Kelly’s Korner: Salesmen Keep F&I Profitability?
Can a Sales Consultant Complete the F&I Process and Maintain Profitability?
During a recent speaking engagement, I was asked if I thought the sales consultant could maintain a certain level of profitability while completing the F&I process. The question took me back to the beginning of my career in the 1970’s. Many dealerships did not have an F&I process, sales consultants had customers sign a blank contract, and there was little or no revenue from the F&I process.
The sales managers who sold the paper to the lenders (who by the way completed the paperwork) ran the finance department. The general managers did not expect the finance department to make a profit. It was a matter of convenience for the customer.
Then Regulation Z came along, and disclosures and complete contracts became the order of the day. Thus began the F&I process. Dealerships soon learned that selling intangible products and services required a change in procedure. Leaders who quickly hired and educated a finance manager realized a huge return on their investment: higher profitability and an increase in the number of units sold.
Now I find that many dealerships have gone back to their old ways in the F&I process. They claim that having the sales consultant use a menu helps to make the customer feel less anxious during the paperwork process. Did you catch the phrase, paperwork process?
When dealerships start down this road, there is usually a resultant dip in profitability. Sales consultants typically take the path of least resistance. While they offer, mention and perhaps even ask for the extra business, they may not do so with sincerity and many settle for the first “no”. The sales consultant is focused on the sale of the vehicle (which is, by the way, what we want them to do) .
I am not convinced that the average customer would feel comfortable in telling their new best friend (the sales consultant) all of the reasons why they have poor credit. I am also not convinced that the sales consultant would be confident enough to ask for the full sales price after hearing the customer’s sad tales of misfortunes.
History has shown that to achieve the best for each profit center, efforts are best rewarded when there is a change of face. Additionally, the new face must be professional in thought and deed. In order to maximize the opportunities presented, the F&I professional must have faith in their dealership’s products and services, and be able to make a value added presentation prior to asking for the investment dollars. Can the process of sales and F&I be done by one person? Absolutely. However, the dealership will sacrifice profits and customer satisfaction by eliminating the F&I manager’s role.
RECORD KEEPING
Recently, I was asked about the length of time a dealership is required to retain the credit application obtained from a customer on a deal that was never completed (otherwise known as a “dead deal”). My reply: It depends on the regulation to which you refer.
If a credit application becomes a deal, the dealership needs to keep the file for seven years or until the contract expires (whichever period of time is longer).
If the credit application never becomes a deal, pursuant to Regulation B we must retain the application for 25 months post adverse action notice for an individual and 12 months for a business.
Additionally, we have the OFAC ruling, which has a five-year records retention provision. If you check this by electronic means using a company such as First Advantage CREDCO, PatriotDealer.com, or Bridger Systems at OFACcomplaince.com, all of these companies will save your inquiries electronically for five years so you will be in compliance with OFAC regulations.
I realize this can be confusing. Here are my two cent’s worth: I recommend retaining the files for five years; then, shred the credit application and have the clippings disposed of in such a manner that you are in compliance with the Disposal rule. As always, records and all of your customers’ non-published information should be retained in a secured environment following your own safeguard procedures.
This commentary is not meant as legal advice but simply as an informational report. Please consult with your dealership’s legal counsel for additional details. If you need a copy of Regulation B, please contact my office and I will be glad to provide you with a copy.
“Kelly’s Korner”, OIADA Oregon Dealer News, June 2007, P. 7