Tag Archive | "Providers"

F&I Is Not About Menus


Everyone in our industry has their own vision of what our new, hyperconnected world, tomorrow’s vehicles and the F&I department of the future might look like. It seems every manufacturer, DMS provider and F&I menu software company has their own high-tech version of what the sales and F&I process needs to become. In this geekoid future of Snapchats, Instagrams, and Tweets, we’ll discover a glorious new world filled with cars that drive themselves and products that sell themselves, which are then delivered right to our doorstep via Amazon drones.

The ultimate fiction of this shiny new techie-world of virtual reality goggles, wall-size touchscreens and chat-bots is that somehow computers and menu software will soon be able to discover and fill customer needs, create customer interest, overcome objections and entice people to buy more stuff. And they’ll be able to pay for it all with digital money that rains down from a virtual cloud. Yeehaw!

Now I certainly don’t profess to know what the future holds. However, I do know that, while technology, computers and software can do a lot, there’s one thing they can’t do and won’t ever be able to do: care. Only a human being can care about another human being.

The Easy Button

Dealers, F&I managers and agents (and F&I trainers!) are always looking for an “easy” button — that new product, word-track or “close” that will magically get customers to buy F&I products with little or no effort. Whether it’s menu-selling software, a new closing technique or a video product pitch using a spokesmodel, hope springs eternal that someone has found a quick, easy and foolproof way for an F&I manager to sell more F&I products and make more money in less time with less work.

The latest easy buttons are the high-tech electronic F&I menus that have more bells and whistles than a $35,000 Tesla. The only difference being they’re actually available, and you don’t have to stand in line to buy ‘em. Some of these menu software companies now offer desktop or large tablet touchscreens or their menu on an iPad. Some even include computer-generated graphics and video product presentations. Most allow the customer or F&I manager to easily move products around to see how adding or removing them will change their payment.

Some of these menu software programs are truly impressive. They have the ability to combine previous purchase information and new customer data to determine which products they’re most likely to buy. These menu software programs mine the dealership’s own data to see what F&I products the customer bought last time, as well as the odds the customer will purchase a specific F&I product this time.

Even I have to admit this is a huge improvement. In prehistoric times, we actually had to get off our butts and walk down to the accounting office and pull the customer file out of the file cabinet to see what F&I products they bought for their last vehicle.

Many of these software programs include self-serving “customer surveys” that are designed to eliminate the needs discovery process. I put the term in quotes because these brief surveys include a few questions designed to replace the antiquated idea of having an actual conversation with a customer. Most software designers aren’t too keen on human conversation, so the assumption is that most consumers would prefer little or no conversation.

Once the customer completes the survey, the F&I software operator knows which products they should offer the customer. Apparently, knowing the answer to only six or eight questions allows a computer to know all of the products a customer is likely to buy. Here’s what the computer says you need, here’s what it covers and here’s your new payment. Now talk yourself into it.

All of these menu software programs can structure the deal and create a menu designed to ensure maximum profit. And all are promoted as a surefire way to increase F&I product sales and profits. On the surface, they are certainly pretty slick. And this futuristic dream of software that sells F&I products continues to be updated, upgraded and improved upon every year in an effort to move us all toward what they really desire, which is to get agents and dealers to buy their software.

But is a high-tech menu on a big screen what the customer wants?

Do you really believe most human beings desire less human interaction and more preprogrammed, premeditated, computer-generated digital sales presentations based on odds, algorithms and logic traps? Do you really think self-serving software created specifically to benefit the user, not the customer, is the way anyone wants to buy anything? No one who has ever been trapped in an automated phone system loop, those automated torture devices that misunderstand what you say or require an endless series of button pushes to complete even a simple task, wants to envision a future with more of that.

That’s not progress. That’s hell on earth!

Putting Technology in Its Place

We have cameras in hundreds of F&I offices and record thousands of F&I transactions every month, and I have yet to hear a customer request a better menu, complain because the options were offered on a paper menu or demand to see a touchscreen version. In reality, most customers couldn’t care less how F&I products are offered. While one generation may prefer viewing a menu on a computer screen to a paper version, they certainly aren’t going to buy any F&I products because of a pretty menu.

All a customer wants to do is get their paperwork completed as quickly as possible so they can take delivery of their new vehicle. The fact is, most customers do not walk into an F&I office wanting to buy additional products. Nor do they want to be forced to wait while an F&I manager creates a custom menu with those products. If customers are being forced to wait while a menu is being prepared, we’re wasting their time. Can you imagine a restaurant forcing every customer to wait while a custom menu is created just for them? That restaurant wouldn’t last a month.

What a customer is really buying is the F&I person presenting those products. Customers appreciate having someone take time to review the options, answer their questions and help them make an informed decision. They resent having to listen to a sales pitch. It doesn’t matter whether that sales pitch is made using a brochure, a paper menu or a 60-inch flat-screen monitor. It’s still a sales pitch.

