Friday, June 01, 2001

The Key to Selling More Service Agreements

The one who controls the financing controls the future of the deal. Financing is the key to the deal. Vehicles are easier to sell using financing as a closing tool. Products are easier to sell in monthly payments versus additional cash outlay at the point of vehicle commitment.

Lenders ultimately control who will receive the protection offered by service agreements. Lenders often cap the selling price of these policies. When the customer’s debt to income ratio is on the edge, the lender will cap the payment amount. The point is that we can sell everything; however, the gross profit of every deal reflects how much the lender will fund for the deal.

The Gramm–Leach–Bliley Act will be effective on July 1, 2001. Now is the time to review financing and privacy policies. When you gather information on a client, how is it used? Who has access to the information and for how long? Are customer statements for all deals -- whether they were made or not -- kept in a secure place?

The GLB Act requires each dealership to establish a privacy policy and to provide written notification of that policy to each customer. State dealership associations have been working on this issue and are prepared to help their dealer members comply with the legislation. Mark your calendar and be ready for July 01, 2001!

Review your current process. Who presents the benefits of a service agreement to each client before securing the financing arrangements? Do the sales personnel give the presentation, or do they introduce the customer to a business manager before leaving the lot?

For maximum production, the dealership should have a change of face after the client commits to purchasing the vehicle. Optimally, the new person will be a sales business manager -- a specialist whose focus is to secure the financing and present all the F&I products to each customer.

Your production will increase in direct proportion to proper presentation posture and use of your products to satisfy the customer’s present and future needs. When addressing customer concerns, the professional sales business manager will reduce the issue to the smallest denominator. While the concerns may remain, the product benefits will outweigh them, and the customer will choose to purchase the policies.

Use the power of small numbers to produce larger profits. Simply reduce the cost of the service agreement to cents per mile, per day, or per annual investment. In most cases, guaranteed mobility costs less than 3.5 cents per mile driven, or less that $1.00 per day. What else can your customers do for that small amount each day to guarantee their mobility for the next 36,000, 48,000, or 60,000 miles?

When customers finance their vehicle purchase, they often do not set aside funds for future repairs. A service agreement makes those provisions for them. With a service agreement in the loan, future repairs for the primary loan period will not be a burden to the family budget. The cost of the policy is spread out over the loan term and represents no additional expenditure at the time of purchase. This gives the customer an easy payment plan -- they pay as they drive.

Ask your service agreement provider about a payment plan. When the lender will not allow inclusion of the policy in the installment loan, the easy, no-interest payment plan the service agreement vendor offers can provide an alternative payment method.

The small fee the service provider will charge the dealership for financing the payment plan is added to the cost of the policy. Read the instructions for the payment plan carefully. Properly submitted policies will ensure that the payment book arrives in time to prevent any first payment defaults and automatic policy cancellation.

Do you have a presentation book that contains proof statements supporting your policies? This can be one of your greatest tools and is easy to put together. The presentation book should contain brochures and copies of articles with positive comments about your products. You may also want to include current repair orders showing that service contracts do pay. And be sure to add copies of thank you notes from your customers and CSI letters. You get the idea.

When I observe my F&I trainees in role-playing sessions, I notice that presenters are so busy telling the customer everything about their products they forget to ask questions that let the client participate in the process. Customers always enjoy talking about themselves; all we have to do is to ask the right questions and listen to the answers. The customer will tell us how to sell them.

In one of my recent F&I seminars, a student had a great reply to one of the customer questions. During the disclosure process, the customer asked the presenter if she could do any better with the price of the service agreement and the credit life protection. The presenter replied, "Since you are a previous customer, I have already given you all the available discounts. I thought you would like that. That is our way of saying thank you for your business. The monthly payment with the protection you want does fit your budget doesn’t it?"

Keep a list of customer concerns that you are having difficulties with. When your general agent stops by, go over this list and ask for suggestions. Take the list with you to training sessions. We all like challenges, and you can get some great tips on a better way to approach the sale from your instructor and fellow participants.

You may also fax or e-mail your list of customer concerns to my office. I will be glad to share some ideas with you.