Kelly’s Korner: Holding on to the Front End GP
Q. In the current marketplace, how can we hold on to the gross profit on the front end of the deal?
A. Today’s marketplace is filled with competition from every direction. Margins have indeed dropped in recent months. An often over-looked strategy in the race to protect gross profit is what I refer to as PRE-F&I or the AfterMarket Desk.
Your customers love to customize their vehicles. Special wheels and tires are more popular now than ever before; truck bed liners have made their entrance as a main stay. Your customers are purchasing these aftermarket products from someone. Why not from you?
Many dealers are placing an aftermarket salesperson between the sales department and the F&I process. The aftermarket consultant takes the customer on a tour of the service department, reviews the owner’s manual, and introduces the manufacturer or dealer’s CSI letter.
Since customers typically want to add something to the vehicle to make it special, the aftermarket specialist helps the customer choose a running board, bug guard, paint and fiber guard, special wheels and rims or other accessories.
Then the aftermarket specialist simply determines if the customer wants to pay by cash, check, charge or see if they qualify to have the items included in the amount they are financing. The lender will usually include these items as part of the advance provided the customer is within budget.
Dealerships who present these customizations are enjoying an increase in profits while remaining competitive in the marketplace. Customers are happy and the dealership has a beginning place for F&I trainees to learn the paperwork, aftermarket accessories, and credit & insurance products in a logical progression.
If you are a salesperson who hesitates to talk about customization because you fear the increased cost will give the customer a reason to say no to the vehicle, try instead to view extras as a buying signal. Think PRE-F&I and accessorize to hold the gross on the front end.
OIADA Squeaky Wheel Newsletter, September 03, p.11