5 REASONS
OUT to Kick Ancillaries
of F&I
The MORE F&I Has to Sell, the LESS Your Dealership is Making Any F&I manager who has to pitch a product menu with 8-10 items while negotiating rate and payment to a disinterested customer knows all too well how mind-numbingly awful it can be deal after deal; all day long. What used to be a menu of 2-4 products has rapidly grown to a number that forces you to race through the descriptions faster than you should. For this reason, the F&I process can become a time-consuming grind. Finance paperwork takes up much of the time in the box but when the F&I manager has to pivot to the overstuffed menu of products, eyes glaze over as the customer tunes out and says ‘No’ to everything after they have their payment where they want it.
There is a Better Way… and It’s Not What You Think This is not likely to be a popular idea as it runs counter to the way dealerships and their F&I departments have operated for decades. F&I is one of the biggest profit centers at any dealership and the staff is paid well to push as much rate and product as possible. Many dealers don’t want to change that and if anything, they want to sell MORE in their F&I office. But more products don’t necessarily mean more profits. Trim the menu to 2-3 products, period. Crazy? Not so much… read on.
Move Ancillaries to a Preloaded Bundle and Lift the Burden on F&I Every F&I director knows the time it takes to sell certain products. VSC and GAP arguably take the longest to close. It requires a different type of consultative sales approach and for that effort, F&I managers make a much higher commission when selling these products. Higher incentives, too.
All the ancillaries that clog up the menu like appearance protections, key replacement, alloy wheel repair, GPS, windshield, PPM, and PDR…they can ALL be preloaded to a Line 1 add on the buyer’s order. It can be a bundle that every car has, and that the sales team can highlight as a value-add to every car sold. Pushing the lower-margin products out to the inventory takes the burden off the F&I staff immediately and gives them the time to do the deep dive into the products that make them AND the dealership a lot more gross profit.
More Selling and Less Order Taking = A Better Overall F&I Experience It wasn’t so long ago that salespeople were clamoring to get into ‘the Box’ to work deals. There was an art to selling someone an extended warranty and it took a specific skillset to get someone to purchase credit life or GAP. You had time to walk through those options and you were paid well for it. Now some stores have changed the process so much that F&I managers are called ‘Finance Clerks’ or F&I is gone altogether, and the salespeople handle the entire process, tags and all. Lengthy menus have been reduced to a checklist… check off what you want, Mr. or Mrs. Car Shopper. Sounds more like rolling through the drive thru at the local McDonalds. Where is the challenge (or money) in that? Try to sell them everything and you risk making nothing. There are 5 distinct benefits to moving ancillaries to a preloaded bundle. It will help your dealership in ways you may not have thought of before. And though it goes against the new normal in dealerships across the country, this is a strategy whose time has come. Let’s dive in -
1
More Time to Sell
Gives F&I the Time They Need to Close the High-Ticket Products
We all know the old saying… time is money. This has never been truer than now with dealerships having to find ways to streamline an already long process of moving a customer from the showroom floor to the F&I office. This is often one the biggest complaints with car buyers… the entire process of buying their car simply takes too long. Saving time in F&I has always been a little tricky, though. They already carry the burden of driving the highest profit for the dealership (behind Service) while trying to keep the attention of car buyers who simply want to sign & drive. Consumers rarely want to sit through sales pitches for products they don’t think they need. The answer for this is simple… preload bundled ancillaries. When F&I managers have a huge menu of products to present, buyers get frustrated and the process can suffer. Pitch too much and nothing gets bought. But pare it down to a few high margin products and suddenly the penetration rises. If a dealership moves the ‘appearance’ ancillaries to the front of the process as a Line 1 addendum to the price of the unit, the F&I managers have the precious time they need to zero-in on VSC and GAP.
VSC and GAP products demand a deeper level of consultative selling than key replacement or interior/exterior protection. More questions, tougher but more lucrative sale. Without the extra menu items, F&I manager also benefit from a quicker sales process that helps them move more efficiently from one deal to the next. When sales are stacking up at the sales manager’s desk due to slowdowns in F&I, everyone loses. Make the menu ‘skinny’ in F&I and watch the cars move off the lot faster. In tough times like 2020, it’s worth mentioning, too, that dealers across the country saw an interesting and unexpected phenomenon occur in F&I… PVR actually increased in Q3 in the middle of a pandemic. Why? With fewer customers, F&I manager had more TIME with their customers to do the deep-dive necessary to answer questions and handle objections effectively for high-margin products like GAP and VSCs. Though COVID-19 will eventually fade from the daily consciousness, it serves to illustrate that anything that gives the F&I managers more time to sell will help in the near and long term. Getting preloaded appearance bundles out of F&I will do just that. More time, more profit.
