Thursday, January 31, 2008

Maximum F & I Profits with Maximum Disclosure

by: Mike Boolos

The latest data on F&I production nationally proves that income produced in F&I is critical to the dealership's total profitability. New car departments would have lost money in each of the last ten years without F&I profit. F&I income represents over 43% of the dealerships total income. This creates a lot of pressure to produce in the F&I department and sometimes that causes people to shortcut processes and outright deceive in the pursuit of profits.

If you saw the recent Dateline episode where they placed a hidden camera on a customer and followed her through the sales and F&I process, you saw many examples of our industry at its worst. The F&I manager asked the customer to lie about her income, misled her in disclosure and put products in the contract that were never told to the customer.

So how do you maximize profits in F&I without deceptive acts? By learning how to effectively manage your department and sell the value on your products.

The Benefits of a “Menu”

At Assurant Group we have been teaching a menu selling process for six years. We know that it produces results when it is utilized correctly and along with the other financing documents ensures proper disclosure for our customers. People like to have choices and the menu gives them that. Early cancellations are greatly reduced because people don't cancel products they have selected themselves and by presenting the products in a consistent and balanced way, overall profitability improves.

Simply using a menu isn't enough though. F&I managers must learn how to sell their products and create value for the customer. This begins by discovering the customer's wants and needs through questions and helping the customer make the best choice for his or her needs. Each product you sell in F&I must be able to stand on it's own merits and satisfy a customer's needs, if it doesn't or if you don't believe in it, stop selling it. The reality is that you probably aren't selling it anyway.

The old school of F&I taught that every product should be sold to every customer in every situation. In other words our products were a “one size fits all” solution. That thinking is outdated and when you begin to put together packages and products that are tailored for every customer's individual situation, you'll see sales and profits soar. It is true that you should present all of your products to every customer. Then as they select products or show interest, sell those products and find out why they are not interested in the others. The bottom line is that menu selling produces results. F&I profit increases every time a menu process is implemented correctly.

The Benefits of Disclosure

Proper disclosure of all aspects of the vehicle purchase is not an option. No matter what production looks like or if it's the last day of a tough month, never sacrifice disclosure for ill-gotten profits. This benefits everyone involved: the customer, the dealership and the F&I manager. The customer leaves feeling comfortable with their purchase, the dealership receives higher CSI scores and reduced exposure for future liability and the F&I manager knows that they earned the respect of the customer and sold the benefits of the products the customer purchased. You can attain high F&I income with proper disclosure and there is no other acceptable result for today's dealerships.

To truly be a professional you must understand what is required in the form of disclosure. The Association of F&I Professionals is a terrific source for the proper disclosure requirements and information on the laws that affect the F&I Transaction. Becoming certified by AFIP is not an easy undertaking but is a terrific way to ensure you are meeting the legal requirements of your office. We have been an industry member for over ten years and mentor people through the AFIP Certification Process.


Creating a system to ensure accountability is critical to make sure that your dealership is meeting the customers needs. First, every transaction should have a signed menu form in it to make sure that products were presented and designating which products were selected and signed for by the customer. Second, the Dealer or General Manager should check the F&I managers selling disclosure skills. Have the F&I manager role-play these critical steps with you to determine their abilities and take corrective action if they are not acceptable. Third, closely monitor customer cancellations and complaints to watch for trends developing.

Creating a profitable and customer friendly F&I department has always been a goal. Today it is a mandate for doing business. Accepting anything less leaves you open for liabilities. If you still doubt the wisdom of this article, take your total gross F&I income for the last twelve months, subtract charge-backs and get your net F&I income. Now take out $5,000,000 that was the penalty one Florida dealership was hit with for misleading customers. How does your bottom line look now?

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