Focus on used-car buyers to maximize F&I’s per-vehicle retail profit.

“Not only aren’t used-car buyers second-class, they’re a better class than new-car buyers when it comes to their total value potential for the dealership,” says Ed French.

He is a new- and used-car operations consultant with AutoProfit and a board member at TruWorth Auto, a pre-owned vehicle superstore in Indianapolis.

French offers the following to back up his claim about used-car buyers and profitability:

  • Fewer of them are cash buyers, meaning more financing opportunities.
  • Many require credit assistance, meaning more deals with a greater likelihood of selling F&I products.
  • They more often buy service contracts and other ancillary products to protect their purchase and make it more personalized. More than half of used-car buyers buy vehicle service contracts.

F&I managers trained and coached to see the big picture profit potential in used cars are more valuable to their dealerships, French says.

“This means they’re taking another look, not only the front end of a deal, but at the reality that every used car is going to wear out sooner than a new car,” he says.

He adds: “F&I should be enthusiastic about rehashing loan rates with lenders to get their customers’ paper bought, understanding they’re working for the well-being of the dealership not just themselves. In our store we’re seeing a 20% lift in product sales by looking at this bigger picture.”

French says the math proves his point.

“Used buyers are typically back in market in 24 months versus 36 to 48 months or longer for today’s new-car buyers. The question for F&I is, ‘Do you want $1,000 in income every two years or $1,500 every four years?” he asks.

Used-car buyers show customer loyalty to dealerships that “helped improve their equity position down the road, helped protect their investment by doing a good job of explaining the value of a service contract so they’re protected while driving, and presented other products they might be interested in to make that used car more unique,” French says.