Tuesday, May 01, 2001

Kelly's Korner: Service Agreements & Lenders

Q. Do lenders require a service agreement on the contract in order to secure financing?

A. Lenders do not require F&I products or services on contracts they fund. Lenders base their credit decisions on 4 factors:
1) Credit history
2) Ability to repay the loan
3) Employment and residency stability
4) Equity and deal structure, e.g., does the customer have equity going into the

While a service agreement can prevent credit problems by paying for future repairs on covered items within a specified time, it is by no means a requirement for loan approval from a lender's point of view. It should come as no surprise that most state attorneys general also share this view.

Q. Is it a good idea to complete multiple contracts before the customer finalizes the deal?

A. Preparing multiple contracts in advance of a professional F&I manager's presentation can be viewed as an unfair and deceptive trade practice. Selling products from a contract does not create value in your policies; many states consider this "leading the customer".

The professional F&I manager should interview the customer before presenting products and services. Establish the customer's need for the item, discuss the benefits, and give the customer options, to include no protection, if that is the customer's choice.

Every F&I manager should know how to conduct a customer interview to uncover needs and how to match the benefits of policies with the customer's stated needs. The Consumer Protection Act mandates that your customers have every right to make a choice. We have every obligation to give our customers a full range of choices.

Perhaps your personnel can use some fine-tuning on their presentation skills. Send them to one of our seminars. See the schedule that follows this article for a location near you.

Article written by Jan Kelly, President of Kelly Enterprises. She is a sales trainer and consultant, convention speaker, and frequent contributor to industry publications. This article is not intended as legal advice. Readers should seek their own legal counsel regarding any of the practices mentioned in the article.