Every customer asks themselves this question: “Is this person trying help me, or is this person trying to sell me?” How they answer that question in their own mind will determine whether or not we’re able to sell them. If they think that F&I person is trying to help them, they’re going to be very interested in what they have to say. If they think that F&I person is trying to sell them, they couldn’t care less what that person has to say.

Helping customers demands that an F&I professional seek out, with eagerness, reasons why the customer needs each and every one of their products, and helping them see how that product will benefit them. If a customer trusts that person, believes they know what they’re talking about, and feels like they’re genuinely trying to help them, they will value that individual’s knowledge, expertise and input. It doesn’t matter whether those products were offered on a high-tech menu or a bar napkin.

F&I is not about menus. It’s about helping customers make an informed decision about the options available in connection with their purchase. Customers don’t buy F&I products because they understand every nuance of the coverage. They buy them because they feel someone understands their unique situation and is trying to help them make the right decision for them and their family — in other words, an F&I professional.

In the F&I office, we have a responsibility to offer every customer every product every time. You don’t need a custom menu to do that. We don’t need F&I software operators spending more time customizing menus. We need F&I Professionals who are genuinely interested in helping customers, and care about people. Because customers don’t care how much you know, until they know how much you care. And no menu can do that.

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Mechanical Breakdown Protection, Inc. (MBPI) Celebrates 35th Anniversary


Since 1981, MBPI has been recognized as one of the top administrators in the nation. May marked the 35th anniversary for this employee-owned company, which began from James Orr’s vision of what a truly great F&I provider could and should be. Currently under the leadership of Mr. Orr’s son, Kevin, MBPI continues to offer new and exciting ways for dealers to satisfy their customers and increase F&I income.

In the words of Kevin Orr, MBPI President:

“I just wanted to take a moment and make a special recognition of a tremendous milestone in our company’s history. 35 years ago yesterday, MBPI was born. As Dad would say, he had a trunk full of forms and a list of Dealers to go visit. He did just that.  He did it well. 

Although 35 years is something special to be part of, we look to the future and what the next 35 years holds. We continually strive to not only maintain our level of service, but to constantly improve it. 

I am proud of what my Father started.  I am beyond excited about the future of this company. While we have some lofty goals to achieve, I know that we have the right people in place to take us to the next level.”

The purpose of MBPI has always been to design, market and administrate F&I products to the automobile industry. Much of MBPI’s success can be attributed to our original philosophy: to seek out quality partnerships, and provide the highest possible level of service. MBPI encourages prospective agents and dealers to call 1-800-325-7484 to find out more.

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RoadVantage Wins Platinum Dealers’ Choice Award


AUSTIN – RoadVantage, the fastest-growing provider of F&I programs for the automotive industry, has won a Platinum Dealers’ Choice Award in the F&I Products category, marking the second year in a row for RoadVantage to win an award in this category.

“We want to thank dealers nationwide for voting once more for RoadVantage, and we also want to acknowledge the RoadVantage team for providing superior service,” said Garret Lacour, RoadVantage CEO. “For us, it all starts with a top-notch team who are dedicated to providing a better customer experience, and this award tells me that our approach is working.”

Elected exclusively by automotive dealers and dealership personnel, the Dealers’ Choice Awards recognize the industry’s best providers. In 2015, RoadVantage won a gold Dealers’ Choice Award in the F&I Products category.

“I’ve not had one complaint from any of our customers about RoadVantage’s programs since we started working with them,” said Matt Johnson, owner of Holiday Auto Group, based in north Texas. “The RoadVantage team acts with integrity, and they deliver what they promise.”

To qualify for an award, a company must be among those that scored above the group average score in each category. Providers were rated in four areas: the product/service provided, customer support and service, overall value, and whether the dealer would recommend the provider.

“It is both a privilege and an honor to receive the dealers’ votes in this category two years in a row,” said Randy Ross, Senior Vice President of Sales for RoadVantage. “RoadVantage continues to grow at a rapid pace while maintaining excellent service levels – 97 percent of our claims are approved in eight minutes or less – and this commitment to service is what matters most to our customers.”

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Reinsurance and Loss Control


In a past issue of P&A magazine, we discussed the parties that agents represent and some key aspects of loss control. In this article, I would like to discuss the benefits and idiosyncrasies of reinsurance as well as how loss control fits in.

Our goal as agents is to sign a dealer and keep them forever. As farfetched as this may sound, it is entirely possible if you put the dealer on reinsurance. Once they start seeing the statements and receiving checks, they frequently will not even entertain seeing the competition, because they have their “own company.”

