F&I scrutiny

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In the first of a two-part series, one of Canada’s top sales trainers, Chris Schulthies looks at how F&I pay plans can actually have a negative impact on the business office

Every pay plan in a dealership needs to be carefully crafted to ensure that it achieves the following criteria:
• It motivates the employee to peak performance;
• The pay plan aligns the goals of the dealership with the goals of the employee;
• It promotes an ethical and customer-friendly attitude and approach;
• The pay plan is competitive within the trading area and retains valuable employees;.
• It is easy to understand;
By examining the five criteria it is easy to understand the potential manipulation or outright highjacking and possible solutions.

1) It motivates the employee to peak performance
Paying a business manager a percentage of F&I gross profit can certainly motivate them to peak performance, depending on how you define peak performance. If you define it as earning as much money as possible in the business office and being at the top of your 20 group, then yes, paying on gross can achieve this. If your definition of peak performance however, is earning as much money as possible with an even distribution of business office products, then paying on gross will rarely achieve this. As a dealer principal or general manager, you will want to realize healthy sales of each of your chosen business office products, such as extended warranties, vehicle protection products, creditor insurance, etc. The even sales and distribution of these products indicates that your business manager is truly exploring the needs and lifestyles of your customers and matching your F&I products accordingly. If your business manager is a “one trick pony”, focusing and selling only one product to each customer, it is generally a manipulation of your pay plan.

Your business manager may be targeting an F&I product that has wholesale pricing only, allowing the dealership (and business manager) to add the markup of their choice. Obviously, this may not be in the best interest of the customer. Unscrupulous F&I suppliers use this knowledge to their advantage by offering a plethora of F&I products that often have questionable value for the consumer, but high gross profit margins for the business manager.

2) The pay plan aligns the short-term and long-term goals of the dealership with the goals of the employee
The short-term goal of your dealership is, of course, to be profitable. However, long-term you will want to ensure strong sales of your extended warranties. Extended warranties reduce customer defection after the manufacturer’s warranty expires and increase both brand loyalty and dealership loyalty. However, many manufacturer extended warranties do not yield the rich margins of other F&I products, and as a result may be offered only half-heartedly if tied to a percentage of F&I gross pay plans. Creditor insurance also adds real value by ensuring that your customers can continue to make vehicle payments in the event of illness or injury, making them in a financial (and creditworthy) position to still buy another vehicle from you. Again, because the profit may be considered low relative to the selling price, creditor insurance often does not get airplay, especially in eastern Canada. The question that really needs to be asked here is this; is the business office something you do “to” customers, or is the business office something that you do “for” customers? If the answer is “for” then you need to assess whether the business office products being offered (and pushed) align with your dealership’s short and long-term profit goals as well as customers’ long-term satisfaction.

Next time, we’ll look at three more aspects of the F&I pay plan that could be causing problems for your business office.

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