Selling cars is the core focus of every dealership, but there are opportunities for dramatic increases in revenue by turning your attention to F&I products.
For many auto sellers, those verticals generate as much – or even more – revenue than sales.
The Basics of F&I
F&I includes vehicle financing, extended or additional warranties, extra insurance and similar products.
When customers get to the F&I department, they have usually already negotiated a price for the vehicle.
You can still make additional profit by suggesting financing, leasing and warranty options. Even when people say they’re not interested in financing, you might be able to offer them lower down payments or monthly payments than their bank.
That conversation also gives you the opportunity to offer extra products like vehicle service contracts.
Many dealerships that offer competitive prices don’t make much money if a customer decides to pay cash. A great F&I department is essential for generating the revenue your dealership needs to be successful, especially in difficult times.
Using the Right Technology
There are dozens of automotive dealership sales platforms on the market that allow your dealership to input and manage data from a sale, as well as highlight the products available to customers.
That software can also calculate which products the customer is most likely to buy and tell the salesperson which ones to suggest first.
Staff members can use them with tablets or computers to show people visual representations of how their car payments will be affected by longer-term loans, shorter loans or changes to the interest rate.
In the event you can offer a better product for your customer’s needs, that could be the difference in commission coming to your dealership or leaving with the bank.
It’s also a good idea to include F&I products on your website.
People are becoming more familiar with shopping online for almost everything, including vehicles and financing. Giving them an opportunity to do research and compare financing options in their own time and on their terms can encourage them to choose your business.
Customers can take care of most of their application and approval process at home. That lets you complete sales faster and allows F&I salespeople to complete more transactions each day.
It also lets you offer F&I to people who make virtual car purchases. Many dealerships even offer delivery, letting people get access to most products and services without ever stepping into an office.
Knowing Your Profit Benchmarks
Collect and review data about your average profit per vehicle and where that profit comes from.
In some markets, focusing on service contracts, paint sealant, prepaid maintenance plans and insurance might be more profitable. In others, salespeople have more success when they suggest subprime loans with high rates.
Those loans often require low monthly payments and no down payment, so they’re ideal for people with poor credit who still want to drive a nice car, truck or SUV.
After you find out which products are most profitable, you can offer bonuses when people sell more of them. You can also use your knowledge to set sales goals and offer rewards when your salespeople exceed them.
Promoting Your Products
Marketing and advertising works well for F&I products as well as vehicles.
Use social media and more traditional tools like TV ads to let people know about their options and how they can reduce their down payment and monthly payments.
You can often get higher sale prices by offering certified pre-owned vehicles. CPO cars are inspected to make sure they meet high quality standards and the program is administered by a respected third party like NIADA.
That allows you to attract customers who would otherwise choose a new vehicle.
Following Up After Purchases
If customers decide not to purchase an F&I product, reach out to them several times over the next six months to encourage them to change their minds.
After buyers adjust to their new payment, they might feel more confident about adding a small amount for a service contract or insurance.
If they didn’t choose to finance from your dealership and the monthly price feels too big, you can offer a loan with a longer term that’s more affordable.
Contacting past customers occasionally reminds them to consider your business when it’s time to get routine maintenance, make repairs or shop for another car, truck or SUV as well.
Don’t overlook the importance of your dealership’s F&I department. It’s crucial to your profits and overall success.
NIADA has supported the independent used auto dealer community for more than 75 years. Learn how joining NIADA can help you integrate a CPO program into your dealership’s offerings, reduce your expenses and improve your F&I department.