Thursday, February 01, 2007

F&I Is More Than Finance


At some point, smaller dealerships will face the pivotal point where they must ask themselves: Is the current volume of business enough for an F&I department?

Outside assistance
A temporary solution may be to outsource the F&I process until your sales volume reaches a level that can give the department a steady stream of opportunities. Although I am not a huge fan of outsourcing, I also recognize that dealers may need to enter into this arrangement as a temporary measure. Outsourcing permits a dealer to sign on with a company that will conduct the credit interview (usually over the telephone), prepare the documentation, process the contracts and send the dealership a check or a bill as specified in the agreement. The customer has no face other than the dealership’s and no one to refer questions to other than the dealership. An outsourcing arrangement requires that you give up almost 50 percent of the revenue generated by F&I activity, while sustaining 100 percent of the liability -- less than an ideal scenario for a long-term solution.

In-house processing
If you are selling 25 vehicles a month you are selling enough to have a dedicated F&I manager and a stand-alone department. Yes, the job duties of the F&I manager will be slightly different than they would be in a larger dealership. Your F&I manager will need to carry out the additional administrative tasks of pulling apart the loan documents and preparing the loan documents to send to the lender. The manager will also need to follow the lending package through the funding process, since the installment contract is only as good as the ability to get the documents actually funded by a lender.

While securing finance sources is a critical factor in the F&I world, so is building a strong relationship with each lending source. In many cases, a deal is approved because of the solid working relationship between the lender and the dealership.

The F&I manager also needs products and services to present to customers. The standard products are service agreements, GAP, protective coatings and security systems. You also need to be on the lookout for new product opportunities. Where do you find out what is new? Look to F&I 20 groups, dealer 20 groups, and listen to your representatives who routinely knock on your door. Ask your lenders what items they have on their “approved” list.

The F&I department is capable of performing due diligence. All of your vendors should pass inspection. Find out who insures them and ask for a certificate of insurance. Look for vendors who offer products and services with the potential for high profitability, low aggravation, and limited liability.

Professional preparation
The F&I producer will leave a lasting impression upon the customer’s mind. You want that impression to be positive and professional. After all, products and services are merely the tools we use to take care of the customer over long periods of time.

Securing the financing is only one part of the F&I process. Delivering a professional presentation of all the available F&I products and executing proper documentation are also fundamental parts of the F&I equation. The ideal F&I manager likes to be around people, wants to sell, and follows through on details.

Where do you find such as person? Look within your own sphere of influence. Run an ad in the local paper. Ask your lenders and vendors for referrals. Then interview the candidates with your mind and not with your heart. The issue is business, and serious business it is.

When you find the right person who is a good fit with your organization, spend the time and resources required to educate them. No one learns everything all at once, and this position is critical for both financial rewards and compliance matters. Once the profit is made, the F&I professional should never place the dealership in legal jeopardy.

Because F&I is more than finance, F&I is a key position. Do you have your department staffed and ready to produce?

Used Car Dealer Magazine, February 2007