Vital Information

Your first responsibility is to ascertain whether the carrier you are using has the proper program for the dealer. In a panel I moderated Agent Summit 2014, we had a discussion among some of the sharpest minds in the industry. There was consensus on numerous items, including:

  1. Be sure your carrier has the support you need. The big box carriers have all the suits that can come in and put on a pretty good show, but this is frequently style over substance. You need a carrier that will not only supply you with sales support but is willing to have claims or accounting personnel come out and assist in the explanation of reports.
  2. Be sure that the carrier will supply timely reports and detailed loss data. I cannot stress this enough, especially having reports that drill down to great detail on where the claim was repaired and whether it included multiple components, among other details.
  3. Review the treaty. You should see an administrative fee, which includes your commission, as well as a reserve to pay claims and a ceding fee. Sometimes the carrier’s administrative fee and ceding fee are combined, so you have to look at them together as one expense. Under no circumstance should you have to pay a claim fee, and the structure should not change if the dealer were to quit writing with that carrier.

Expert Advice

The dealer is going to need accounting and legal support. Frequently, the dealer will say he wants to use his own accountant and lawyer. However, the dealers’ trusted advisers are not likely to be familiar with reinsurance transactions and thus are not qualified to advise the dealer on this transaction. In such cases, I would always just say “OK” and then call the dealer’s accountant and lawyer. I would explain to them that there are firms that specialize in these transactions and could prepare the tax return for less than $5,000. At this point, most advisers will be happy to have an “out” and will recommend the dealer use the specialist. The fact that the dealer’s trusted advisers are giving this advice, rather than the agent, is an important distinction.

To find these specialists, you can start by looking at some of the presenters and panelists at Agent Summit. You can also ask your carrier if they have any recommendations. Quality, fees, and service levels can vary, so be sure to get recommendations from other agents or industry professionals.

Proper Structure

The structure as to how to hold the shares and or equity of the reinsurance company can vary, but we have usually recommended an LLC be formed to hold the shares. This allows increased flexibility if you want to make ownership changes. It is highly recommended that minority ownership shares be issued to key personnel at the dealership and that it becomes part of their pay plan. The personnel should be selected based upon their ability to influence the operating results of the company and effect loss ratios. Recommendations include the service manager, new and used car managers, F&I managers and controller.

The operating agreement of the LLC should include “golden handcuff” provisions as well as an exit strategy in case one of the management personnel leaves or dies. Golden handcuff provisions include a vesting provision so that the shareholder may only be 100% vested after a given period of time (say five years) or a gradual vesting (such as 20% per year). The exit provision usually is at book value on a given date, perhaps at year-end of the exit or at the previous year-end book value if the exit is prior to June 30.

It is imperative that all relevant personnel, such as service writers, know that this is the dealer’s company that claims are coming out of. This will enforce good claim practices and further align the dealer with the fronting carrier in controlling loss ratios. We wish to avoid reconditioning used cars on a vehicle service contract, upselling multiple claims on the service drive or repairing a component that might break in the future but is currently operating within factory tolerances.

A dealer who truly understands reinsurance and is committed to the concept will reap significant financial rewards and be a great ally for the carrier and agent. We once had a dealer who did not want to pay any claims from his reinsurance company and wanted them all goodwilled. He understood that a goodwill claim is deductible at his ordinary income tax rate whereas as a claim paid from his reinsurance company is effectively deductible at his long-term capital gains rates, which is likely 20% or so less. The problem with this is the IRS would claim tax avoidance and there could have been serious repercussions. We had to explain to him that all legitimate claims have to be paid from the reinsurance company — but under no circumstances should he or his employees push to have a claim goodwilled out of his reinsurance company. Instead, it must be paid by the dealership, due to tax considerations.

Similarly, a dealer who understands reinsurance would push to have the highest reserves possible. This too moves income from ordinary to long-term capital gains. There is some wiggle room to increase reserves from some carriers, but they have to be justifiable increases. The IRS would again look at such increases as tax avoidance if they cannot be justified.

Such justifications could include a premium due to the dealer’s past experiences, the carrier’s history in the geographic area, the carrier’s history with a particular make or model, or simply the fact that the reinsurance company is starting out with a low capital base and there is need to build up reserves in case of a shock loss. In this case, the reserves would need to be revisited later and adjusted up or down accordingly. Most carriers file a rate with a variance acceptable to the state for these types of circumstances.

Reinsurance is a win-win-win situation. The dealer gets to participate in underwriting profits while enjoying the tax advantages of long-term capital gains. The agent wins because he now has a “sticky” client, who is looking to you, his trusted advisor, for guidance. You might make less per contract due to the exposure of fees, but you will sign larger dealerships and keep them longer. Finally, the carrier is a winner, because the dealer’s and agent’s goals are more likely aligned with theirs. So select your carriers, find the right accounting and legal firms, and enjoy increased success.

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