2
Higher Product Penetration
Preloading Ancillaries Helps Sell More of Everything
One of the key metrics the F&I department is measured on is their penetration rate for all products offered. The more they sell across the menu, the higher that percentage climbs. Any motivated F&I manager wants their number to be as high as they can get it especially if their compensation plan rewards for it. It can be a challenge to attain those goals every month. It’s not easy to achieve that with a bloated menu, though. Having to present too many products will naturally result in
some suffering more than others… VSCs may be high but appearance products like interior/exterior or tire & wheel may be low. Most F&I managers are trained to offer the high margin products first like GAP and VSC due to higher payouts. Now try to push smaller products like PPM and watch the buyer glaze over and shut down… you can easily lose them with the small stuff. They just want the keys to go home with their new car. Instead of being ok with the industry average of 10% penetration rate for ancillaries, why not try moving them to the front of the sales process as a Line 1 add on the buyer’s order? Offering a preloaded ancillary bundle with every car sold will seamlessly increase the penetration rate for all of those smaller products and encounter a lot less resistance from buyers. And F&I managers can just focus on the big-ticket products. Each vehicle has a comprehensive ancillary bundle that includes interior/exterior, key replacement, alloy protection, PDR, windshield and 24/7 roadside for $395 (for example) and if presented properly by the salesperson, the buyer feels like they are getting a great deal for a TON of protection. Win-win. Do that for 100 units at an average cost of $195 and your store has not only added an easy $20k to the bottom line but now the penetration numbers go to 80-90% for all the small products that may not matter much. Now, they matter.
Raising the penetration rate by shifting them out of F&I helps everyone.
3
It’s a simple fix for an age-old problem.
Higher Commissions
Make More by Selling Less? You Can When You Push Ancillaries Out of F&I
Some in the auto industry say that the F&I manager has the hardest job in the dealership. They have to sell all manner of extra products and protections after the customer has already committed to buying their expensive car. Oh… and they are responsible for the second highest profit center at the dealership. A lot rides on their shoulders which is why they are ALSO among the highest paid, too. An average F&I manager makes about $125k per year. They have to roll through a menu with anywhere from 5-10 different products to make that money… it’s not easy. What if there were a way to lighten the load and actually help F&I managers make MORE money? Not as crazy as it may sound. Shifting the ancillaries out of the F&I office and onto Line 1 of the buyer’s order would help your staff make more by selling less on the menu. It could be marketed as a simple comprehensive protection package with the most popular products offered at a reasonable price. But more importantly, it alleviates the pressure the F&I manager is under to sell the whole menu in order to make a decent living. Anyone who has had to race through 8-10 different product presentations knows how tough it is to close on ANYTHING when they have to sell EVERYTHING.
Here’s why preloaded ancillary bundles can help F&I staff make even more… F&I managers will have more time to effectively close high margin products, making higher commission with products that pay more. Easy upsells for short term powertrain warranties to longer term coverage. Bump in CSI (less stressed, happier customers), AND a bump in penetration percentages (when incentivized properly). Increased income for F&I means lower turnover and happier staff. Preloading ancillaries into a simple and inexpensive upfront bundle gives your F&I staff room to breathe and present the products the way they were trained to. Consultative, relaxed, and dialed into the buyers’ needs.
4
Less stress, more money.
Higher CSI
Enhance the Customer Experience by Streamlining the Menu in F&I CSI scores impact a franchise dealership in a number of ways. The scores are intended to be a reflection of how car shoppers feel about the entire process of buying a car and many times these scores include some pretty hefty financial incentives you can’t ignore.
These metrics are critical to the OEM’s perception of how one of their stores is performing. It’s serious business and any store that has suffered in this area knows the consequences that come with it. Unfortunately, F&I tends to be the biggest drag on that number.
