If you are AutoNation Inc. and based in Florida, it's hard to know what's going on in one of your far-off dealership's finance and insurance offices.
Without the proper controls, anything can happen.
Such as the time in 2001 when the California Dept. of Motor Vehicles raided AutoNation's Gunderson Chevrolet in greater Los Angeles, accusing employees of assorted F&I crimes ranging from forgery to payment packing.
That and a couple of other high-profile troublesome F&I cases convinced AutoNation brass at company headquarters to implement strict controls for all 269 of its nationwide stores.
“One bad F&I guy can hurt it for all of us because we're a branded name,” Kevin Westfall, AutoNation's senior vice president-sales, tells an F&I Management and Technology conference.
Not that the home office is getting shy about making money from F&I. Far from it. The nation's largest dealership chain last year sold 900,000 F&I products and took in $650 million in pre-tax F&I revenues. AutoNation set a record of selling a per-vehicle average of $1,057 in F&I services and products.
The goal is to stay profitable and stay out of jail, too. So instead of getting skittish about F&I and its risks — which increase when individual store operations go unchecked — AutoNation now “controls all aspects of it,” says Westfall.
That decreases the chances of rogue F&I employees wreaking havoc, says Westfall. He explains the command and control operations as follows:
- A customer-defined process. That includes employees' written pledges of good conduct. Customers are asked to read and sign the pledges, which are then placed in each deal jacket.
- A professional customer presentation, including the use of a menu clearly outlining F&I offerings. It is done electronically to prevent store personnel from “messing with the numbers.”
- Standardized products and preferred lenders. “It is absolutely key that you control what lenders your F&I associates do business with.”
- A standardized pay plan and annual certification through a test “that must be passed.”
- Constant and consistent training. AutoNation employs 20 F&I trainers.
AutoNation gives customers the straight scoop, says Westfall. Each is told they may obtain financing outside the dealership, financing is negotiable and they need not purchase any F&I product or service to obtain auto financing.
“We've found that the more open and transparent we are, our performance increases,” says Westfall.
AutoNation customers also are told the dealership may retain a portion of the finance charge as a service fee. That “reserve,” as it is called, is in the form of a percentage point or points above the lender's interest rate.
Such openness is unusual, says Westfall. “You don't see that often,” he says of AutoNation's reserve-fee disclosures.
Reserve fees once accounted for 60% of AutoNation's F&I income, and products accounted for the remaining 40%. Today it is reversed: 60% of F&I revenues are from products and 40% from reserve fees, which AutoNation now caps at one percentage point.
Caps are on product and service prices, too. Accordingly, providers are told to be on the lookout for overcharges emanating from dealership F&I offices.
“If our (product providers) see overcharges they notify us,” says Westfall. “We, in turn, notify the customer and give a refund — and take it out of the (offending employee's) pay.”
To further ensure F&I compliance, AutoNation conducts audits, some of them unannounced. “You pull open deal jackets, and in five minutes you know what's going on in a store,” says Westfall.
The Ft. Lauderdale-based chain also hires mystery shoppers, requires weekly F&I deal reviews by dealership general managers and takes appropriate disciplinary action when irregularities are found.
“We had to get tough,” says Westfall. “And we made it clear that we were not going to put up with anything.”