Time to Take F&I Online

Use time during the sales plateau to tweak dealership F&I practices.

John Stephens 1, Senior Vice President-Dealer Services

August 9, 2017

3 Min Read
Time to Take F&I Online

Last year, the auto industry sold approximately 17.5 million light vehicles in the U.S., representing seven straight years of growth. However, reflecting on more recent data, it’s clear auto sales have plateaued.

Dealers across the U.S. have reported lower sales numbers over the last few months. Incentives among manufacturers have increased, but that does not seem to be moving the needle much. Despite the trends, let’s put this into perspective.

While it’s true vehicle sales aren’t hitting manufacturer projections, we’ve been in one of the longest economic expansions in U.S. history. How long did anyone really think sustained growth would continue? Is a plateau at 17.5 million really that bad?

The economy was bound to slow down at some point, and there are many positive economic indicators to consider. National unemployment has hit its lowest level since May 2007, and we’ve seen strong jobs gains in recent months. According to CNN, wages rose 2.5% in the past 12 months, and the median price of a home has grown to $236,400.

Consumers also continue taking on debt. According to the Federal Reserve, consumer credit rose 4.8% annually this past February.

These stats show clearly there is plenty of business available, and dealers should take time now to regroup and re-address their go-forward plans. For the immediate concerns of razor-thin front end margins, we’re seeing more dealers rely more on back-end profit. However, it’s important to remember there is a right and wrong way to increase margins in F&I.

Take a look and ensure F&I products match inventory and customer demographics, and focus on penetration rates. This will result in consistent product sales and build customer satisfaction with minimal chargebacks due to refinancing or product cancellations Avoid focusing on increasing product pricing as much as possible, as high markups eventually will lead to customers contemplating ways to reduce their monthly loan payment amount by refinancing elsewhere and increasing chargebacks as they cancel F&I products and services they had originally purchased at the dealership.

This plateau gives you time to increase your focus on F&I training, re-tool pay plans to take into account product penetration and experiment with online consumer education for your long-haul goals.

Yes, I’m referring to taking F&I product information online. This may seem scary at first, but remember that at one point providing inventory information online was an unknown. Now, you can’t operate profitably without online inventory.

But you need to know that providing product information online can increase your penetration rates and profit per unit. Here’s why.

In the traditional finance process, consumers know little to nothing about F&I products until they reach the finance office. This makes them feel uneasy and somewhat defensive. It makes no difference how good the products are or how well your team is trained, the general consumer sentiment about customer-service levels at auto dealerships is below what the industry would like it to be. We all know this; it’s not news to anyone.

One of the reasons why consumers feel this way is because of the F&I process. That’s why many times their guards immediately go up when they enter the F&I office.

Alternatively, dealers who offer F&I product information online are giving consumers a measure of comfort and control. These dealers are also generating greater interest in the products and benefits by letting consumers take in that information on their own time, at home with no one there to pressure them into buying anything.

Under this model, consumers are entering dealerships with questions and interest in the available F&I products. Their guards are down, and they are more inclined to buy.

In addition to simply generating interest in F&I products, being more transparent enables dealers to increase their brand presence and loyalty. This creates more opportunity for future sales growth, customer retention and referrals.

John Stephens is executive vice president-EFG Companies.

About the Author(s)

John Stephens 1

Senior Vice President-Dealer Services, EFG Companies

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