A car dealership’s finance and insurance office can lose its effectiveness when an especially aggressive sales desk, perhaps unwittingly aided by a weak F&I manager, begins performing key functions once solely in the realm of the F&I professional.

“This trend is eliminating the vital checks and balances the F&I office provides on deals, and it is deteriorating the dealership’s value in structuring a deal that’s good for the customer and right for a particular lender,” says F&I consultant Ron Reahard.

The trend stems from the recent economic meltdown. During the credit crisis of 2008 and 2009, lenders were financing only the most creditworthy customers and turning down just about everyone else.

“The desk concludes, ‘Why not just submit all 720 or so FICO (Fair and Isaac Co.) deals electronically and bypass the finance office?’” Reahard says. “The sales department, in many cases, took over the financing part of the deal, putting the dealership at considerable risk.”

He argues that without F&I’s due diligence, a rogue salesperson or sales manager who coaches a customer on a credit application (exaggerating income, for instance) and then electronically submits a credit application can deceive lenders and expose the dealership to fraud liability.

Fudging of credit-application information is not new to auto lending, and a shady dealership finance manager is capable of it. But lenders have become far less tolerant of that behavior. The chances of this happening go down if a well-run F&I office processes and submits loan applications, Reahard says.

“Dealerships must have someone other than the sales department or sales person review customer-credit information,” he says. “That has been and still needs to be the role of the F&I professional.

“It is F&I’s duty to learn the customer’s story and then work a deal that obtains for the customer a competitive rate.”

In doing so, an F&I manager also takes into account lenders’ portfolio mixes that typically are balanced by loans of various risk levels.

An F&I manager also is better attuned to a lender’s look-to-book ratio. If it is, say 40%, the lender expects to fund four deals out of 10 applications submitted. A sales desk submitting loan applications might not know or care about that.

Moreover, when financing is removed from F&I, it can deprive the F&I that department of information it needs to make credible and effective sales presentations of aftermarket products.

Presentations then become rote product pitches that do little to match product benefits to customer needs, Reahard says.

“This is very ineffective, and an F&I manager in such a position cannot help the customer make a good decision with regard to the options available in connection with their purchase,” he says.

“If this trend toward the desk handling customer’s financing continues, the F&I department will go away, because it can no longer add value to the purchase experience.”