By Myril Shaw, Dealer Profit Services
In many ways, this may seem like three-dimensional chess. You have an F&I team whose job is to get a customer financed (or, in some cases, try to convert them to finance and in any case sell protective products) and also to drive real F&I profit through the reserve and protective product sales. What is your F&I team supposed to do – how do they balance this apparent conflict of interest?
While this may seem complicated, with proper management, training and compensation plans, this becomes a false choice. There are decisions to be made through the course of the transaction, but they should never feel conflicting on the part of any of the people involved.
There are three parts to this: management philosophy training, F&I sales training, compensation.
Let’s start at the beginning. When someone is hired, they should be hired understanding that no matter what their job is, no matter how directly or indirectly related to any other part of the business, they are there because you believe that they can help drive the success of the dealership. Of course, they are expected to do their job – and that by doing their job correctly they will make everyone and the store more successful. This is a message that needs to be communicated from the outset, through training and repeated regularly.
Anyone hired needs to understand that they are part of a larger mission than their job description. They need to be able to ask and answer the question, “Is what I am doing better for me or for the store – or is it good for both?” If they ever find themselves thinking that it is better for themselves than the store or both, it is the wrong choice. Team first!
This is a matter of correct hiring and correct training. The job of your F&I team or person is to maximize F&I profit. F&I profit cannot be maximized if there is no sale. The first rule for this team or person is the F&I Hypocratic Oath, “First do no harm.” No matter what, sell the unit.
The second rule is, “You never get more than what you ask for first.” Your team needs to be able to ask for the maximum reserve, and offer the best protective products at the maximum profit while leaving the door open to “graceful retreat”. They should always be able to believably reduce the first offered contract rate by suggesting they will check with other lenders (unless they already know that they are as low as they can go.).
They should always be able to drop or repackage protective products in more favorable ways. Here is the bottom line…no one makes any money unless a unit gets sold. Somewhere between 30% and 45% of the F&I compensation (above the base offered) should be a “yes or no” bonus based on applications received to applications contracted – and this should be set at 50% or higher. This makes it important to “sell a unit”.
About 25% of the F&I compensation should be a “yes or no” bonus based on whether protective products are sold on a contract with a target of 60% plus.
Finally, there should be an uncapped commission of roughly 8% - 12% on the total F%I profit on a transaction.
With this compensation model, you are aligning your philosophy and training with the performance reward. You pay someone a base for subsistence; you provide the training and tools that they need and you reward them for performing accordingly. A dilemma, what dilemma? Your team does what is best for you because they believe it is best and because doing the best is best for them. Nice job!
