New Beginnings For 2006
January always brings time to reflect on past performances and to review game plans and measure the level of success achieved by the players. Did your F&I department meet 2005 goals? Or did the department fall short of expectations?
Identify the parts of the plan that are working well and leave them alone. Then flag the items you need to improve and make an action plan to do just that. Make a list of what you will need to implement the changes. And remember to note all the departments that will be impacted by the changes.
Check your jackets
As an example, if production of service agreements is below expectations, check the deals to verify that a menu is part of the F&I process. Does the backside of the menu show evidence of a second effort to close every sale? Are your F&I personnel providing written solutions to address customer concerns?
If the retail price of a service agreement is $2,195 for a six- year plan and the customer says the price of the policy is too high, how does your F&I manager respond? Does the manager immediately say, “OK, please sign this customer declination” and move on to the next item, or do they isolate the true objection to the protection?
If the effect of the additional charge of $2,195 is too much for the customer’s budget, what will happen to that budget if the customer’s vehicle experiences a mechanical breakdown after the factory warranty has expired? Will the labor rate be lower or higher than the current prices?
Every file jacket should bear witness to a second effort to make a policy sale. You should be able to find word tracks something like the following:
“I understand your concern about the additional payment. As you know, our vehicles are made here on earth and not in heaven. I think you will agree with me that everything made by man breaks at some point in time, doesn’t it?
“Consider that when anyone brings a vehicle into any repair shop they have to pay for parts and labor, a fee for disposal of fluids, and, in many states, sales tax. Correct?
“Let’s take today’s labor rate of $______. [We’ll use a rate of $85.00 per hour for this example, while recognizing that some of your rates are higher and some are lower.]
“Labor is $85 per hour. Parts are $____ in relation to labor $____ [Use whatever the customer says. For the sake of excitement, let’s say the customer response was $10 in parts.]
“Labor is $85, parts are $10. Add the two items = $95.00 an hour to be in the shop, right?
$2195 divided by $95 an hour = 23.10 hours in the shop. Take 23.10 hours in the shop and divide that by an 8 hour work day and you’ll get 2.8 days in the shop.
“Here is the question – What are the chances of any vehicle being in the shop 3 days within six years? [Be quiet and let the customer answer.]
Would your review of deal jackets show evidence of the foregoing effort along with a customer declination? (By the way, this “effort” can go home with the customer since there is nothing to hide and most of the numbers are the shop’s current labor rate and the number the customer chose for parts. The only F&I department number is the retail price of the service agreement. )
Review the trade interviews
Check the trade interview sheet as part of your process review. Are you using this document correctly to evaluate trades? Do the sales personnel walk around the vehicle making accurate notes on the condition of the trade? Do they have the customer verify mileage, title, and air bag deployment? Do your salespeople ask the customer for copies of the vehicle maintenance records?
A View to Value
Is the dealership’s value for F&I products evident to employees and customers? How is the value displayed? Is it effective? If so, keep it; if not, change it.
Change is not always welcome by those in the trenches. Sometimes that is because they cannot see the landscape. When you need to make change in order to gain, make sure your producers have a clear view of where you’re headed.
World of Special Finance Magazine, January 2006, p. 20