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Product Offering – The Key to Achieving a Robust PVR


While there are many factors that can impact per vehicle retail (PVR); top agents agree that having a well-rounded array of products and presenting them appropriately is the foundation to achieving a desirable PVR. In the last issue of Agent Entrepreneur, we asked successful agents about their methods for achieving a healthy PVR. They discussed the importance of managing the process through detailed reporting, using data collection, how to develop a working relationship between sales and F&I, and the impact of quality training. They also pointed out a necessary prerequisite to a healthy PVR – offering a wide array of products and being an expert on all of them. They cautioned F&I managers never to view any deal as a throw away deal – even cash and lease purchases now bring the opportunity for profit with all the quality ancillary products that are on the market today. In fact, these agents had so much to say about the impact of product offering on PVR that we decided to make it the sole focus of this article.

Everyone agrees that product offerings should be catered to fit the needs of the customer, but do customers’ needs vary dramatically among dealerships and manufacturers? If so, should PVR results be correlated with the price or type of vehicle? Do savvy agents expect that more products will be sold at some dealerships than others, or is there a basic expectation for what PVR ought to be regardless of other factors? These are some of the questions that we asked top agents to address. Read on and learn their tips for selecting the right product array for high-end, low-end, lease and cash customers – how the products, and presentations differ to best meet the needs of the customer and achieve a most desirable PVR.

Education as a Motivator

Educating the consumer on the coverage that comes with their vehicle, whether new or used, regardless of the manufacturer, can be the perfect segue for the F&I manager to step into the role of a problem solver rather than a sales person. This is a great place to start. “When customers really understand any loss or risks that they may have with their vehicle purchase,” notes Michael Tuno, president, World Class Dealer Services, Inc., “their motivation to ‘buy’ always trumps the F&I managers motivation to ‘sell.’”  Tuno refers to this approach as “loss aversion” and uses it in his menu construct and word tracks when training F&I managers.

Tuno sites paint as the perfect example of a feature, that when fully explained to the buyer, becomes an area where the customer often wants protection. “Every single car today is painted with a water-based paint instead of oil-based paint in manufacturers’ attempt to be environmentally friendly. It’s a softer paint that damages easier. Saltwater and sun both damage paint. There is a whole market segment for that – especially within those high-end buyers. No one I know of wants to drive a Mercedes that’s all pitted and washed out.” Once the customer understands what the paint protection offers, and recognizes the value of the protection, it can be an easy sell.

Menu Selling

The introduction of menu selling has opened the door for many ancillary products that are a key part of achieving a healthy PVR. Mike Conley, CEO, Conley Insurance Group, says that by using a menu to present products, many more products can be offered than if they were to be presented separately. “Lost key coverage, paint and fabric, maintenance contracts, windshield coverage, dent protection, theft protection – the list goes on and on.” Another advantage to menu selling is it gives the ability to bundle products chosen to appeal to a particular buyer’s needs.

Customer satisfaction is another critical element that can be achieved through the F&I product presentation. “Back it down to 1-2 points of reserve, and limit the service contract to a fair and reasonable level,” says Conley, “The additional income can come from selling other products presented with the menu, that will not only increase PVR, but will also provide customers with additional products and protections, and not just a higher payment.”

Cash Deals

Regardless of the type of vehicle or dealership, experienced agents report that they typically expect greater profitability on a finance deal than on a cash deal. While it may seem logical to think that if people have money, they are more apt to buy something (i.e. cash buyers), Randy Crisorio, president and CEO, United Development Systems, Inc. (UDS), reports that 85% of F&I products are sold in a controlled transaction, which would be lease or finance – not cash. “It is easy to say, ‘Would you like your payments to be $385, or $401 with protection?’ But if a guy comes in with cash for a $28,000 vehicle, you’ve got to get him to write another check for $1800 (or whatever the amount is) for a service contract.”

