F&I Flies High

Dealership finance and insurance directors are gazing at blue skies this year.

They are seeing better rates from lenders, deeper penetration of aftermarket products and more options for credit-challenged customers.

“We haven’t seen times like this since the early 2000s,” says Michael Schwartz, F&I director for the 9-franchise Galpin Motors that includes the highest-volume Ford store in the world, Galpin Ford in North Hills, CA.

“The banks are loosening up their credit, people are buying extended warranties and sales volume is up,” he says.

Galpin Ford placed No.1 in this year’s WardsAuto F&I 150, a listing of top dealership operations in the U.S.

The single-point store generated $17.05 million F&I revenues on the sale of 6,823 new and 2,704 used vehicles.

F&I remains a strong profit center at most dealerships. Some say that during the recession dealerships honed their skills in relating better to customers, finding options when the traditional approach came up empty and revisiting training.

Those skills are paying off now as the auto industry recovers.

Consultants point to new technology that can swiftly approve a customer credit application online, such as a pre-approved home mortgage. That way, consumers shop for cars that are affordable instead of wasting their time and the sales staff’s on something financially out of reach.

Technology also presents some drawbacks to car owners that can be addressed upfront in the F&I department. A popular option at Penske dealerships is key-fob-replacement insurance. Other dealers are looking at insurance to cover damage to car computer screens.

Dealerships with strong F&I departments typically commit their teams to training and regular meetings that include mock presentations as well as reviews of regulations, credit options and processes for applications.  

“We’re not robots,” Schwartz says. “We follow a consistent process. We run through dozens of scenarios and look for how to help our customers buy a vehicle and have a worry-free experience.”

A hot F&I product sold at Galpin is gap insurance that in theft, accident or other losses covers the difference between the actual cash value of a vehicle and the current outstanding balance on the loan or lease.

Also popular are prepaid maintenance contracts.

Schwartz favors a simple sales pitch, spiced with testimonials. Good-value F&I products don’t need a lot of hyping because they sell themselves.

Stronger unit sales and F&I revenues throughout the country mean more money for dealers to invest in specialized training, says David Robertson, executive director of the Association of Finance and Insurance Professionals.

“Certified professionals don’t get the dealer in trouble,” he says, referring to cases in which some dealerships have faced prosecution because of unsavory F&I practices.

The F&I department can be the source of devastating lawsuits, hefty fines and reputation-ruining media coverage, Robertson warns.

His nonprofit company offers training in regulatory and ethics issues, disposing of documents, retaining of electronic documents and potential red flags throughout the process.

At the same time, interdepartmental training can help identify the proper roles for personnel, so the whole team synchronizes its approach, says Robert Gault, F&I director of Classic Chevrolet in Grapevine, TX. The store is No.6 on the WardsAuto F&I 150.

“Every meeting, we stress satisfying customers,” he says. “There’s no finance conversation on the sales floor. We don’t make promises we can’t keep.”

The dealership relies on veterans skilled at asking qualifying questions of customers to get an idea of their vehicle and F&I needs.

“We make incredible numbers because we have good people who have been here a long time and ask the best questions,” Gault says, adding that salespeople focus on putting customers in the right vehicle, and then F&I staffers find the right financing.

People with blemished credit may find a willing lender, provided they come up with a substantial vehicle down payment.

The risk of rejection intensified when the nation underwent economic turbulence starting in 2008, and many individuals lost the ability to buy or lease a new car every three years.

These people often appreciate an anonymous credit application on the websites of dealerships or financial institutions.

Lenders use a spectrum of financial indices to make a decision about a customer, says Sue Mallino, director-global communications for Ally Financial.

In the past two years, lenders have widened lending parameters, thanks to more available credit, she notes.

“Our goal is to deliver meat-and-potatoes credit to our customers and stay competitive,” says Fawad Ofmani, F&I manager of Rosenthal Fairfax Honda in Fairfax, VA.

Patricia Ballin, finance director of Fletcher Jones Motor Cars in Newport Beach, CA, works with a host of factory-branded financial products from Mercedes-Benz to help customers roll out in a new vehicle.

Her store, with $9.6 million recorded F&I revenue on 5,369 new and 3,044 used units sold, encourages customers to lease a vehicle because many people can afford monthly payments that way.

Leasing, done right, also enhances customer retention. “We get tremendous support from the factory,” she says.