Staying afloat in a tough economy means every area of a dealership must run as efficiently as possible, and perhaps nowhere is that more important than in the finance and insurance (F&I) department. To ensure it stays successful in these troubled times, Michigan-based General RV Center relies on people, products and protocols to keep the bottom line black.
From it seven stores across two states, General RV has already sold more than 2,500 motorhomes and towable products in 2009 and is on track to move another 2,500 by year-end. To do that kind of volume, the family-owned dealership depends on 13 managers led by Larry Peter, director of General RV’s business department (as its F&I team is known). The former U.S. Air Force loadmaster leads a group of veterans who know the business.
“The best thing about General RV is we don’t have a lot of turnover. I’m kind of the young guy around here with six years in the game. We have a few people who have been here two or three years, but most of them have been here eight, 10, 16, 17 years, so we have a lot of longevity because it’s such a great organization to work for,” he says.
Training is Ongoing
In the ever-changing world of F&I, Peter conducts annual on-site training for the business department between October and December so his staff is kept updated on a wide variety of topics.
“We communicate in a forum about what’s selling well and what techniques work for each business manager and we try to incorporate that into our menu selling the verbiage we want to use going forward with this product versus that product,” he says. “We’re always training. Usually once a month we’re all together just to pick each other’s brains, see what lenders are doing, what trends are out there, and then I talk to each individual business manager at least two to three times a week just trying to get their thoughts, if they’re stuck on anything, they’re having a bad deal, or any other issues.”
Although keeping training sessions local mean staff travel costs are reduced, Peter says there’s another reason for conducting training sessions himself.
“We’re not big on consultants, just because consultants think their way is the right way and that’s it. So what I do is attend the RVDA and RVIA conventions every year,” he says. “I go to all the classes, and then I bring that information back and share it with the group and we try to figure out how we can intertwine that into our successful way of doing things.”
As for backgrounds, Peter says some of his managers have worked at the F&I desks of auto dealers like he did, and some haven’t; at least one was a salesperson. Although Peter admits the best salesman doesn’t always make the best business manager, what’s more important is confidence and attitude.
“We sit up on our desks, not back in our chairs. Customers need to be led and our job is to keep control of the closing. We preach that a lot: ‘You have to keep control of the customer at all times, even in the closing,’” he says. “In the business department, we’re selling paper and a promise, so we have to really portray confidence in the products we’re selling. It’s important for all of my men and women to be as confident as I am in their abilities as they are about selling the products.”
Menu Selling Brings in More Money
General RV is far removed the techniques used by the car dealers of old who offered a smattering of options from the F&I desk while hoping customers would buy at least one, Peter says. Instead, his managers use a comprehensive menu of products that give their customers many choices.
“We like to give a menu to our customers and the reason is two-fold: one is for compliance. The law says you have to present 100 percent of the products 100 percent of the time, so for compliance sake, we do it that way,” he says. “On the other side, it’s our job to build value in the products to show people why they need them, but you also have to be able to present it to people in a way that they’ll understand. The menu keeps them focused on what we’re trying to accomplish: that’s going over the products and letting them make a wise economic decision about their purchases.”
General RV’s customers may choose from one of four packages from the menu; each package contains at least two items, such as an extended service agreement or a tire protection program. The most popular, Peter says, is the package with three to four items. With menus, he adds, it’s important to keep it fresh.
“It’s constantly evolving. This game is ever-changing and I think that’s part of the problem with some of these smaller stores. They don’t want to change with the environment and if you don’t change in this environment, you get run over,” he says. “We monitor our products. If something new comes along, we’ll throw that onboard, too. We want to have the latest and greatest presented to our customers so they have every option available to them.”
It also helps that Peter’s managers also have many of the products they sell in their own vehicles. “So we’re not just selling them,” he says, “we’re using them.”
Of course, the main mission of any F&I department is simply getting banks to buy deals, and the tough economy means Peter and his managers have to carefully structure each contract if they hope to complete a sale.
“The hardest part of our job right now is getting people financed. The banks tied to the mortgage world that seem to be getting all this bailout money aren’t releasing it down to the credit field,” he says. “We fight the battle with the big banks, such as Bank of America, because they’re extremely tight. Bank of the West isn’t tied to the mortgage world so they’re not hit as bad so they’re able to continue lending at normal levels.”
