Editor’s note: This blog by Jeff Wyatt, a principal at DLR Financial, is part of an ongoing series of blogs in 2018.
20 Groups have been around for years and provide valuable perspective for dealers that would be impossible to achieve through normal means. These groups take significant time and resources to attend, but the benefits are undeniable.
Think about your F&I department and what you gain by factoring in real perspective to compare your performance. Not a one-size-fits-all perspective, but a dialed-in regional perspective on what is available to you and what it should be producing.
For example, if you are a $10 million a year boat or RV dealer in Ohio, what can the F&I function for your dealership in your region produce and where do you stand currently?
Many states have limits on what protections can be sold and may have limits on what you can sell them for. In addition, which lenders have you chosen to work with and what percent of your customers have poor credit? If half of your customers are a 600 credit score or less and you compare your F&I profit to a similar dealer with completely different buyers with much higher credit scores, those two dealers would be like comparing apples to …. well, something that’s not an apple.
The point is to form an accurate opinion on whether one of your most profitable revenue sources is thriving or not.
Think of the product line that you sell the most. Speaking generically, if that line is grossing 12 percent and you are unaware, chances are that you will continue on that path. If you learn of the 12 percent with specific perspective that your setup can produce at 22 percent, you now know what to expect and where to put your hands on it.
On the other hand, if you are aware of what it is producing, but aren’t sure if the results are good or bad, you’ll most likely accept it for what it is instead of pushing to its full potential.
This is not intended to be confusing or scare you out of the F&I function, but the point is to evaluate the credit dynamics of the customers you work with, understand the protections that are available to you and how often you can expect to sell them, and lastly, how often do you expect to finance your customers with the lenders you currently work with.
If you can’t answer these questions, then prepare yourself to accept what your F&I profit center wants to give you. Many dealers are fine with this, as they feel like the point is to have a way to capture F&I profit and offer financing. Once that’s in place, the thought is: We’re sure to have a highly profitable department regardless of who is handling the process or how you go about it.
This is an incorrect position and will be costly, as F&I has huge potential. What does F&I net to you, and is it good or bad?
Think of a greyhound and how fast it runs when you take it to a park and tell it to go run. It will most likely jog around and take a nap.
Now, think of that same dog next to other dogs chasing something at the right time and right place that drives them all crazy. That greyhound can run 60 miles per hour in the right setup, or it can simply jog around the park. The difference is that you make sure your expectations are specific and correct and then you impose them with support and structure.
The sales side of F&I is primarily selling rates and then selling protections at a level that should never cost you the sale of a boat or RV but that also makes your staff or service company run at full potential. Having an F&I department or an outsourcing relationship is a start, but having a profit center that is performing by design is where you will recognize the financial value F&I can bring.