Reducing the number of product offerings, increasing managerial training and focusing on customer comfort zones are ingredients in Big Two Toyota-Scion's finance and insurance success, says Wally Henkel, general manager.

The dealership, based in Chandler, AZ, ranks 146th on the inaugural Ward's F&I 150, a listing of the top 150 F&I revenue-generating stores based on the Ward's Dealer 500 list. Big Two's F&I revenue in 2007 was $4.4 million — about $768 per new and used vehicle sold.

Meanwhile, the Ward's F&I 150 as a group averaged $1,364 per new and used vehicle sold.

“We really focus on three things, instead of how a lot the finance offices focus on a huge number of products,” says Henkel. “They are service contracts, the gap (insurance), because there are so many people now trying to trade out of vehicles with pretty incredible negative equities, and then we focus on the service maintenance agreements.”

Gap insurance covers the “gap” between the actual value of the vehicle at the time of the accident, and the amount owed to the finance company. Many finance companies require vehicle owners to have full coverage on their cars or trucks, but gap insurance isn't usually included.

“We don't sell a lot of the hard-type items in (F&I),” says Henkel. “We focus on the three we feel like add the most value to the guest, particularly if they keep the car for a longer period of time.”

The store pitches extended service contracts. About 69% of its customers buy them.

Henkel says that percentage is “about double the industry standard.” According to data from the National Automobile Dealers Assn., service contract penetration for the average dealership was 31% in 2007 — down from 35% in 2006.

The industry-wide decline is due to improvements in vehicle quality and better manufacturer warranties, says NADA.

Dealers say they are facing significant pressure in their F&I departments because banks and captive finance firms are tightening credit standards.

That's resulted in a decline of 20%-25% in the number of loans being funded. The weakened economy and an increasing number of customers owing more on their vehicles than what they are worth are also hurting sales.

Henkel says his dealership is trying to ease some of that pressure by training their finance managers with the goal of building value into products they do offer.

“We were not particularly strong into the secondary business,” Henkel says of non-prime financing. “We do have a secondary department, and do some secondary financing, but that's the one that's been most dramatically impacted with the economy being like it is right now.”

Big Two's finance department staff consists of a finance director, who oversees and supports seven finance managers, and two secondary finance managers specializing in non-prime loans.

Customers spend about 30-40 minutes on average with a finance manager at Big Two. The store has implemented new processes to shorten the buying time for customers and as a result, created a more friendly atmosphere.

Big Two opened a new facility last year. “There's 120,000 sq. foot under one roof, and 108,000 of that is air conditioned,” Henkel says. “It's a pretty big store.”

Not only does the dealership have a customer lounge in the sales department, there is a similar lounge for F&I customers.

“You know you can't have enough finance managers on a Saturday afternoon,” Henkel says. “We built a lounge very similar to our customer lounge, with big-screen TVs, nice wood ceilings and floors and couches. There's also a play area for children between the finance offices, with video games and games.”

Henkel says the added touches help keep customers and their families from being tired and frustrated with the whole sales process before they get into Big Two's F&I office.

Service customers really have it made. They have their choice of manicures, pedicures, shoe shines, back massages and hair cuts while waiting for their vehicles to be repaired. “We're a little unique,” Henkel says.

The dealership has spent a lot of time developing and maintaining in-store processes and policies to ensure nothing illegal or unethical occurs.

“Our finance director's office faces the finance managers' offices, and we do a lot of surveying and monitoring of our guests,” Henkel says.

“We haven't gone to videoing yet, mainly because the guests might not be comfortable with that,” he says. “A lot comes back to just hiring the right people, and supervising them properly.

“We do a tremendous amount of surveying of our guests, both internally and with other companies outside, so that we feel like we have good handle on our policies and practices being followed.”

By the Numbers

Big Two Toyota Scion

Ward's F&I 150 Ranking: 146th

2007 F&I Revenue: $4,376,082

F&I Revenue per vehicle: $768

(Includes both new and used vehicle sales)

Ward's Dealer 500 Ranking: 88th

2007 Total Revenue: $153,279,684

Ward's F&I 150

Total F&I Revenue: $1,042,823,876

Average store F&I revenue: $6.9 million

Ward's Dealer 500 average F&I revenue: $3.8 million

F&I Revenue per vehicle: $1,364

(Includes both new and used vehicle sales)