Recently I’ve experienced a strange déjà vu when providing onsite consultations. I’m reminded of a time when I was working with a dealer in Arkansas who purchased a Buick / GMC store. He told me there wasn’t much meat on the bone and not to expect much in F&I performance. Most customers paid cash or had prime credit.
“No problem,” I thought. After all, I can positively impact any operation. But I couldn’t help wonder why the dealer didn’t get any tier three or four business. The customers at dealerships up the street seemed to represent a full cross section of buyers. It didn’t make sense.
I continued to ask questions until the dealer came up with a brilliant idea (or he got tired of my harping). He decided to spiff the sales people one weekend $40.00 per write-up. “Just come to the desk with whatever write-up, no matter the credit, and you’ll get $40.00.” The following Monday, the dealer called to report he had plenty of tier three and four customers.
If you’re reading between the lines, you already know where I’m going. The store didn’t have any subprime lenders – or the F&I manager wasn’t keen on working subprime customers. The salespeople thought, “Why bother selling a customer a car if they said they had slow or derogatory credit history?” So they broomed the customer, sent them packing to the competitor down the street and moved to the next customer who could buy a car.
Is this you? Be honest. Because this is exactly what is happening in dealerships throughout the United States today. This is the dark side of the pandemic’s silver lining for auto retail.
The front is making big profits on preowned cars today. They don’t have to take the skinny deals or cut profit to swallow a lender fee. Those vehicles aren’t easy to come by, so they’re being saved for the customer who’s going to pay all the profit. Who can blame them?
But will it pay off in the long run? Are you sending customers to your competitor, CarMax, Carvana, Vroom or independent dealers who are lining their pockets with the deals you don’t want? The sales manager may not see the value in a lower-tier customer today, but your competition does. Because when you treat a customer with slow pay history right, you have a customer for life.
What about the customer who just paid full gross? Will they use your service department? Does it matter? That’s a discussion for another day.
You may not realize it, but many of the larger dealer groups have their own in-house financing with internal scoring metrics. They’re not only going to sell more cars; they’ll earn more profit doing it. They will take the market share if you don’t do something about it.
Some say, “Ok, let them,” but remember when CarMax offered to put an appraisal on every trade whether the customer was going to buy a car from them or not? Talk about clever! Today, customers go to CarMax to get a trade value even before they step foot in a dealership. In fact, your sales manager likely sends the customer to CarMax to get a trade value! Is that you?
Today’s most successful dealers aren’t fixed in their ways. They have a growth mindset and continually adapt to the changing market!
This bubble won’t last forever. Do you have the necessary skill-set and processes in place today to meet market conditions tomorrow?
Schedule a 15-minute Zoom call today!
Unparalleled Experience + Analytics + Gold-Standard Training = IMPACT
Chernek Consulting, founded in 2001, offers automotive dealers exceptional experience-based consultation for multipoint, multi-brand automotive groups to significantly impact performance. Rebecca Chernek has worked with industry leaders such as JM&A, AutoNation, NCM Institute, NCM 20 Groups, NADA 20 Groups, Mercedes Benz Financial Services, Sym-Tech Dealers Services and more.
Rebecca’s comprehensive analysis identifies operational and team strengths and weaknesses. Her focus is on:
1) plugging profit leaks
2) getting the customer on the right car at the get-go
3) cultivating customers for life
4) digitizing processes for maximum efficiency and profit
It’s the little things you do that can make a big difference.
CALL BECKY CHERNEK DIRECT AT 866-894-1899 schedule a 15 - minute call today!
A laundry list of products won't add more profits to the books, it will only confuse your customers!
By Rebecca Chernek
U.K. Prime Minister Harold, no stranger to recessions, said, “The only human institution that rejects progress is the cemetery.”
Those who were involved in our industry during the 1960s know that it was Pat Ryan, described by some as the father of finance and insurance as a designated dealership entity, who brought us out of the Dark Ages.
At only the age of 26, he introduced the idea that dealers should not only offer consumers financing arrangements at the time of sale, but other benefits as well, benefits such as credit, life and disability insurance and service contracts.
Within four years, his idea had grown into a $15 million business. By the end of the 1980s, Ryan had acquired or merged with other companies and, together, his newly formed Aon Corp. had 28,000 employees and was worth a few billion of dollars. By 2004, Aon employed 53,000 people, with 600 offices in more than 120 countries.
“There is only one way to do business — the right way, Ryan once said, referring to high levels of integrity and morality.
When Ryan introduced his revolutionary idea to those in our industry, it was not without detractors. In time, his proposal was accepted enthusiastically, because it offered dealers the opportunity to generate additional back-end profit through the sale of F&I products.
It also allowed them to take advantage of reinsurance profits. Most dealers benefited handsomely from this system and can do so again. But increasing profits through the sale of products must be tempered with building customer trust and loyalty through “…the highest levels of integrity in a highly principled, highly moral and highly ethical manner.”
Today, dealers have a long list of products to offer consumers: service contract, maintenance, tire and wheel, etch, key replacement, paint and fabric protection, GPS, Lo-Jack, dent-ding, diamond fusion, lease wear and tear, gap, unemployment insurance, credit life/disability, tires for life, engines for life. The list goes on.
Obviously, products are the driver to a profitable finance department. But, in today’s business climate, exactly which products bring the most value to the consumer, while creating wealth for the dealer?
What is the most effective and efficient way to present them? Why shouldn’t every value-added product available to the consumer be offered? Which products for specific dealers make the most sense?
Which products should be offered every time and with every customer, because they deliver the greatest impact to the dealer’s bottom line? The answers to these questions influence the end result. So is understanding that offering an endless litany of products in the finance department does not always lead to profits.
Now let’s talk about you and your dealership. Before you make any decisions regarding which of the wide variety of products to offer your customers, you need to put your primary goal on paper.
This gets you to think about it. And seeing it in black and white ensures you recognize the reality of your current situation. Is your goal simply to offer whichever products will bring in the most back-end profits?
Or is it to increase back-end profits while building a successful reinsurance portfolio? Or something else? Unless you commit to putting your primary goal in writing, you will not know what needs to be changed and why.
Once you know your goal, ask yourself another series of questions.
Begin with an assessment of all the products available to you. Is this the best product of its kind and at the right price?
Do I have complete trust in the product company? What are my product partner’s expectations and can I meet them? Can they meet mine? Can I fully support the product and its value for my customers? What are the negatives, if any? Will my F&I manager agree with my assessment and be enthusiastic about offering the product to my customers?
Ironically, few dealers ask their F&I managers if they believe the offered products on their menu have intrinsic value over other similar products.
Why is this necessary? Unless they can wholeheartedly support the product, they will be unsuccessful in not only presenting the product but in overcoming customer objections.
The only way to know for sure if a product should be on your menu is to make product comparisons and conduct thorough research. Especially in today’s market climate, every dime a consumer spends must have proven value.
Presenting your menu with a long list of products will seldom increase products sold. It will, however, confuse the customer and diminish their interest in buying any!
Today’s more savvy and cautious vehicle buyers are looking for the best quality, the lowest price, and the best terms on everything. Dealers must be prepared to answer their every question candidly, convincingly, and conscientiously.
F&I trainer Rebecca Chernek is CEO of Chernek Consulting, LLC. She can be reached at 866-894-1899 or email Becky at becky@chernekconsulting.com