To achieve the target PVR, Glen Tuscan, president, Dealer Commitment Services, emphasizes a consistent focus on those cash customers. He says cash customers are strictly a matter of the F&I person’s attitude. “The approach is no different than a captive finance customer. If the F&I manager stays focused on his offerings consistently with that cash customer, the solid PVR results will come.”

Clearly, appearance and “peace of mind” products such as paint and fabric or roadside assistance offer viable avenues for approaching all cash customers. Older vehicles merit a focus on service contracts while purchasers of new vehicles can be shown the value in an array of appearance products. John Braganini, principal of Great Lakes Companies, pointed out that deductible amounts, length of coverage terms, and the level of coverage can all be adjusted to best meet individual customer needs.

An array of appearance and peace of mind products, similarly to the products often valued by lease customers, are most recommended for cash customers. Among the top of the list for those peace of mind products are identity theft, and credit insurance. Other products with strong appeal to cash customers are theft recovery products and planned maintenance – both of which are also excellent tools for promoting customer retention. Appearance products such as tire and wheel protection, paintless dent removal and paint and fabric protection also are products with strong appeal to cash customers.

Lease Deals

Historically, finance deals may have proven to be the most profitable, but the rapidly growing number of leases has had a big effect on product offerings at higher-end dealerships. According to Crisorio, 2/3 of new vehicles are now leased in high end stores, rather than purchased. And dealerships are feeling the effect this has on PVR. “If one dealership sells 100 vehicles and leased 40, and another dealership sells 100 and leased five, their PVR is not going to line up because of the lease income. You can’t compare the two. The guy who delivered 40 leases would be in trouble – he is going to look terrible.”

Many agents agree; the recent surge in leasing has everyone reevaluating how lease deals are approached in the F&I office. However, today more than ever, they are beginning to be viewed as a ripe opportunity for profit. The days of viewing lease and cash transactions as “throw-away” deals are quickly becoming a thing of the past.

When asked to compare the PVR on a lease versus finance deal, John Peterson, former president, The Oak Group, pointed out that it might be more difficult to attain higher PVR on lease vehicles, but with today’s offering of ancillary products, he says it is becoming easier now than it ever was in the past.

When you are in tune with the customers’ needs and buying style, agents agree that you can have a very productive conversation with them about products – even on a lease. Since PVR is an average, the higher numbers achieved on other vehicle sales can even out the lower PVR from leased vehicles. Tuno says he looks at aligning lease vehicles with products such as lease wear and tear, key replacement, chemicals, tire and wheel, and theft. “The lease customer is the payment buyer of yester-year. We are sensitive to that and we don’t expect that the PVR on a lease vehicle is going to be 50%. Remember, PVR is an average. If it’s a big leasing store, we like to try to make sure they stay at a floor of $750 per vehicle lease, and make up the difference with new non-leases and used cars.”

Since most leases are for three years, service contracts can be a tough sale. Many agents mentioned aligning lease customers with products such as lease wear and tear, chemicals, and key replacement. It is wise to point out to customers that appearance products can often prevent them from having to pay for damages at the end of their lease by protecting the vehicle through the term of the lease.

A lease deal can be impacted by the allowances of the lease institution – therefore, the target for lease deals may vary by manufacturer. Crisorio says that while a common target for lease and fleet deals is $1000, he says the potential impact of a lease institution could be as significant as, “Mercedes might be $2200 and Nissan could be $350.”

From Luxury to Low-End

Braganini, says the only difference between a buy-here-pay-here customer and a Bentley purchaser is the customer’s needs awareness. “The people in that higher income bracket, driving upscale cars, are no different than anyone else. They buy the same way – they buy things they see value in . . . You have to carefully look at the composition of your customer base and build an F&I department around that. If you try to sell the same products to Ford buyers as you do to Mercedes buyers, you just aren’t going to get the same results.”

