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F&I Department
December 04, 2001 09:55:09
Left Pocket, Right Pocket
Think You Have To Take from Front End Gross to Increase F&I Gross?

Kimberly Greenhut
Director of Training, Automotive Professionals, Inc.

Managers and dealers believe that by placing more emphasis on F&I profitability, you are stealing front-end gross profit. This does not have to be the case. You can increase F&I profit, increase CSI and protect front-end gross.

Are you caught in the trap of limiting your F&I potential? Ask yourself and your managers these questions:


  • Does more than 40% of your F&I profit come from reserve?
  • Do your sales managers lack strong F&I experience?
  • Do you have less than 100% turnover?
  • Do you and your sales managers believe F&I is a necessary evil?
  • Have service agreement penetrations decreased over the last 2 years?
  • Have you experienced turnover in the last 12 months in F&I?
  • Have front-end gross profits decreased over the last 2 years?
  • Have F&I profits decreased or stayed the same over the last 2 years?

If you answered yes to one or more of these questions, read on.

F&I accounts for as much as 33% of the dealership profit (CNW Marketing/Research). Growing this department doesn't require additional inventory or capital investment, only an investment in incentives and training.

Increasing F&I profitability is one of your dealership's key success factors for future growth. F&I sales impact repeat business, parts and service, CSI and your exposure for legal liability. Yet managers struggle with the ideal of placing a lot of focus in this department for fear of hurting current gross profit levels and CSI. This defensive posture is limiting your ability to take control over a key component of the dealership's bottom line.

In many industry publications, we continue to see how many factors are pushing front-end gross profit to very low levels. Incentives, market conditions, used vehicle inventories, the Internet...stores struggle to build value in the sale of the vehicle. Your F&I department can turn red into black with little investment! Remember, when the customer enters F&I, it's a whole new set of buying decisions and they are willing to pay more for quality products. The dealership needs to capture these additional dollars.

F&I reserve has been a major part of the dealership's profit structure for a lot of years. Being dependant on this is risky. Legislation can take these profits away. The customer doesn't really gain anything of value when a dealership focuses on increasing reserve profits. Nor does the business manager have total control over this profit center since most customers have usually predetermined their finance options and the sales department will help to determine the finance option that maximizes the deal structure.

Finance profits must come from the sale of high-quality products from a knowledgeable professional. Your F&I department needs to have the right products that fit your market as well as the training to deliver the right message. The entire dealership needs to believe in the value of these products so a consistent message is given throughout the entire sales process.

“Front end gross is king!” Yes, we agree. It cannot be canceled or turned down once in finance. Now let's add to this profit! The products available to customers in F&I have a lot of real value to the customer. Traditionally, customers only have the experience of a simple feature/benefit presentation, not one that helps them understand how these products impact their ownership experience.

F&I isn't looking for “leg”, “air”, “water” or anything else that inflates the customer's payment. A quality business manager can sell their products on their own merit. What F&I does need is support from properly trained sales managers, sales personnel and owners. They need deals to be structured and presented correctly, 100% turnover and the right training.

Dealers don't make a habit of making sure that 100% of their customers are presented 100% of the products 100% of the time (The 300% Rule). This is important in order to maximize the performance of each of your products. Another place where money is being left on the table.

The sale of F&I products impacts your service and parts department as well as repeat business. Service agreements, appearance protection and maintenance plans bring the customer back to your service drives. If the customer has repairs during ownership and they are taken care of hassle-free, your customer will want to come back! If the GAP, appearance or theft product you sell does its job, they are more likely to come back!

Your business manager makes a lasting impression on the customer since they are the last step in the process. Your business manager needs to make a strong presentation that fits the customer's needs. They need to understand the impact they have in the customer's perceptions about their experience. It's up to today's dealership to change the customer's experience in a way that makes them feel well-served and confident that your dealership is looking out for their best interests.

How can you change how your dealership treats the F&I department and its profits? First, it starts from the top. As a dealer, understand your own experience with F&I. Be truthful about how much you really know about proper presentation, products, department role and consumer acceptance. Look at the message you give to other departments regarding the entire sales process.

Managers should meet to match expectations for the department. Where is help needed? How can the store upgrade the skills of all management, not just F&I? Thinking long-term, how will you find and/or groom the right individual(s) and plan for growth? Research if the products you are using meet your needs as well as the customer. Analyze current F&I performance and identify where you can make the greatest impact.

It is change management and it is not easy. Once the owner and management change their perspective on the role of F&I and its positive impact on the overall profitability of the dealership, it then becomes a common goal to structure, plan and manage a positive and very profitable F&I department.

Kimberly Greenhut is the Director of Training for API. API's training division, The Career Best Learning Center, is located in St. Louis, Mo. She has trained professionally in the automotive industry for dealers nationwide since 1994. Her experience includes retail management and agency management with an extensive background in F&I. She brings expertise that provides dealers training using the highest levels of technology today.

Related Articles
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Promote From Within and Limit Turnover
Training Business Managers and Sales Managers Together



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