Some of it is a result of lenders cutting back on reserves and advances, but I’m also seeing a real negative pattern of dealers just waiting for things to turn around rather than trying to affect change.

PSFI: Auto retailers weren’t always so keen about F&I, and I know you helped change that with several of the books you authored. What caused the shift in mindset among auto dealers?

Martin: I think the one thing responsible far how far that industry has come is the shift away from simply jamming products. Some of this was the result of regulation, but most of it was the paradigm shift the F&I industry went through. Basically, there was a realization of the tremendous value the products and services we offer provided. When someone believes in what he or she sells and does, it’s easier to transfer that enthusiasm to the customer. Since crossing over to powersports, I’ve heard many dealers say they don’t want to be like auto dealers and jam products into a deal. I agree that’s not a good course of action, but it’s simply not true that automotive F&I is done that way today.

PSFI: What was behind your decision to jump into powersports?

Martin: I like to say it’s the challenge, because I do like a challenge, but I think it’s the opportunity that it brings our company more than anything. I think many on the automotive side think powersports is way behind when it comes to F&I, mostly because the perception is that many of these stores are mom-and-pop operations. I don’t think that’s the case.

There is no doubt automotive F&I is far more sophisticated when it comes to products, technology, and processes. Much of that is due to the amount of attention that side of the business has received. Powersports is unique when it comes to things like culture, products, and the way business is conducted. Over the last couple of years, we at The Vision of F&I have learned a lot about the way business is conducted in a powersports dealership. We are able to capitalize on the successes we had in automotive and transform them to be successful in the powersports culture.

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PSFI: Dealerships will really need to get good at asking for a down payment. I understand powersports dealers are better adapted to doing
that than auto dealers. However, can you talk a little bit about the challenges dealers will face in 2009?

Martin: I think lenders are going back to the concept that if customers have skin in the game, they are more likely to pay than walk away from the loan. That certainly affects F&I advances, but it’s really a front-end sales issue. Bottom line, we need to be able to say to our customers, “How much should we tell the lender you’ll be putting down?” We have a software package that electronically handles that issue by giving the customer choices of installment, revolving, and cash options with different down payment choices. It focuses the customer on the decision-making process, and encourages them to consider putting at least the tax down.

PSFI: The ability to finance a customer is a big issue these days. Can you offer any tips to F&I managers on how to get a customer financed?

Martin: I always tell F&I managers they need to think like a lender and sell like a salesperson. Today it takes a lot of resilience to get a deal approved. It’s no longer just about a credit score. It’s about credit, debt-to-income, types of debt, balance on revolving, time on the job, job type, residence status, and equity. The best thing a finance person can do is listen to the lender to evaluate its objections, overcome them, and then close with benefits or customer credit and demographic strengths. The lender will always make you believe it is doing everything possible to put a deal together, but that’s not always the case. We need to sell them on the benefits of doing business with us and the strengths of the customer.

PSFI: Finding a lender is also a big deal these days. Can you offer any advice on how to locate a lender?

Martin: The first thing is to never assume lenders won’t do business with you, even if they have never done business with a powersports dealer in the past. The major lenders are easy. They’ll find you and most of you are already signed up with them.

The opportunity is in the regional or local banks, as well as credit unions. The current situation has provided a real opportunity for them to compete, especially since the major lenders are tightening there loan policies. That’s why dealers should target all the banks and credit unions in their area, and cultivate relationships with them. Sure, they may initially tell you they don’t finance powersports on an indirect basis, but don’t accept that as an answer. Encourage them to meet with you. Let them know that you’ve lost some customers to them and that they’ve lost customers to you. Then tell them a relationship between your organization and theirs would provide an opportunity to have all of them.

Don’t be afraid to reach out to your competitors and ask them to contact lenders as well. There is strength in numbers. It’s time to think outside of the box. If you’re going to wait until they just show up, you might be waiting a long time, and both of you won’t be able to realize the win-win relationship you can create.

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PSFI: With today’s economic crisis, provider evaluation is definitely critical. Do you have any advice on what dealers should look for when reviewing a provider?

Martin: I have one rule of thumb when it comes to evaluating the financial stability of a company. If it looks to good to be true, it probably is. If a company has very low prices, is easily paying claims, and you’re unable to verify their financial stability, it’s probably playing on borrowed time.

There are two components to a product company, the administrator, or the one that processes contracts and handles the claims, and the underwriter, the one insuring it. You can take the conservative approach and use a provider that handles both, which means there’s less chance for error. Just remember that it’s not unusual for the administrator and underwriter to be different. However, it does mean you need to check out both sides of the picture. You should verify their financial position and make sure you check credible references, including dealers that have had claims processed with the company for some time.

PSFI: In the auto side of the business, they talk about making sure one’s store has at least three core products. Some say it’s service contracts, GAP, and tire and wheel. Others will throw in credit insurance or another product. In your opinion, what core products should be on every powersports dealer’s menu?

Martin: It’s pretty much the same for both types of dealers. However, I might add a maintenance program to that list. The biggest difference for powersports is that they can’t always sell all of the same products each time. The product mix will vary based on the type of powersports unit the customer is purchasing. For example, tire and wheel can’t be purchased on a dirt bike. Powersports dealers are also working with revolving credit, so their menu needs to be able to handle that. The one thing powersports dealers need to do is offer more of a variety. It’s not uncommon for a powersports dealer to only offer two products, which significantly reduces the customer’s choices. When a powersports dealer commits to 100 percent menu selling and expanding the store’s product mix, he or she will see a big spike in F&I profits.

PSFI: I wanted to turn the focus on you now. You’re the president of The Vision of F&I Inc., which provides training, and president of VisionMenu Inc., a designer of menu, desking, and reporting software. You also run a certification program called Vision E-Academy. What should a dealer expect when he picks up the phone and calls you for help?

Martin: I’d like to add that we will soon be releasing an online powersports-specific certification program on F&I sales and compliance. We are doing this in conjunction with CIRUS, a provider of online training in the automotive and powersports industries. When you call us you’ll get one of our friendly F&I mentors that will be happy to walk you through our complete F&I selling solution in the privacy of your own office. They can show you how VisionDesk, VisionMenu, VisionReport, and Vision E-Academy can help do many of the things we talked about in this interview.