However, Glen Tuscan pointed out that European imports do have a real effect on PVR. He says a penetration rate of 30% for service contracts can be expected if you include what he refers to as “the high-end European lines” – BMWs, Audis, and Mercedes. “But if you are talking strictly domestic and Asian imports, 40-50% is a very reasonable number to expect for F&I service contract acceptance rates.”

Lower-end dealerships have a much higher penetration of service contracts overall than higher-end dealerships. “In lower end dealerships, VSCs are very important, without a doubt, ” says Peterson. He says that the average number of VSCs that are sold should be 50% or better if a store is operating effectively.

Crisorio says a high-end customer might be more prone to buy tire and wheel because the cost of replacement is so high, but so is the cost of the protection. The lower-end customer might not be as concerned about this type of coverage. Crisorio says tire and wheel is his biggest selling product at high-end dealerships and service contracts dominate at the lower-end dealerships.

John Braganini believes the demographics and franchise of the dealership should drive the menu. “A franchised dealership selling both new and used vehicles will need to select products and coverage formats that match both the mechanical, functionality, and operating conditions of the vehicles they sell. Trucks and SUVs call for different coverage than sedans and smaller vehicles. The income, trade cycle, driving habits, and lender metrics will then drive the pricing and selection of the products that are selected for the menu.”

Braganini included the following list of products recommended specifically for truck buyers, as opposed to car buyers:

  1. Commercial use surcharged products
  2. Rips, tears, and burns coverage on interior protection
  3. Electronic corrosion module
  4. Consequential damage coverage for the extended service agreement
  5. Hydrophobic windshield protection
  6. Curb & cosmetic coverage on tire & wheel

Tuno says the marketplace is rich with great products that offer all customers real value, regardless of their vehicle type or if it is new or used. “Typically in the ‘luxury’ marketplace, with longer factory warranties and shorter ownership cycles, appearance and convenience-type products are more valuable to the customer.” This is particularly true when a manufacturer, such as BMW, includes the cost of maintenance as part of their lease. When this is the case, Tuno says that there is nothing left to offer except for those appearance and convenience type products. He suggests: cosmetic wheel repair, windshield protection, key replacement, paint protection, paintless dent repair, pre-paid maintenance, tire and wheel, and even biweekly payments.

Braganini says drilling into the demographics of a store’s customer base allows him to put together a product portfolio that makes sense to those customers. “You can pull 500 dealer files from a dealership. You can’t use the information specifically, but you can look at where they live, where they work and their credit application profiles. I want to see where they put their car at night, what kind of weather they are driving in, what kind of roads they are on, how far they are driving to work, and what the prime rate is in any particular area. The information is all there. You can look at the density and location of the car washes and various detailing opportunities people have. When you are done, you can put together a pretty good story for the consumer.”

More traditional products such as VSC, GAP, and anti-theft do have their place at “luxury” stores, added Tuno, but he pointed out that they often fit better in a “non-luxury” store – where the demographics of the franchise better support those products. Buyers at “non-luxury” stores typically do not have the financial resources of luxury car buyers, and a costly mechanical problem could be a major financial burden. For this reason, these customers often find the peace of mind coverage of a service contract to be especially attractive.

The bottom line in adapting your product offering is to understand the customer and cater products to their unique needs. Higher-end customers with more economic or buying power will see value in high quality appearance products. Tuno noted that, “no one wants to drive an $80,000 Mercedes that’s dented, scratched and has beat up wheels or tires.” He says the “bling factor” has to be accounted for, as does the customer’s buying style. “You have to recognize when a customer really wants to have that arrival factor – ‘I’ve made it, I am successful, and now I’m getting my Mercedes.’ People don’t buy Mercedes because they don’t want you to know they’ve arrived.”

