By Myril Shaw, Chief
Operating Officer, Dealer Profit Services
Interest rates are
rising quickly. While this should not affect
your F&I success, it should affect your F&I behavior.
Many stores encourage
or allow all salespeople to provide rate guidance to customers, either by providing a
range or suggesting what they think the high rate could be. This is a practice that needs to change/stop. With the rapid change in rates, sales have no
idea what these rates could be, and suggesting something to customers that simply
turns out to be false will sabotage the F&I results and create angry
customers.
When customers ask
sales about interest rates the answer should be, “They are changing pretty
quickly right now, so I just don’t know.
Our Business Manager will go over the market and these rates with
you. Rest assured, we want to do the
best we can by you.”
A particularly
insidious effect of these rate increases is on ordered boats – and given the
inventory situation and history, this is a big piece of the customer
market. The challenge here is that when
a customer wants to finance and gets qualified on order, they may have to
requalify when the boat arrives (most approvals are good for 60 days.) In this financial market, the requalification
issue is not that the customers don’t remain qualified, it is that the rate they
qualified for initially is no longer available and may have increased by
one-half a point or more.
The effect of this
rate increase is that Finance has an ugly choice – try and raise the rate
initially quoted to the customer and risk the sale, or sacrifice F&I profit. Generally, as long as a good job has been
done on Protective Product sales with good profit there, giving up some reserve
to protect the overall sale and the Protective Product Profit is the better
idea.
This just reinforces
the value of aggressive Protective Product sales. The profit on these products can
help maintain a baseline 5% F&I profit on unit sales even when the reserve has
to be sacrificed – and there is no risk to the sale on a rate increase.
It is likely that rate
increases will continue for the foreseeable future. Prepare your team and your strategy. Keep your customers satisfied by delivering
the correct message at every step. Make
sure that Finance is focusing not just on Reserve (although that still remains
important) but also on Protective Product profit, to protect against rate changes. Nothing comes easily – profit still can.
About Dealer Profit
Services
As a premier F&I
Services Provider, Trainer, Consultant, and Comprehensive Compliance Program
supplier, Dealer Profit Services is about improving a dealer’s F&I profit
and then providing the tools to ensure that profit is protected. As a
Service Provider, Dealer Profit Services provides complete F&I services and
delivers industry-leading F&I Profit Results. As Trainers and
Consultants, we help dealers improve their in-house F&I departments.
Through the Comprehensive Compliance Program, Dealer Profit Services provides
an online, on-demand, Compliance Program with documents, training, and tools to
make F&I Compliance a process that helps protect the dealer against
potential risks from compliance issues. Get your Comprehensive Compliance Program here - just click.
Learn more by visiting dealerprofit.com, email info@dealerprofit.com,
or call (470) 326-0966. Dealer Profit Services is proud to be a member of
the Brunswick family.
