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Boost Back-End Profits

How to Maximize Your Finance & Insurance Department

This month, I will take a closer look at Finance & Insurance (F&I) department operations. This column will focus on best industry practices and key performance indicators (KPIs).

We call F&I “found income” because of the department’s potential for producing gross profit. Selling F&I products has little cost of sales, so it is almost pure profit. This is often referred to as “back-end” profit because it does not come directly from the unit sale, but is added on after the unit sale is closed.

There are some key ingredients you must bring together to have a successful F&I department in your dealership. First, your store culture needs to have a good attitude regarding F&I products. If they don’t believe in it, they won’t support your efforts in selling it. I can still remember a salesperson telling a customer; “Our F&I Manager will try to sell you some stuff, but you don’t really need it…” Do you suppose that customer bought hundreds of dollars in F&I products? Your entire store team needs to be educated on the benefits of the products.

Shame on you if you don’t offer GAP to someone who is buying a $20,000 motorcycle or credit/debt protection to someone who works in a field that has frequent layoffs or an extended service program to a person buying a used motorcycle. If they don’t purchase these products, that is their prerogative. However, you should feel an obligation to at least provide them with the opportunity. If something happens that would have been covered by these products and you never offered them, you could lose that customer.

Next, you need to have a well-trained person with a good attitude who possesses the proper aptitude for this position. Training is useless unless they have the right characteristics. What I’m talking about here is a somewhat rare person who is personable, has low-key selling skills and the ability to organize and follow through on paperwork. In general, good front-end salespeople are not the best at organization and paperwork (surprise). However, there are some who can become excellent F&I people.

You also need to acquire all the F&I products available to you. Some of this may be governed by local regulations. If you need to get an insurance license to sell some of the key products in your state, do it. It is generally not difficult to pass the required test, and it will be worth it in the long run. You want to be a one-stop shop when it comes to F&I products. You need to be able to finance the product, insure the product and protect the customer’s investment.

Financing is a key ingredient here. If you can’t finance it, you can’t sell much in the way of F&I products. They go hand-in-hand. In many cases, you must take the time to develop a good lender presentation that you can take to local banks and credit unions. You need to convince them that they want to buy your paper. Once you have secured multiple lending sources, you need to maintain these relationships or risk losing them. A good F&I person can handle all of this for you.

Once you have the lenders, your F&I person needs to focus on conversions. This is the process of taking cash, bank and credit union customers and converting them to dealership financing. Again, a good F&I training program is an essential ingredient to developing these skills.

Once you have brought all this together, it is essential that your procedure ensures that 100 percent of the buyers are introduced to your business manager. The customer perception is much higher for this title than if you call them the F&I person. The salesperson must brief the business manager prior to this introduction. This might include information such as the customer’s riding preferences (where, when, how much, with whom, etc.), ownership history and any other details that would help guide the F&I sales process. There is not a lot of time for the business manager to complete their presentation, close the sale and prepare the paperwork. They have to establish a relationship, recognize and respond to the customer’s behavioral style and uncover their F&I needs and wants very quickly. Preparation is vital to their success.

Following this, the customer should have the opportunity to purchase or refuse all applicable products. We strongly support the use of the menu selling process for the product presentation.

F&I Department Performance

The featured chart shows June 2011 YTD F&I department data from one of our 20-groups including National Norm data (the average compiled from all of our groups):

1: We see a considerable increase here. The top 5 percent of the group (TBOC) is up a staggering 35 percent. Most of this is due to improved finance penetration — both as a result of dealers working harder to acquire sources and due to (somewhat) relaxed credit requirements.

2: Here is what you need to know about the compensation plan for this department. This is the size of the bucket available for paying the staff.

3&4: Healthy as the National Norm numbers are, they are well below some of the individual dealer examples I have seen. Are you doing this well? You should be! The dollars are out there if you will make the effort to get them. Doc fees are not included in these numbers.

5-8: These are a few of the products we track that have significant sales. There are many more you should be selling. The TBOC dealers are really rockin’ in this area. All I will say is effort = results.

9&10: Check this out! Through June, the dealers in this group took in over $100,000 in gross profit from each F&I person. I’ve had several dealers tell me they couldn’t afford to hire an F&I person. Would it be worthwhile if you could add one person and bring in an extra $100,000 in gross profit in six months? That’s almost $17,000 in gross profit per month. Think about that …

I hope you will take all of this to heart. If you are not getting these kinds of results from your F&I department, take the time to analyze it and implement effective solutions. Is it your dealership’s culture that needs to change? Do you have the right people presenting the products? Is it the methodology of their presentation? Is it a lack of training? If you can’t come up with a viable solution or just need some help, contact us. Don’t miss out on the potential profitability you can achieve from F&I sales.

The goal for these articles is to get you thinking about the performance you could be achieving in your dealership. If you have questions, or would like to discuss the help we can provide, please contact me.


Steve Jones, GSA senior projects manager, outlines dealership best business practices to boost margins, increase profitability and retain employees. His monthly column recaps critical measurements used by the leading 20-group dealers. GSA is recognized as the industry’s #1 authority on dealer profitability.

Access to the new Voyager 5 data reporting and analysis system is available for any dealership for nominal fee.
For more information on GSA’s data reporting system, dealer 20-groups, on-site consulting or training, email [email protected] or visit www.gartsutton.com.

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