Braganini emphasizes the importance of finding the right products. He says a lot of agents either don’t take the time to do that, or they don’t have the capability. Instead, they end up trying to fit the customer into their plan instead of creating a plan designed to best meet the customer’s needs. And for dealers who are doing business with a large national company, those options to customize product offerings often do not even exist. Customizing the product offering is key. “By taking out a clean sheet of paper and designing a program specifically for that store based on its demographics and types of vehicles, we are able to offer a product mix with specific appeal for that group of customer’s needs.” The result? Achieving the PVR that all agents strive for, a happy customer, and at the end of the day, the satisfaction of a job well done.

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Closed Deal Announcement – Peakstone Advises The Oak Group on Strategic Alliance with Total Warranty Services, Inc.


The Oak Group has entered into a strategic alliance partnership with Total Warranty Services, Inc. (“TWS”) of West Palm Beach Florida.

Founded in 1975, The Oak Group (including its related affiliates) is a leading master general agency and third-party administrator of vehicle service contracts (“VSCs”) and related ancillary products sold through automotive dealerships nationwide. Oak’s managing principals, Steve Pearl and John Peterson, are two of the most respected industry leaders in the Automotive F&I industry and pioneers in product innovation in the F&I marketplace. They have built a highly successful agency that is also a leader in reinsurance, providing customized programs for automotive dealerships.

“Peakstone’s dedicated Auto F&I practice team, led by Brad Curtis, delivered us a terrific outcome and found us a great strategic partner to extend upon our longstanding reputation as a leader and innovator in Auto F&I products and administration,” said Steve Pearl. “Peakstone developed and executed on a highly targeted strategy and led every aspect of the process in a highly efficient and discrete manner and brought us a partner in TWS that will greatly benefit Oak’s customers by bringing additional strategic resources to the Oak platform,” Pearl said. John Peterson, added, “Peakstone delivered us numerous strategic options that enabled us to select the best partner for Oak employees and stakeholders for accelerated growth. We are extremely pleased with the result and we could not have found a better partner in TWS to build upon the Oak franchise.”

Peakstone has a dedicated practice covering the Automotive Finance & Insurance industry and has completed numerous transactions in the sector.

The Peakstone Group served as exclusive financial advisor to The Oak Group in connection with this transaction. Terms of the transaction were not disclosed.

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Top Agents Talk About PVR


Per vehicle retail (PVR) has long been the measuring stick of F&I success.  While it is a useful tool, it clearly does not tell the whole story. In the simplest terms, PVR – also referred to as per retail unit (PRU) – consists of two components: finance or lease reserve and the profit from F&I products. Randy Crisorio, president and CEO, United Development Systems, Inc. (UDS), describes it this way, “The most common formula for PVR is to take all the vehicles and all the income divided by the number of vehicles that were delivered and come up with an average. One of the most common averages is $1000 PVR/PRU.”

In the last few decades, PVR numbers have seen a great change. Today, numbers are significantly higher than they were in the past. Mike Conley, CEO, Conley Insurance Group, says things are much different now than when he got started 25 years ago. “Stores that were producing $500 per vehicle were considered to be well performing. In the last decade, this number snuck up to $1000 per vehicle. Now the new normal seems to be a goal of $1500 per retail.”

Other top agents we spoke with stated similar ranges for today’s typical PVR. Michael Tuno, president, World Class Dealer Services, Inc., says they do not like to see anything under $1,000 for PVR, regardless of the manufacturer. Glen Tuscan, president, Dealer Commitment Services describes a solid number for his stores as $1,200 PVR with a maximum of 40% of reserve in that number.

Depending upon the area and the dealership, John Peterson, president, The Oak Group, lists a typical range of PVR from $1,000 – $1,800 or even as high as 1,900. He believes the most important thing in attaining the maximum PVR is doing things properly – in a compliant fashion and having the accountability that allows for tracking using electronic reports.

Data Tracking Systems – Invaluable Tool or Unnecessary Expense?

Many agents take advantage of tracking or reporting software that is readily available through a variety of industry sources. The software allows data to be broken down in many ways, providing detailed information about everything from the individual performance of F&I and sales managers to specifics on each F&I product sold and PVR excluding lease and fleet vehicles. The data is mainly taken from DMS and menu systems and broken down into specific categories – all of which can be viewed in real time by the agent.

