Since I began my career in the automotive finance office in 1987, I have witnessed several national recessions. The markets crashed. Banks closed. People lost their jobs and their savings or both.
Always, the car industry was deeply affected. Always, recovery produced more prosperity than ever before. Now, the entire world is in a recession and deeper than most of us have ever experienced.
Our government has taken over a chunk of the car industry and hundreds of dealerships have been closed by edict. We wonder how we can pull ourselves out of the doldrums produced by our worry and concern. Times have changed.
U.K. Prime Minister Harold, no stranger to recessions, said, “The only human institution that rejects progress is the cemetery.”
Those who were involved in our industry during the 1960s know that it was Pat Ryan, described by some as the father of finance and insurance as a designated dealership entity, who brought us out of the Dark Ages.
At only the age of 26, he introduced the idea that dealers should not only offer consumers financing arrangements at the time of sale, but other benefits as well, benefits such as credit, life and disability insurance and service contracts.
Within four years, his idea had grown into a $15 million business. By the end of the 1980s, Ryan had acquired or merged with other companies and, together, his newly formed Aon Corp. had 28,000 employees and was worth a few billion of dollars. By 2004, Aon employed 53,000 people, with 600 offices in more than 120 countries.
“There is only one way to do business — the right way, Ryan once said, referring to high levels of integrity and morality.
When Ryan introduced his revolutionary idea to those in our industry, it was not without detractors. In time, his proposal was accepted enthusiastically, because it offered dealers the opportunity to generate additional back-end profit through the sale of F&I products.
It also allowed them to take advantage of reinsurance profits. Most dealers benefited handsomely from this system and can do so again. But increasing profits through the sale of products must be tempered with building customer trust and loyalty through “…the highest levels of integrity in a highly principled, highly moral and highly ethical manner.”
Today, dealers have a long list of products to offer consumers: service contract, maintenance, tire and wheel, etch, key replacement, paint and fabric protection, GPS, Lo-Jack, dent-ding, diamond fusion, lease wear and tear, gap, unemployment insurance, credit life/disability, tires for life, engines for life. The list goes on.
Obviously, products are the driver to a profitable finance department. But, in today's business climate, exactly which products bring the most value to the consumer, while creating wealth for the dealer?
What is the most effective and efficient way to present them? Why shouldn't every value-added product available to the consumer be offered? Which products for specific dealers make the most sense?
Which products should be offered every time and with every customer, because they deliver the greatest impact to the dealer's bottom line? The answers to these questions influence the end result. So is understanding that offering an endless litany of products in the finance department does not always lead to profits.
Now let's talk about you and your dealership. Before you make any decisions regarding which of the wide variety of products to offer your customers, you need to put your primary goal on paper.
This gets you to think about it. And seeing it in black and white ensures you recognize the reality of your current situation. Is your goal simply to offer whichever products will bring in the most back-end profits?
Or is it to increase back-end profits while building a successful reinsurance portfolio? Or something else? Unless you commit to putting your primary goal in writing, you will not know what needs to be changed and why.
Once you know your goal, ask yourself another series of questions.
Begin with an assessment of all the products available to you. Is this the best product of its kind and at the right price?
Do I have complete trust in the product company? What are my product partner's expectations and can I meet them? Can they meet mine? Can I fully support the product and its value for my customers? What are the negatives, if any? Will my F&I manager agree with my assessment and be enthusiastic about offering the product to my customers?
Ironically, few dealers ask their F&I managers if they believe the offered products on their menu have intrinsic value over other similar products.
Why is this necessary? Unless they can wholeheartedly support the product, they will be unsuccessful in not only presenting the product but in overcoming customer objections.
The only way to know for sure if a product should be on your menu is to make product comparisons and conduct thorough research. Especially in today's market climate, every dime a consumer spends must have proven value.
Presenting your menu with a long list of products will seldom increase products sold. It will, however, confuse the customer and diminish their interest in buying any!
Today's more savvy and cautious vehicle buyers are looking for the best quality, the lowest price, and the best terms on everything. Dealers must be prepared to answer their every question candidly, convincingly, and conscientiously.
F&I trainer Rebecca Chernek is CEO of Chernek Consulting Inc. She can be reached at 404-276-4026 and [email protected].
