By: Myril Shaw - Dealer Profit Services
Here we are…it is now almost July 4th and things will slow down…although, with this year being so different, maybe they won't slow down as much or as quickly as usual.
Besides being "different", how was the first half of your year? Did you make as much money on F&I as you should have? Do you know what the metrics for that?
We are now approaching the time when you can begin to make
changes if you are not maximizing your F&I profit, you left a lot of money
on the table during the first half of this year – and you need to fix that,
even for a normal year.
There are several measures for F&I profit and there are
a lot of variables that go into these. You
need to look at your business, your numbers and then take the appropriate
steps.
Measure #1: What percentage of your deals are being financed?
You should be financing 50%+ of your deals. If you are not, are you making sure that you are turning 100% of your deals over to F&I? The only way to maximize F&I profit is with a 100% TO policy. To be clear, this does not mean 100%TO sometime, it means that before you take a check from the customer, "cash" buyers talk to F&I. This is a real time event and must happen before the customer finalizes their decisions. If you are not financing 50% of your deals, you need to examine your standard operating procedures.
Measure #2: What is the average reserve on your financed deals?
Reserve is the amount that your lenders are paying you based on the interest rate charged to you customers who are financing. Depending on the creditworthiness of your customer and their willingness to participate and negotiate, this can range from 0% to 8%. If you are making every effort to finance all of your customers, this should be in the 5% to 6% range. This means that the lender is paying you 5% to 6% of the amount financed as a reward for financing through them. There will be cases where you earn 0% and there will be cases where you earn 8% - if you are not averaging 5% -6%, reserve, you need to examine your standard operating procedures.
Measure #3: How much are you making on the sale of Protective Products?
Protective products are things like extended engine warranties, interior/exterior protection, GAP Waiver, Tire and Road Hazard and others. Sometimes these are viewed negatively as "rip-offs" – they are not – they are lifestyle protection products and need to be presented 100% of the time to 100% of the customers in order to ensure that they have complete lifestyle protection. You should be selling these products on at least 55% of your deals…and when you do, they should they should add an additional 5% profit on the amount financed. If that is not happening, you need to examine your standard operating procedures.
Measure #4 – How much F&I profit are you averaging per unit financed and per unit?
Ultimately, it all comes down to this – how much are you making on F&I profit and does that amount make sense? There are clear answers. If you are financing 50% of your deals, getting 5.5% reserve, selling protective products on 55% of your deals worth 5% of the amount financed, you should be seeing 8.15% F&I profit on your financed deals. If you are financing 50% of your deals, you should be seeing just over 4% F&I profit on your unit sales. Now, if you are only financing 30% of your deals, that would still put your F&I profit per unit financed at almost 2.5%.
How are you doing? Are you doing between 2.5% and 4% on F&I profit per unit sales? If you are not, you left a lot of money on table and now is the time to make the changes that you need to. It will make major positive impact on the balance of 2020 and into the future.
Dealer Profit Services, LLC can help you achieve F&I excellence - no matter where you are in the development and/or maturity of your store or stores F&I success model. As the industry's only Finance Solutions Provider, Dealer Profit Services can and will equip you with what you need to take that next step in your F&I success - regardless of what that next step might be. Whether you want someone to help you take over take over your F&I and with our experienced personnel just help you drive profit to your store, provide help to you some of the time, need some quick advice or just provide F&I Training/Consulting, we are here to help you. If you are not fully equipped with all of your Compliance Manuals and Training, Dealer Profit Services can do that too. Contact us anytime at info@dealerprofit.com or give us a call at (470) 326-0966.