Some agents, such as Crisorio, say the reporting software is worth every penny. If you can’t show exactly how each F&I manager is performing and gather information about each product sale, you can’t use the information to improve things. He also views the real time availability of data as vital. “We don’t want to get to the end of the month and it be an autopsy. If performance died three weeks ago and you don’t find out until the end of the month, you are dead in the water. Once the month is gone, you can’t recover the money. In my opinion, awareness is the biggest piece of PVR. Setting expectations and having ready awareness is one of the pathways to success in F&I.” UDS has used tracking software for over 12 years and before that Crisorio did it manually. In the old days, calculations were done manually by the F&I manager and given to the agent. Crisorio says he would then actually draw graphs by hand and Xerox and distribute them each month.

Peterson too, feels electronic reporting is absolutely necessary. “You can’t improve something you can’t measure. Having the processes and taking accurate measurements is very important. If a dealer is not achieving the desired PVR, there is great value in being able to determine the reason why – is it the lack of sales of a particular product or perhaps it is a particular person who is underperforming.”

Other agents view reporting software or tracking systems as beneficial, but not essential. To fully realize the benefits of the system, complete dealer buy-in is a must and not all dealers want to use the systems. Some dealers fail to use it consistently and others use it improperly. In some cases, an agent may view a smaller dealership as not being worth the cost of utilizing such software.

Conley says he has dealerships that are just as successful without utilizing tracking software as other dealerships that do use the tracking software. “It is a great tool but is an awfully expensive way to get information that should be provided as a part of the DMS. The information it provides is readily available on the DMS but it is not as easy to access. The benefit of the software is that it is an automated process. The data from each day is emailed to agents nightly, allowing them to keep a close watch on everything that is going on inside the dealership. They get addicted to having that up to the minute reporting emailed to them daily. It is a beneficial tool but a good F&I manager is going to be a good F&I manager regardless.”

Another potential downside with the reporting software is the time the agent must devote in order to take full advantage of the software’s numerous capabilities. Conley says some dealers who are particularly computer savvy produce their own reports, obtaining the data directly from the DMS. Is the answer simply taking the time to teach dealers how to extract data from the DMS and put it into a report? Would that make the need for costly software unnecessary? Conley thinks that is at least part of the problem. He says agents can be lazy in helping dealers to effectively write a report. Perhaps if they devoted the time to do this, the reporting software would not be an issue.

Analyzing PVR

There are additional ways PVR can be broken down. The first is to look at products per retail unit (PPRU). This is described as a good measure of where the metric PVR ultimately needs to be – and whether or not it is healthy. The numbers we heard for achieving a solid PPRU were two to three products per vehicle. Another is profit per financed retail unit (PFRU). This is a good indicator of whether a dealership is relying too heavily on reserve – or not enough.

Using their reporting software, Crisorio says the first value they use is lease and fleet excluded. He refers to this as true retail. The next is lease per retail unit. On a lease transaction, the customer is usually sold on a monthly payment before entering the F&I office. Historically, finance managers have pushed lease deals away because they could not make the big finance reserve. With leases at an all time high – currently making up nearly 30% of sales – lease deals are now more important than ever.

Another reason to use tracking software is that it provides the ability to determine when a system is followed and when it is not – thus letting the agent identify exactly where a problem is, so it can be targeted and corrected. “Being able to track it is critically important,” says John Braganini, principal of Great Lakes Companies, “The ultimate goal is to identify situations and issues within the dealership that can be corrected in order to bring the PRU back up to where the dealership wants it to be.”

The results from the tracking software provide a good picture of what an F&I manager is doing and not doing. For example, if all the products are being presented on a menu, they are kept in the deal folders. The reports will show if a menu was properly presented. Crisorio explained, “The menu is presented in three pieces and there is a date and time stamp on each piece. First, there is the presentation piece and then the final piece shows what they bought and didn’t buy. If the final piece is run 13 seconds after the first part, then all of this was done without a menu. The audits prove invaluable in looking for individuals who undermine or distort the selling system.”

