A Change Of Face Pay$
The Face of Fatigue
Many independent dealerships do not have an F&I process. Instead, the sales representative takes charge of the deal, from the greeting on the lot, to the delivery and over the curb. By the time the salesperson has obtained the customer’s commitment to purchase the vehicle, seller and buyer are mentally spent and equally anxious to get the forms signed and nothing more. The customer who is interested in a service agreement is not told one is available; a buyer who might like the security of having only the title used as the collateral doesn’t get to consider it because the sales representative accepts the credit union direction thinking the deal will be paid quicker. Without a change of face, F&I becomes Forms & Ink rather than a Finance & Insurance process that links the customer to additional opportunities related to the vehicle purchase.
Facing the Facts of Finance and Insurance
The customer is entitled to know the facts about dealer assisted financing. Yes, it takes a few additional minutes, and yes, the dealership is generally compensated for their efforts. More importantly, the customer can choose the security of knowing the vehicle is the only item used for collateral. The customer’s checking accounts and other accounts they have in the credit union will not be at risk, provided your contract does not have either a pledge of shares, or right of setoff clause.
A pledge of shares clause is common in the Truth in Lending disclosures of credit union loan applications. Generally, the clause states that the customer is pledging all funds they have now and in the future in any and all accounts held by the credit union as additional collateral for the loan.
A customer should be able to review and compare the contracts of the dealership and other lenders in order to make an informed choice about financing options. (In some instances, the customer’s credit standing may mean that the credit union is the only source of financing available.)
As with financing options, the automobile industry has a variety of products designed to enhance ownership of a vehicle. Someone other than the person who sold the tangible vehicle should present intangible policies to the customer.
Based on the amount of negative equity now involved in trades, the limited cash down available for the vehicle purchase, and the fact that many insurance companies still do not provide total loss replacement policies, every finance customer needs to know that in the event of a total loss situation due to accident or unrecovered theft, the loan can be satisfied by both the customer’s insurance policy and a GAP policy.
While the policies work in tandem, one does not take the place of the other. The customer’s physical damage policy generally protects the market value of the vehicle in the event of a total loss. In many cases, the insurance settlement leaves a deficiency between the loan balance and the market value, which the customer is still responsible for. GAP pays after the automobile insurance settlement. The objective is for the total benefits of both policies to repay the lender, plus the insurance deductible. The purpose of insurance is to “make whole” after a loss.
The Face of F&I
Do you have employees focused on too many parts of the deal? Could productivity and customer service be improved by separating the sale of the vehicle from the F&I process? Can you verify that disclosures are properly made to every customer? Do your customers know what the bare payments are for the vehicle alone? Do they understand that all ancillary products are optional and have additional costs? How have your customers authorized the additional expenses?
The professional F&I manager knows the rules by the numbers:
1) Protect the dealership.
2) Secure the sale.
3) Provide world-class service to each and every customer.
4) Build customer retention.
5) Build the dealership profits by ethical presentation practices.
6) Complete all the legal documentation.
7) Follow funding and titles of the trades to completion.
The F&I process should be completed 100 percent of the time, presenting 100 percent of your products to 100 percent of your customers.
Are you keeping pace with a change of face?
NIADA, Used Car Dealer Magazine, September 2006