If you’re looking to see profits, you need to have the products people really want and need. You also need the proper finance & insurance training. Don’t just guess and assume you want what the public wants. Working things out on paper can show you which F&I products you can offer that will bring in a lot of business for your company.
One of the things you need to be careful about when you’re selling finance and insurance products and services is the way you present what you have for sale. If you’re trying to strong-arm your potential customers or pushing unneeded products on them, they aren’t going to be receptive to that. When you present F&I information, you need proper training and good product knowledge.
Practicing often also matters, so you know how to sell what you have on your menu. The more sensitive you are to the individual circumstances of your customers when you’re menu selling, the more likely you’ll be to see sales and profits increase.
Ask yourself a couple of important questions before you make your sales pitch, too. Consider:
What kinds of products are the best for your customers who are making a cash transaction? A finance transaction? A lease?
What has been your company’s percentage of each type of these transactions.
Until you know these percentages and can answer these questions, you aren’t completely prepared to offer menu selling to your customers and potential customers. If you know the percentage of outside finance sales to cash sales, your F&I manager can offer a gap policy on the cash menu. If you aren’t in a waiver state, that’s highly important. If you weren’t aware of this issue before, your preparations need to be stronger and some F&I training might also be in order.
Sometimes, a cash transaction yields a better result than one that’s financed, but that depends on the product. In Detroit, dealers know that because they know that product choices need to include fabric and paint protection. The climate and weather changes are significant in that part of the country, so it’s important to insure against those kinds of things.
In Memphis there is a different isue – one of security. The theft rate is high there, and it continues to grow, so dealers offer a VIN security product on their menu.
Another thing dealers should evaluate when they’re considering F&I training and what to offer to customers is credit life/disability insurance. Twenty years ago it was the product to sell. Today it’s not as popular but there is still a big market for it. If there are credit life or disability products that will raise the customer’s payment, the commission on those products could be as high at 50 percent.
The cost of the product and the extent of the commission can vary depending on where a dealer operates. In New York, for example, the commission on the credit life/disability product would be nowhere near 50%. Instead, nearly 100% could be eanred on other valuable products that would also help the customer keep his or her payment low. You must know your numbers, because they greatly affect the profit you’ll receive. If you’re unsure about how to calculate these kinds of things, some F&I online training can help you be more successful.
So many of the decisions you’ll have to make each day will depend on your individual business and your location. For example, do you have a lot of customers who lease vehicles? If you do, it won’t make sense for you to offer a service contract as a high priority. Instead, your focus should be on products that are relevant to your customers and that will help you bring in more profit.
Consider paint and fabric protection, tire and wheel maintenance, key replacement, or dent and ding repair coverage as options for your vehicle lease customers – but keep your prices fair. If you offer products that increase the customer’s payments too much, you’ll actually end up losing in the long run. Those customers will start to look for other options that don’t include you. Customer retention is important.
You’ll see different kinds of results depending on where you offer your services. The brands and inventory you have, along with the local economy and the market size, will also affect your bottom line. The more vehicles you work with and the more products sold, the better you’ll do.
The expectations that the dealers have are wide-ranging, but the results they see are similar. The percentage of sales they want and the profit margins they look for helps them decide how to price every product and what kind of return on investment they want and need. Customers are all limited on what they can afford, so finding them the best deals and keeping them coming back is a great way to build your backend profit and your financial success.
Contact Rebecca Chernek for Customized In-Dealership F&I Training. Increase your profits limit your liability.
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