If someone is underperforming then the answer may be to enroll him or her in the next training school. This is the standard recourse according to Crisorio, “We want to make sure we are supporting them in every way, because we don’t make a dime until something gets sold. They don’t send us checks every month because they like us. If they don’t sell any products, we don’t make any money.” They offer regular live training as well as webinars, UDS TV, a partner portal and F&I tip of the week – all to provide constant support and keep F&I managers performing at their best. As a rule, Crisorio says their objective is to make a star out of the F&I manager. By doing this, they will earn more; stay in that role longer and the dealer will be more profitable. This, of course will result in a long-term relationship with the agent – who will ultimately be rewarded for the performance of the F&I manager.

Braganini has F&I managers utilize a self-reporting tool as part of their data management system. On the deals where all the subprocesses were conducted properly, he reports a significantly greater PRU.

Training

All agents agreed that training is extremely important – and even more beneficial when it can be used after targeting those who most need it and utilizing the data provided about the breakdown of PVR. “Training, whether online, in-store or in classroom is essential,” says Conley, “For most of our clients, the products we sell are not as important as the training we offer.  Our clients rely on us to help them maximize profit, but to do so in a consumer friendly and legally compliant way.  Without ongoing training and continuous commitment to improvement, the ‘new normal’ cannot be realized.”

Tuscan says when it comes to PVR, his focus is strictly on F&I type products and he is cautious when he sees PVR numbers listed in the $1,300 – $1500 range. “I have seen people boast of record numbers out there and as I see those numbers, I question if they are real F&I products or if they include aftermarket, accessory-type products. I don’t focus on after market type accessories that would be added into F&I numbers – accessories being window tint, clear mask and those types of items, which simply are not F&I products. Those are accessories.”

Braganini referred to another management approach known as throughput analysis – looking at only how many units were sold and how many dollars were generated at the end of the month, without managing the process or breaking down the data. “You have to basically guess at what to do to change it the next month or you have to live with it. I have never been a fan of this because you are going to guess wrong most of the time. I would rather track each step in the sales process.”

Maximizing Profits and Working with the Sales Department

To truly maximize profits, the F&I office and the sales team need to share common goals and work together to achieve them. This relationship is very important in maximizing PVR. Customers tend to be very guarded about committing additional time in a dealership, once they have decided to purchase a vehicle. For this reason, it is imperative that the sales department breaks the ice by properly setting customers up, educating them about all the features and benefits of their new vehicle and pointing out the areas that are not protected. This way, they allow for a seamless handover to the F&I office. “To maximize F&I income,” says Braganini, “you have to have both departments working together and often, they just don’t do a very good job of it because they have different objectives.”

Explaining the features of a vehicle’s smart key and it’s replacement cost to a consumer who’s trade in had a key that could be copied cheaply at a hardware store, is an important part of making the consumer aware of the potential cost of replacing that new $600 key with a computer chip. By doing this, the sales person provides a perfect set up for F&I to offer key replacement and for the customer to see its value. It is the same with other products. As the sales department educates consumers of the features and benefits of their new car and the customer sees what is not covered, the F&I department can then come to the rescue by offering products to completely wrap the new vehicle in protection.

To say a new car has “bumper-to-bumper” warranty, simply is not true. Tuno says using this term is just plain lazy. “Cars typically come with six to eight different warranties on the battery, tires, paint, etc. and that needs to be clearly explained to the customer. Then we can explain the value and the convenience of what we call a warranty-guarantee program – which is really prepaid maintenance – because if you don’t change your oil and maintain that vehicle, the manufacturer will not cover you for any of that warranty. If two wheels can cost a thousand dollars each to replace and the customer is under the impression that they have a three year, bumper to bumper warranty, their mindset is ‘Great, I don’t have to worry about anything.’ It’s not a question of worrying, it’s ‘these are your driving habits and these are your driving needs – what’s going to be important to you over the course of your ownership?’ And there’s no shortage of products to take care of their needs.”

