Forty years ago, Pat Ryan virtually created the modern F&I industry. He may not have invented the concept of positioning the dealership to provide financing and insurance on the loan.
But as Henry Ford made the automobile available to the masses, so did Pat Ryan's F&I process reinvent auto retailing.
It was a breakthrough. The concept of an additional profit center, occupying less square footage than most dealers' offices and employing but a handful of people was a dream come true.
It's almost hard to believe that a time existed when most customers paid cash or came to the delivery office with a check in hand from the bank or credit union.
What a difference 40 years makes. With the advent of manufacturer incentives, rebates and subventions, the challenge in most F&I offices has become one of retaining aftersale income in the face of rate caps, longer manufacturer warranties, and skeptical consumers.
Extended service contracts, GAP and vehicle security and appearance packages now contribute significantly to aftersale income. Reinsured, retrospective and self-insured programs increase dealer wealth over the long-term and raise the multiple in buy-sell agreements. Each of these services is the result of dealers trying to maximize the income on every transaction.
New technologies reduce the time needed to complete a delivery and get customers over the curb in a timelier manner. Finally, with the great array of products available, assembling a menu of high-value offerings has become more critical than ever.
Some elements of the F&I office have changed little or not at all since 1964.
Identifying individuals with the appropriate skill sets to fulfill the responsibilities of the department is still the genesis of a successful operation.
Ongoing training continues to aid the process. Competitive and motivational pay plans maintain momentum. A top-down mandate of proper customer treatment, utilizing a balanced and compliant presentation every time, remains the keystone to profit strategies. Consolidators have identified the opportunity presented by the F&I department as a proving ground for future senior managers. Every dealership can benefit from this practice.
In contrast to the earliest days of F&I when anyone with a tad of training was considered qualified, today's financial services managers carry the responsibility of transactions averaging over $22,000 and a growing list of regulatory requirements.
Rather than the “hired gun” approach of finding the guy who simply could generate income, today's demands require a career manager with the ability to understand and implement the customer strategy set forth by the dealer principal. Much is at stake when a rogue F&I manager sets his or her own course to profitability.
The next 40 years of F&I promise to be equally as exciting, if not in terms of revolution, certainly in terms of evolution.
Manufacturers continue to offer incentives and consumers continue to respond to them. The menu of products and services continues to expand. The demands on the financial services manager continue to increase. The size and scope of dealer groups continues to grow and processes continue to be mapped and centralized to facilitate efficiency. With greater pressure on variable-operations margins, one might expect a breakthrough in managing those operations as well.
The F&I department clearly performs a critical function. Its ability to adapt and respond can lead to increased profitability.
Pat Ryan may not have envisioned the many challenges faced by today's F&I managers. But his strategy of generating incremental income throughout the transaction process remains intact. It's simply a question of having the resources you need to best serve your dealership and your customers.
Rob Mancuso, a former metro Chicago dealer, is senior vice president of marketing and communications for Aon Warranty Group.