The automotive industry is changing fast for many dealers and their bottom lines. Two factors are limiting dealership profits. First, as the dealerships face competition, which can squeeze profit margins per vehicle retailed. Secondly, transformation in the customers’ driving habits and behavior is influencing the purchasing decision now more than ever. The dealerships could face problems if they do not pro-actively adapt to the changing trends.
Historically, dealerships have depended upon Finance and Insurance to counter front-end profit pressure, generate revenue, and grow business. The finance and insurance department’s success often lies in offering various cutting-edge products to meet customers’ needs. Continually review your F&I products portfolio to ensure it is comprehensive and includes products that are most valuable to your customers.
Here are some best practices to help your dealership boost profits:
Sell multiple F&I products for customers to pick and choose from.
Additional products in your F&I portfolio can contribute to more profit. For example, selling two or three products per vehicle retailed equates to earning an average of $200 to $300 more per vehicle retailed. Offering products that speak to what the manufacturer does not cover can close the deal faster.
- GAP waiver and insurance helps pay off the auto loan if your car is totaled or stolen and you owe more than the car’s depreciated value. So, its usefulness is easily understood by the customers and, therefore, is a must in your F&I product portfolio.
- Pre-paid maintenance keeps your customer returning to your dealership. It increases customer loyalty and significantly raises the chances of making the additional sale while the customers are in the dealership.
- Vehicle Service Contract Through the use of a one-part contract, dealership personnel have the ability to offer their customers a combination of coverages and terms that best suit the customer’s driving habits.
- Anti-theft protection covers theft loss, so the customers will not have to pay out of pocket. The Invisible Marking System (IMS) is one of the easiest theft deterrent products to apply. Backed by a robust warranty, the IMS product provides valuable benefits and peace of mind.
- Tire and wheel products cover wheel replacement when damaged by a Road Hazard. Tire and wheel are damaged easily and most commonly. Therefore, coverage with no deductible offers big consumer value.
- Windshield protection such as Diamond Fusion scientifically coating improves visibility in severe weather conditions. The customers easily grasp this plan because most of them have experienced driving in challenging weather.
- Paintless Dent Repairs covers minor but very common door dings, and the consumers can easily see its value. A car’s worth depends highly on its exterior, so covering the dings provide considerable benefits to the customers.
Offer custom products as per the customer’s unique needs.
Custom finance and insurance products serve the customers’ needs and further enhance their overall ownership experience. A customized maintenance plan can create a profit center in your finance department. Additionally, the custom dealership maintenance programs keep the money in your shop instead of the factory’s coffers. Build a plan that ties the customers to the dealership that opens the door to more revenue opportunities, and significantly increases the possibility of making a second sale.
On the other hand, the following overlooked practices could drastically hurt the finance and insurance department and ultimately impact your dealership’s profitability.
Limited products for a higher price: Adopting a typical approach of offering only limited products and selling products for high prices is the first and foremost threat to your finance and insurance department. Thus, to grow profit, it is essential to offer a variety of products to match your customers’ unique requirements.
Insufficient knowledge of products you are selling: Your team must be well-versed in the products, purpose, and benefits to customers. The more your F&I team understands the products they sell, the more they believe in what they are selling. This, in turn, allows them to portray confidence and establish a comfort level with customers.
Demotivated personnel: Having various products to offer to customers is advantageous when your team possesses high motivation to grow PVR. Dispirited personnel who are not keen or well trained to sell a broader offering of custom products can be a significant risk to your finance department’s profitability. Providing comprehensive sales and finance training helps achieve the highest levels of success in the automotive industry.
Finance and insurance will remain a large contributor to dealership gross profits. To maximize your profitability, follow the 3 R process of realign, revitalize, and remove.
- Realign best practices and products to stay current with market conditions.
- Revitalize your people and your processes with recurrent training and updated technology in your department.
- Remove processes, products and people that are not a part of the solution for growth.
Reevaluate the practices of your F&I department to determine if it is helping or hurting your dealership. Our decades of automotive industry experience can help you make incremental improvements across all areas of your F&I operations. Contact us today to get tailored solutions for your dealership.