Lost & Found: Revitalizing F&I Profit Centers
Many F&I departments still rely on reserve and service agreements for additional profits despite the fact that a highly competitive finance market makes reserve income far less lucrative than it once was. The future viability of the F&I department requires that dealers and their lenders revisit some of the lost profit centers in order to find new bottom line strategies in today’s marketplace.
History shows that increased productivity and profitability occur when we give our customers a choice of products and services. Ask your customers what they need to protect their financial security in a time of illness, death, or catastrophic loss. When you have a clear understanding of what your customers require, you are poised to review the opportunities you have to meet those needs.
Insuring Profit Centers
Most of your customers are under insured. Many do not have a reserve to fall back on when financial difficulties arise. Few have disability insurance. Often credit insurance is the only protection available to them.
Credit insurance has historically served customers well by limiting their financial risk in crisis situations. Yet credit insurance is often overlooked as a profit center due to licensing requirements and the perception that it does not provide an adequate profit margin. Each state dictates the profitability of insurance. Your vendors can help you evaluate the profit potential of their policies and guide you through the licensing process your state mandates.
Another orphan profit center is GAP protection (debt cancellation). In our equity-anemic environment, GAP protection is an alternative every customer should know about and have the choice to utilize.
Pricing that Sells
Sales are only as good as the ability to secure funding. When F&I producers must constantly remove products or policies they sold and rewrite retail installment contracts, it doesn’t take long for those products and services to find their way back to the “lost” profit centers. Since your lenders must approve every policy and product sold in the F&I office, work with them to obtain funding on the policies that fit your customers’ needs.
Kelly Enterprises has long advocated standardized pricing for all F&I products and services offered by a dealership. Many of you operate in a small community where your customers talk among themselves and compare what they pay for everything from the cost of the vehicle to the cost of the service contract. Standardized pricing enhances your credibility with customers and may also help you to secure lender funding for all your F&I profit centers.
The marketplace demonstrates that when your customers have an enjoyable financial experience, they will return to you in the future and they will refer their friends and relatives to your store. When you employ all your profit centers to make the customer’s financial experience positive the benefits will be evident in your customer retention, your bottom line and the growth of your business.
Dealer Marketing Magazine, July 2003.