Finance and insurance should be an extremely profitable revenue source, regardless of the size of your dealership. In fact, it could be said that smaller stores have the potential for an even greater return based upon their lower overhead.
The starting point of any F&I department is to dedicate someone to continually learn and understand the available lenders and products to sell and to be the point person for all things F&I. If this person is a salesperson or clerical staff who handles F&I as an add-on to their normal duties, that will most likely drain your profit center.
For example, consider a small dealership with less than $5 million a year in sales. The dealership may have a lender or two that allows minimal to no reserve or rate markup on the loan and may not even offer product protections. What you are then left with is a few hundred dollars a deal from F&I and a “who cares” philosophy. This strategy can be summed up as: “Just move the unit – that’s where we make our money.”
This strategy is dead wrong and is not what profitable F&I looks like.
F&I departments for larger dealerships are usually set up to succeed and maximize F&I. However, product protections are not a focus and rates are seen as way too sensitive. Product protections include a suite of products that customers typically don’t ask for and many salespeople would prefer to not offer.
That is a mistake, as the benefits and value of these products are real, and customers will pay for them. It boils down to what you expect from sales performance and how you impose those expectations.
There are industry perspectives from top performers across the country who know how to preserve a sale, maximize rate markup, sell protections, and maintain compliance. Drop any one of the pieces and F&I is not a focus and you will lose margin.
Just putting a deal out or referring customers to a local credit union is hurting your dealership to a tune of 25 to 35 percent less profit on every deal. There are multiple lenders available with rates competitive to credit unions and who will pay reserve at high levels and allow financing of product sales.
Once you have the lenders, you have to know what to expect and impose it on your staff. Most employees don’t like to sell or offer a product that the customer is not asking for. Product protections will not sell themselves and will be a large area of neglect if you don’t know what you should expect and impose it on your staff.
Do you have the proper DMS system or specific RV software or marine software or outsourced service that will help you understand and evaluate your performance? If not, you will have no way to know what is happening and where you stand.