Historically, the biggest complaint coming out of the F&I department centers around the high-pressure sales tactics that come with presenting a bloated menu of products. Most customers don’t want to sit through all that and just want to sign & drive. We’ve all been that customer. One of the most effective ways to alleviate that ‘CSI killer’ is to simply move the ancillaries to a preloaded bundle on Line 1 and give the customer what they really want… a streamlined presentation that allows a deeper discussion about the protections they need the most like VSC and GAP. Better still, itemize for complete transparency. (here is a good example) Preloading appearance bundles on every car shifts that burden to sales and allows the customer to have the time to consider the higher margin products or upsells without being rushed. The F&I manager is not rushed either and a good rapport can be achieved. Happy customer, higher CSI scores for F&I. But there is another benefit to including a robust ancillary package with every unit… it gives your customers the extra peace of mind without the extra hassle of the hard sell. The interior and exterior are covered, keys can be replaced, alloy wheels can be fixed, and their windshield can get repaired without a deductible. For lease customers, having all this as part of the deal keeps them from being hit hard with recon fees at turn in. It's all set up to ensure higher CSI scores and helps put your store in a better light with the OEM. Private label to your established dealership brand and the community will know your top priority is protecting the appearance of every car sold. And when priced reasonably, gives the customer a transparent fixed cost for appearance products that don’t have to be pushed in an unethical manner. Pushing the ancillaries out of F&I checks all the boxes to add to the customer experience… time saved, less stress, and a sense that the F&I process has finally evolved.
5
More Overall Profit
Kick Ancillaries Out of F&I and Watch the Bottom Line Grow. Yes, It’s That Easy.
People say, ‘numbers don’t lie’. That’s true… they don’t. Every dealership is looking to make as much profit as possible, now more than ever. Unfortunately, there are so many factors that could be beyond anyone’s control… do the salespeople consistently hold firm on price, how good are the service advisors on upsells, and how good are the F&I managers at holding rate or closing on a VSC? Every month you take a chance the profit you need will be there and some months… well, it may not. So, how can moving your ancillaries out of F&I and to Line 1 of the buyer’s order help overall dealership profitability? Easy… Let’s look at those numbers. If your store adds a preloaded appearance bundle to every car on the lot at $395 each with a cost of $195, your store pockets the $200. With an average inventory of 200 cars, you have added $40k to the dealership’s bottom line. Even assuming that you lose a few along the way with customers asking for it to be removed, the profit will still be high. And it’s extra money at a time when every dealership needs it. That extra cash can be leveraged across the dealership… Training (more money to make sure sales and F&I are at peak performance) Marketing (increase the ad spend to highlight the bundle and create the ‘why buy here’ value proposition) Service (An extra $40k each month helps update critical shop & diagnostic equipment)
Hiring (extra profits can be funneled into adding staff for increased efficiencies and to address evolving challenges like social media management or digital delivery specialists) When the F&I managers are stuck selling from a huge menu of products, PVR can suffer when trying to sell everything to every customer. Trim that down to the high margin products which make more gross for the dealership, and profits will organically grow in F&I. Push the ancillaries out to the inventory, and,immediately trigger a steady profit stream month after month. Dealerships can’t afford NOT to be more creative when it comes to generating more profit that can be used to enhance every department. This simple shift can literally be achieved overnight.
A NEW Decade, A NEW Approach for F&I Dealers have been notoriously resistant to change over the last few decades. It’s the ‘if it ain’t broke, don’t fix it’ approach that has kept many dealers stuck and perhaps for some, that’s ok. But for dealers who are looking to the future and how a new generation of buyer wants to be sold in F&I, it’s time to rethink not only WHAT aftermarket products are offered but WHERE & HOW they are offered. These 5 reason clearly make the point that moving appearance products out of F&I benefits the F&I managers, the dealership as a whole, and even the customers looking for a better overall buying experience. It’s about higher profits, a happier customer, and an F&I manager that has time to be the ‘rockstar’ you need them to be on every deal.
About truwarranty
Led by CEO Garen McMillian, TruWarranty offers a robust turn-key suite of digital F&I products that include private label warranties, service contracts, and a comprehensive offering of both appearance products and back-office compliance support. TruWarranty can also give your dealership the look of a TPA without all headache of building the process in-house. Preloaded ancillary packages can be customized to help your dealership gain valuable market share through private label marketing support and training. Call TruWarranty today at 888-800-2251 or click here to schedule an online demo today.