Asleep At The Deal? The True Cost of Protection
Insurance is two-fold protection. Insurance protects the customer from administrators who go out of business and leave no reserves to pay claims. Proper insurance also provides a layer of protection for the dealership.
Paying for Protection
With so many products available in the marketplace, dealerships may be dozing rather diligent when it comes to verifying a company’s insurance. It appears that a plethora of companies now pay the F&I producer separate and apart from the dealership’s pay plan. As this practice becomes the norm, F&I producers may be tempted to replace companies that carry proper insurance with vendors who will pay them directly, leaving dealerships in a very vulnerable position and their owners in the dark.
When I hear from general agents that they fill out 1099s for F&I managers in sums that can exceed $250,000 I begin to wonder what drives business. Agents represent great products and deliver world-class service. Why, then is it “business as usual” when these same vendors enhance the paychecks of dealership personnel? Please understand that I am not insinuating that everyone is standing with a hand out; rather, I am suggesting that the practice is rampant and should be reconsidered.
The life of a road warrior (an apt description for the typical general agent) is difficult at best. The day begins early and the miles make for a late finish. Armed with cell phones and PDA’s professional agents make themselves “on call” to producers nearly 24/7. While the average producer envisions the agent “good life”, that same producer cannot accurately assess the fatigue extracted by long work hours, endless road miles, and the ravages of rejection.
Driving the Business Home
Value and service should be the primary drivers for business. When a quarter of a million dollars circumvents the dealership’s bottom line, I believe it delivers a message that hurts business. I am not a dealer; however, as a professional who cares deeply about the integrity of our industry and as a business owner who devotes most of her waking moments to productivity and profitability initiatives for dealerships throughout North America, I contend that it is both the right and responsibility of every dealer to investigate who is paying whom and to count the cost when a vendor compensates their employees. Is there a conflict of interest? Who is your employee looking out for? Is your employee working to secure the sale and protect the dealership while increasing the dealership’s profitability, customer retention and CSI?
If you’re snoozing your way through a summer slump, use the down time to reconnoiter production, protection and profitability for your dealership. Resist the temptation to rationalize the loss as only $50 or $80 a deal. The total dollars involved are more than you may realize. Do the math and figure out why your people are selling policies and producing PRU $ that do not meet your expectations. Is it possible for an employee to sell a policy at cost and still make the $50-$80 themselves? Oh and by the way, the $50-$80 comes from the cost of the product. If you think about it, isn’t the store really paying the bill in the cost of the product? And given that, isn’t it time the store reaps all the profits from the efforts of its employees?
World of Special Finance, August 2005, p. 14