Other factors that come into play involving the sales department are desking compliance, how the customer is handed over to F&I and the delivery conditions of the vehicle. Some agents pointed out the importance of not using the F&I department to close too many deals. This responsibility requires a realistic sales manager. If he isn’t, the dealer has to make the decision to let the practice continue or not. If a customer wants unreasonable financial terms, a decision must be made as to what percentage of sales are acceptable being turned over to the F&I office to close the deal. A reasonable estimate might be that 90% of people coming into a dealership to buy a car have a pretty good idea of what they can buy on a monthly budget or on a pricing schedule. Therefore, using the F&I office to close deals probably should not occur in more than 10% of deals.

The turnover – how the customer is introduced and greeted, and the time it takes to get into the F&I office, affect a customer’s mood and attitude. Also, the delivery conditions are significant. Having everything ready to go when the customer comes in to pick up the vehicle and handling the exit interview professionally are both key factors that require a good working relationship and common goals between F&I and the sales department. Braganini noted, “You have a better chance to increase PVR if the customer does not come in and have to wait for a long time. It puts the customer in a sour mood if paperwork is not completed after two hours and their car is not ready.”

The sales manager can take the lead by establishing a process for how customers are turned over to F&I. By making it clear when hiring sales people that they are expected to introduce customers to the finance manager at the point of sale – without exception – they can lay a foundation that will prevent this from becoming an issue at all.

Tuno says the people who are really good at it manage the process, train their people, have talent and have consistent pay plans that push both sales and F&I departments in the right direction. “Pay plans ultimately are job descriptions. The one that is the killer is if we just give them 10% of the whole department. What is forcing F&I departments to sell F&I products in that environment, when the desk is giving them 70% of their income from reserve? The answer is nothing. It’s just human nature.”

Peterson says that having a good pay plan along with goal setting clearly lets people know what is expected of them. He lists the four keys to success in F&I and pointed out that they carry over to all professions: goal setting, accountability, education and compliance.

Having a well rounded offering of products and being very good with all your products is also a foundational part of ensuring a top performance according to the top agents we spoke with. To maximize PVR, an agent must be able to present the products that best fit the customer’s needs – whether it is a cash, lease or finance deal – both at high-end and lower-end dealerships. We will analyze the importance of product offerings, and all the dynamics involved, in detail in a follow up article.

Advice for the Future

As F&I becomes an increasingly critical piece of a dealership’s profitability, the challenge is not only maintaining a healthy PRU, but also for the F&I office to take steps to ensure they are not on the slippery slope that regulators are sure to focus on. Just as caution needs to be taken in pricing interest rates, consistent pricing of F&I products may be the next shoe to fall. Tuno says the abusive practices of charging a customer $1995 for a product that actually costs $100 are gone. He says the footnote to making sure you are achieving a good PVR and doing a robust amount of product sales is to price consistently. “This will keep you out of harm’s way and ensure that you have not abused or intentionally caused protected classes to have to pay more for a product. You can go to any number of regulatory workshops and learn that pricing products consistently is a best practice. But dealers are their own worst enemy.”

Peterson also emphasizes the importance of accountability. He says with all the regulations out there now – CFPB, Dodd Frank, etc. – being able to measure performance becomes imperative in maintaining accountability.

Clearly, the advice from these top agents can be summed up as: be aware, manage the process through detailed reporting, ensure a good working relationship between sales and F&I, train your people well, offer a wide array of products and know them all, and don’t view any deal as a throw away deal. Tuscan concludes, “You have to have total focus and the same commitment to each different type of buyer as well as a solid, well rounded product offering. That, to me is how you will achieve a solid number for PVR.”

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