Channel | F&I

The Five Key Ingredients to Improving F&I Gross Profits

Two top trainers review the five key components to maximizing F&I gross profits and product penetrations.
By: Michael Marchione and Chris Lumley

The Five Key Ingredients to Improving F&I Gross Profits

There are five key components to maximizing F&I gross profits and product penetrations:

  1. Right Person / People
  2. Properly Trained
  3. Motivating Performance Based Compensation Plans
  4. System and Controls
  5. Dealer / Management Support

Let’s break these down with more specifics.

RIGHT PERSON / PEOPLE: Agents should be actively involved with the recruiting of their dealer’s F&I personnel. The keys to effective recruiting are to have a game plan, meaning a written interview process, which is designed to ask questions to gain knowledge of the applicant’s sales experience and skill sets. With that, the questions we ask should be sales specific related questions where we ask the applicant to provide us with the “situation”, “actions he / she took to resolve” and the “end result”. As an example, “tell me about a sales situation that you were involved with where you felt you gave it your all, but you were unable to make the sale, again please provide me the situation, actions you took, end result.” “In retrospect is there anything you could have done differently in that situation to change the end result and make the sale?”

The second key to effective recruiting (in no certain order), is to keep a “bull pen” of F&I managers you worked with in the past. We all know that good F&I managers are hard to find but keeping a log of contact information of the “performers” gives you a quick source of candidates to contact when your dealer is in need of a new person. I am certainly not suggesting you recruit quality people from your current accounts as that is not an ethical business practice. However as we all know, F&I managers often move from place to place and you can always reach out to them to see where they are currently and if they are happy there (again, only if they are now working at a non-client dealership). This strategy prevents you from having to recruit from a blank slate.

The third key component to effective recruiting is utilizing some type of third-party personality profile survey, i.e. D.I.S.C., Predictive Index etc. Many good sales people can really impress you in an interview and seem to “say all of the right things” but coupling a quality interview with a true picture of those individuals’ inherent personality traits, can assist us in making more accurate decisions. When it comes to selling F&I products, intangibles, there are certain personality traits that are more favorable, i.e. dominant and out-going versus introvert.

PROPERLY TRAINED: All F&I managers regardless of experience and past track records, when hired, should attend a formal F&I training course with one of our industries leading F&I training companies. Experienced or not, we all need a refresher periodically to re-tool as it is human nature to revert back to some old habits or maybe we just need to get back on track. I personally have never conducted an F&I training seminar where the veteran F&I folks will approach me at some point during the seminar and say “thanks dude, you know I used to use this stuff but I have gotten away from it” or “wow dude, I really like the way you handled that objection, I am definitely going to add that into my arsenal”.

When it comes to training and really running at market leader performance numbers, we should also have the sales managers cross trained on how to menu sell and how to overcome customer objections as they often have to fill in on the F&I managers day off or during their sick or vacation time… and I think we all know what typically occurs from a back-end profit standpoint, when a sales manager takes the deal… most often it’s a $0.00 profit deal or deals.

Lastly, we need to recognize and make sure our dealers and/or general managers recognize the role the sales person plays on the impact of the F&I profitability. Good sales people can make or break the deal and inexperienced, untrained sales people will almost always impact the outcome of the deal profit, negatively, not with any malicious intent, they just don’t know any better.

I will add one more point regarding the importance of the training, how many of our general managers know what “Customer Showroom Interview”, the “Menu Presentation”, and the various products “Customer Objection Handling Techniques” sound like? Might it be a good idea to role-play a presentation with them, or even better yet, have them attend a formal F&I course? We consistently have GMs and even dealer principals attending our F&I course and damn if that is not a show of Dealer support, I don’t know what is.

MOTIVATING PERFORMANCE BASED COMPENSATION PLAN: F&I compensation plans should be absolutely congruent with the dealer’s expectations of performance levels. Our compensation plans are our job descriptions. The F&I comp. plan should be based on a graduating scale of product penetrations and gross PVR (profit per vehicle retailed). The graduating scale method allows for the F&I manager to continue to “chase the carrot”.

Sales managers and sales people should also have a component to their comp. plans based on their F&I performance. This creates synergy and has everyone on the team striving for the same goals. Too many dealerships do not pay their sales people for F&I performance and therefore those that are totally money driven, simply don’t care.

SYSTEMS & CONTROLS: “We cannot manage what we cannot measure”, I’m sure all of you have heard this message in your careers and/or “we have to know where we have been, know where we are, to know where we are going”. Both very positive messages and absolutely spot on accurate. If I may, I am going to bullet point some of the measuring tools and reports that dealers should have in place in their dealerships and it is up to us as their trainers and consultants to get them to recognize how much impact the detailed tracking is to overall profitability. Not to mention, the more measurement tools the dealerships use, the easier it is for all of us as consultants to identify “profit leaks” and provide them effective solutions.

  • Daily F&I Production Reports (should illustrate): units sold-new, used and lease, percentage of deals financed both with and without leases. Individual products sold, including volume of each product, penetration of each product and profitability per contract sold. This report should be provided both for the store as a whole and also by each individual F&I manager production.
  • Individual Sales Person / Sales Manager F&I Production Report: This report should illustrate by sales person and / or sales manager the exact same information that the F&I Production Report illustrates. This allows us to pinpoint who supports F&I and conversely who is not supporting F&I. This provides us with additional training opportunities with individuals who need more help.
  • Cash Down Reports, “Cash is King”: We all know the more cash down we acquire on finance deals the more gross profit we make, both on the front end and the back end of the deal.
  • Desking Reports: We should track each and every deal and identify who the desk manager was and how the deal was structured, i.e. what was the initial term quoted (first, second pencil), was there any room in the payment to accommodate for credit challenged customers (rate guidelines), did we quote a $10 payment spread, etc.
  • Total Customer Yield Report: Illustrates the entire front end and back end by manager. When tied into the Desking Report by manager we can really highlight the strengths and weaknesses and again this represents training / consulting opportunity.
  • Contract In Transit Reports: Speaks for itself.
  • Charge Back Reports: Break down of reserve chargeback and product charge backs (by product).

DEALER / MANAGEMENT SUPPORT: This is really simple. Without the support of the dealer and his/her management team, we cannot move the numbers, and we will not be perceived by our clients as a valued partner and an extension of their management team.

 

This article was written by:

- has written 2 posts on Agent Entrepreneur.

Mike Marchione is a corporate trainer for Interstate National Corporation. He handles the creation, development and instruction of training curriculum for automobile, marine, recreational vehicle and power sports dealerships nationwide. Previously, Marchione was a corporate trainer for The Warranty Group (formerly Pat Ryan & Associates) and served as a F&I Specialist with Resource Automotive (formerly Pat Ryan & Associates). He is a graduate of Berklee College of Music in Bostom, MA.

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The views expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views of Agent Entrepreneur or any employee thereof.

One Response to “The Five Key Ingredients to Improving F&I Gross Profits”

  1. Don McNamaea says:

    I was trained by Par Ryan and associates in Chicago in 1970. The F&I business has changed tremendously since then. RV loans are entirely different. No Life ir Accident and Health possibilities with dollar amounts and much longer terms. Our Corporate goals are huge for F&I at $4K PRU. We rarely achieve those numbers, but more often than not come within a few hundred dollars. November and December were worst F&I months for some reason. We do menu selling, but didn’t seem to have the payment spread needed to di much on the back end. Are there replacements available anywhere for the old LAHA income which is now missing from F&I arsenals selling RV’s?

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