Knowing Lenders Personally Pays Off
As business department director, Peter sees himself as a link between lenders and the dealership. It’s a role he takes seriously because the health of General RV depends on it and he suggests his counterparts at other dealerships do the same.
“At one time or another, I’ve either personally talked to or am talking to every local bank, every local credit union, and every regional bank that we have about our indirect programs My job is to sell them an indirect program in order for them to make money and for us to make money,” he says. “It’s part of that process of evolving and moving forward.
“You should have a core group of lenders, and Citizens Bank, Bank of the West, U.S. Bank and Bank of America are our core lenders. We have other credit unions and regional banks that move in and out of the market, so we’re always signing up new banks. I think that’s key,” he says. “If you’re not signing up new banks – if you’re not out there spending the time knocking on banks’ doors selling them an indirect program – you’re losing.”
Once a bank has signed with General RV, Peter insists on knowing how they’ll process his loan applications to ensure deals get bought.
“I want to know what happens on the other side of the fax machine. When our business managers structure a deal and fax it to a lender, I’ve been to that bank and I’ve seen the fax machine where it comes off. I know how the lender inputs it into the system and how they score it,” he says. “I know everything they’re looking for, that way it’s a seamless transition. We want to trade a contract for a stack of money from the bank and we can’t get that stack of money unless our paperwork is 100-percent clean.”
To start the process, the dealership runs credit and OFAC (Office of Foreign Assets Control) background checks on every customer. While costly, it’s necessary to getting applications approved as quickly as possible. Besides, lenders can’t legally do business with people or companies on the Specially Designated Nationals list, so the OFAC check tells General RV whether or not to proceed.
Shotgunning Not Allowed
The biggest no-no in his department, Peter says, is the old-school method of shotgunning.
“We don’t shotgun deals because our business managers are trained to look at the structure of a deal and understand who’s going to buy it and where they’re going to buy it at,” he says. “They understand the integrity of the deal from the front to the back, they understand the front-end advance, they understand exactly how much back-end advance they can get, and they know the rates.”
Of all the things his managers should know, Peter says those rates rank at the top.
“You need to memorize your rate book. That is our bible,” he says. “We have several banks, so when I have my business managers look at a deal, they need to know mentally every program that’s available and where we can maximize the most gross. That’s before it goes to the bank. I know there are a lot of dealerships that get an application, don’t pull credit, and just put it on the fax machine to all seven or eight of their lenders hoping somebody buys it. We do not do that.”
Lending Landscape Has Changed
Having multiple lenders in place, from local credit unions to the national banks, really helps get deals done, Peter says. In today’s climate, General RV’s use of local lenders has increased dramatically.
“In years past, it was the big national banks that you did 75 to 80 percent of your lending with, but that’s gone the other way now. Probably 30 to 40 percent of your lending now is with the national banks and 60 to 70 percent is your local credit unions and banks,” he says.
The reason, at least to Peter, is clear.
“They’re loving it because they’re getting a bigger piece of the pie. These little local banks and credit unions aren’t attached to the mortgage side of banking,” he says. “They don’t have a lot of subprime loans out there that are eating up their bottom line, so they’re always excited to get more deals and some money turning in their portfolio because in the end, RV paper is good paper.”
General RV’s strict business protocols also require its managers to watch closely over certain ratios in a customer’s financial data.
“Our two biggest things that we fight are debt-to-income and loan-to-value (LTV). The LTV is controlled by us and the customer with money down. One of the best things that we do over our competitors is we get money down on everybody. We start by asking for money down right on the sales floor straight through to finance. Money down is how we get deals done nowadays. We can’t control somebody’s debt to income.”
Fortunately for General RV, which will open its eighth store near Jacksonville, Fla., in September, subprime borrowers are few and far between, he says, which eliminates a huge headache.
“Most of the time people who come in here buying big-ticket stuff, they know they need good credit,” Peter says. “We don’t have to weed out a whole lot. That goes back to pulling credit. You’ve got to pull somebody’s credit to know.”