Damage Control in the Finance and Insurance Offices

LAS VEGAS — In business, some wounds are self-inflicted, others sustained from random gunfire.

So says Peter Briscardi, president of National Auto Care, a vehicle-service contract firm. “Shame on us if wounds are self-inflicted. If they are from something out of control, we need to get through it.”

He offers solace to victims of the latter: “There have been 13 recessions in this country, and 13 recoveries.”

But wounds imposed upon ourselves come from doing “stupid things,” such as an auto dealership finance and insurance manager selling more products but at deep discounts that jeopardize profit margins.

“These are the things that come back to bite you,” Briscardi says at a recent F&I Management and Technology conference here. “I can triple my business tomorrow and create a lot of wounds to myself and others. But you just can't do that.”

Dealerships should sell the value of service contracts and similar F&I products, he says. “Explain the value-added. If price is the only thing you are selling, you are done. You start playing games.”

Conference attendees here talk about how tough times have changed auto consumers, making many of them reluctant buyers, frugal shoppers or people with lower credit scores.

“I disagree the consumer has changed,” says David Duncan, senior vice president of Safe-Guard Products International LLC, a provider of dealership F&I products.

“Car buyers of the past are the same as car buyers today,” he says. “They want a respectful, easy process and sensible payments. It's basic human nature.”

But he cites a buying trend affecting the auto industry: “People have learned how to live on less.”

They also have learned from experience that they do not want to spend needless time in an F&I office. Experienced car buyers can spot dealership shortcomings, when an F&I salesperson takes too long pitching unwanted products, Duncan says.

“Over the course of a lifetime, the average customer purchases 13 cars from a dealership,” he says. “After four times, they've figured out what goes on in the F&I office.”

Menu-selling makes the process more palatable, because it speeds up presentations and groups F&I products into packages with more relevancy to customers, Duncan says.

Veteran car buyers may disconcertingly find some unwanted changes in the F&I office, such as stricter financing standards set by lenders that retrenched when the credit crisis hit in 2008.

“Many lenders withdrew into a shell,” says Randy Crisorio, president and CEO of United Development Systems, an F&I training firm.

Lenders now look closely at credit scores and want a hefty down payment. “They want more security,” he says.

Lenders show less tolerance for misinformation. They insist on honesty in customer credit applications dealers forward to lenders. “That's a big deal,” Crisorio says. “Dealerships that haven't done that are possibly in trouble.”

Auto retailing relies on credit, and one entity controls credit: “the lender,” Biscardi says. “They were easier to deal with before. Sometimes they looked the other way. No more. Why put a guy in a $50,000 car he can't afford?”

Doing that is like providing ammo to a borrower who stands to suffer self-inflicted credit damage when the loan goes bad.

Still, auto lenders generally get higher marks than mortgage lenders when it comes to standards and practices and thwarting borrower recklessness.

“In housing, you had people spending $400,000 for $325,000 homes,” Crisorio says of life before the bubble burst. “In automotive, you didn't have people spending $40,000 on a $25,000 car.”