Avoid Misusing Car Dealership Pay Plans
A dealership pay plan should not be responsible for managing F&I staffers. Dealership management should be responsible for that.
November 18, 2016
Let’s play pretend at the car dealership.
Let’s pretend:
It is the last day of the month (which isn’t too far off).
The top salesperson is sitting at a 50% close ratio on demo drives.
Salespeople are paid a commission percentage tiered on their close-to-demo ratio.
Fifty percent is the top tier.
At 49% a salesperson is paid 10% less commission.
Given our “pretend” scenario, how motivated is a salesperson to take anyone on a demo drive today?
I would guess in this situation the upside to another sale does not outweigh the negative effect of a demo without a sale.
We as humans run from pain and towards pleasure; it is nature at its core and it drives every decision we make as a species.
Now, I don’t know of any sales pay plan that mimics the one above, however I do know that almost every single finance pay plan is like the one above.
We pay our finance managers based on percentages and then wonder why their blood boils when they have to deliver a cash, fleet or employee deal.
We pay them on percentages and then wonder why they call in sick the last day of the month. We pay them on percentages and then wonder why they yell at sales people bringing them low-quality deals.
This is human nature. Some managers hide their frustration better than others, but they all are frustrated.
I am not suggesting we don’t hold finance managers to the highest of ethical and performance standards. I am suggesting we come up with a way to encourage them to get in front of the customer with a positive attitude, giving the customer a genuinely positive experience without the lingering thought of “I hope time spent doing this doesn’t end up costing me my bonus.”
One way to avoid that is to tier the finance manager on the number of products sold, not the average.
Tier them on the total gross and not the average per deal. Tier them on the customer experience and CSI scores. Tier them on how many declined credit applications they are able to turn into approvals.
While doing all of this, hold them accountable to hitting certain percentages or averages. But don’t subject their pay scale to it. If they are lagging behind in the averages, coaching may be necessary. So is training, motivation or any number of other remedies. Bottom line: A dealership pay plan should not be responsible for managing a finance manager. Dealership management should be responsible for that.
Let the pay plan motivate and encourage finance managers to do what is best for the store and its customers.
Chris Cochran is the lead underwriter at Off Lease Only Orlando and a former dealership auto finance officer.
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