Are you prepared for 2023? One thing is for certain, the status quo doesn’t last very long in the car business these days. If you haven’t already done so, now is the time to be planning, setting your vision, and defining your goals and strategy for 2023.
There are many predictions of what is in store during the next 12 to 18 months for the auto industry, and when you compare predictions, some trends emerge.
Many predict that production shutdowns and delays will continue to persist due to supply chain issues. But even with these issues, inventories will continue to increase, while month-overmonth sales are projected to be flat on an unadjusted basis. Rapidly rising interest rates, inflation, reduced vehicle affordability, and general economic uncertainty have started to cloud the picture for new vehicle sales and F&I heading into 2023.
If economists were to examine F&I heading into the new year, they might say something like: “F&I managers will be facing headwinds, as market conditions and the economy will put pressure on what has been strong F&I performance during the past 24 months.” That brings me back to our original question: Are you prepared? I have always referred to F&I as a business within a business. F&I managers who are entrepreneurial in their approach and look at F&I in this way consistently perform at a higher level than those F&I managers who do not. If you are not planning on 2023 not being much different than 2022 and are planning to adopt a wait-and-see approach to your F&I business, you may find yourself in a tough spot next year when your year-over-year KPIs are down and your year-over-year income is significantly less.
Don’t wait and see in 2023, instead set goals and plan. I’m no economist, and I don’t have a crystal ball, but I can predict with confidence that in 2023 reserve will be harder to come by than in 2022. If you want to maintain the F&I per vehicle retail you enjoyed in 2022 in the upcoming year, product enrollment will need to fill the gap.
As we move into the new year, economists are predicting that consumers will be more cautious and careful in how they spend their money in the new year. They predict that consumers in 2023 will be making buying decisions based more on need and less on want.What does that mean for product enrollment in F&I? It means that offering the same menu with the same product placement to every customer might not be a winning strategy in 2023. A personalized and customized product offering along with a consultative F&I process is a much better strategy.
Higher interest rates and longer finance terms now have the average monthly car payment right around $735. Add the stress of inflation and its effect on the consumer’s budget, and it is easy to conclude F&I managers will have to work harder to match the benefits of the products we offer in F&I to the customer’s needs.
The good news is many customers need the products we offer in F&I more than ever. The products we offer can help to make the ownership of a vehicle more predictable and less uncertain. That’s something that may resonate with customers much more now than in the past.
One exercise I would recommend you consider as you plan for 2023 would be to objectively evaluate your discovery process. Creating a personalized product offering based on need is a winning strategy. Customers tell us they want to be known. They also tell us they want to be involved in the F&I process and are looking for someone to guide them through it. They want us to tell them about the products, not sell them. If you are not being proactive in your discovery process and utilizing all the resources at your disposal to learn all you can about the customer’s needs before your first interaction, you may not be able to achieve your per vehicle gross profit goals for 2023.
If you believe the prediction that reserve will be harder to come by in 2023, plan to improve your discovery skills so that increased product enrollment can fill the gap.
ABOUT THE AUTHOR: John Tabar is executive director of training for Brown & Brown Dealer Services.
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