When a dealer said he regularly goes through his store's deal jackets, finance and insurance expert Jimmy Atkinson asked why.
The dealer's reply: “I can learn a lot about what's going on at my place from looking at the deal jackets.”
Sometimes it can be unpleasant reading, especially if it reveals sales and F&I irregularities.
But it's worthwhile reading, especially if it precludes a plaintiff's attorney from combing through the same jackets, looking for ammo in a potential lawsuit against dealership practices.
F&I has come a long way in its 43 years as a separate dealership department. It has become one of the most important dealership profit centers. Because of sins along the way, it also has come under intense scrutiny from regulators, investigators and litigators.
“A concern of many modern dealers today is: ‘What can my F&I manager say or do that could lead to a class-action lawsuit?’” says Atkinson, a former dealership sales manager, F&I manager and now vice president-sales and marketing for Assurant Solutions, an F&I product provider and trainer.
F&I departments can both comply with laws and still make a healthy profit, he says. Compliance and integrity start at the top.
“Dealers need to share their thinking with their people by letting them understand the ‘why’ behind ethics and integrity,” Atkinson says. “We've all seen people hitting numbers, but not living values. As tough as it is, get rid of those people. Otherwise, you have to live with their sins.”
Plenty of quality people with character are out there, he says. “These are the people you want.”
You don't want workers who think it is fine to pack payments or get a “leg in the deal.” An example of that is surreptitiously inflating a monthly car payment plan from $450 to $500, then using the extra $50 to sell F&I products, telling the customer they are included with the vehicle — or saying nothing at all.
That once was common practice. “Today, it is a major compliance violation,” says Atkinson. “The first payment quote is for the car only.”
But even straight shooters need to know what to say — and not say — when discussing vehicle financing or selling F&I products.
For instance, resist responding to customers who, early in the process, proclaim: “I've got great credit; what will my monthly payments be on this car?”
The temptation is to give an estimate. Don't do it, Atkinson says. Instead, tell the customer you need information on vehicle price, trade-in value, tax, credit score and length of loan before you can quote a payment.
A ballpark figure could be wrong and create problems, he says. Besides, it's too early in the sales process to be talking payments. “You need to slow down.”
Also avoid telling a customer your dealership offers the best interest rate. It may be the best “buy” rate for the dealership. But if the store adds percentage points as a surcharge, “it may not be the best rate in the eyes of a plaintiff's attorney,” says Atkinson.
He advocates the use of F&I menus in every deal as an effective and uncomplicated way to present products and services, while reducing liability and exposure.
A good menu provides:
- The base payment or principal and interest-only payment.
- Individual pricing on each product.
- Terms, payment and annual percentage rate for each package.
- Terms for the purchase of the vehicle.
- A statement that the sale or financing of the vehicle is not contingent on the customer's purchase of any menu product.
- A place for the customer to initial, sign and approve products selected.
Electronic menus on a computer screen are best because they provide accurate calculations and provide tracking, including the length of the presentation for potential management review, Atkinson says.
“If a presentation starts at 10:00 a.m. and ends at 10:06, it probably is not a good presentation,” he says. “One that starts at 10:00 and ends at 10:38 is.”
It is important for showroom sales personnel to refer all “sold” customers to the F&I office, and it's up to the sales manager to make sure that happens, Atkinson says.
But customers shouldn't be in the F&I office prematurely, he adds. “Customers shouldn't be in F&I if they are still negotiating a trade-in.”
He recommends F&I personnel get out of their offices and meet customers on the sales floor to take care of introductions, build rapport and ask qualifying questions.
He also recommends using word tracks for F&I referrals and presentation. “Word tracks keep people on message and raise accountability.”
Good F&I personnel share the value of the products they sell both with customers and co-workers, says Atkinson. Bad ones brag about “killing that customer” and “making a million bucks” off someone.
Meanwhile, dealers should be open with their employees on the subject of profitability, he says.
“Teach people how we make money by selling, servicing and financing vehicles. You don't need to show them financials, but they need to know conceptually.
“A dealer should want people to understand how a store makes money and what role they play in that. It pays off to share and to not keep employees in the dark.”
Five Ways to Protect Your Dealership's F&I Operation
To protect yourself from potential litigation and prosecution, finance and insurance trainer Jimmy Atkinson offers these tips on creating a dealership F&I compliance program:
- Conduct a formal risk assessment for your store. “F&I companies can help find holes that need plugging.”
- Have the dealership attorney review procedures and forms used by the store so that only approved forms are used. “Torch old buyer order forms that may be stuffed away. They could have legal implications.”
- Document your efforts with procedure manuals, training, testing, written acknowledgements and random audits.
- Build and demand a culture of integrity, ethics and compliance.
- Create a system for managing record retention, as some records need to be kept two years and others up to five.
— By Steve Finlay