By Myril Shaw, Chief Operating Officer, Dealer Profit Services
The National Marine Lenders Association (NMLA) Conference wrapped up last week. So much fantastic and important information from and with an amazing group of people – every dealer needs to thank this organization for everything that they do for dealers and the industry. I feel blessed and honored to be part of it.
There were several presentations on economic trends and conditions. To say that everyone agreed on everything relative to the economy and where it is going would be a gross overstatement. There are a lot of shattered crystal balls out there.
That said, there was complete agreement on one set of issues that will clearly and directly impact dealers, and which makes one often overlooked area in the dealership critically important.
The things everyone agrees on are:
· Unit prices are going up – in some cases rather dramatically
· Higher unit prices make it much more difficult to hold margin – meaning less profit per unit
· Higher prices also mean that the rate and absolute number of sales is going down
· Manufacturing is normalizing and so manufacturers are shipping inventory to the stores at the old rates
· With higher inventory and higher prices, inventory carrying costs are going up
· With less profit per unit and higher carrying costs, dealership profitability is being driven down – sometimes significantly
With standard operational profit down, what can dealers do?
There is one source of “free” profit – meaning that, except for personnel and standard transaction costs which are unchanged, this is a source that help protect dealer profitability.
This magic source is F&I profit.
Done right, F&I profit can represent 5% + of unit sales – and with practice and discipline, it can improve from there.
There are few key steps to achieve this level of F&I Profit – and they start with leadership and a declaration that F&I profit is critical and the steps needed to achieve it will be followed.
The key elements to achieving excellent F&I Profit are:
· Advertise “Competitive Financing Available” early, often, and loudly including on the website, in any ads that are being run, as well as in-store signage
· As soon as the customer arrives to look at inventory, the first thing they hear, before they even declare “cash” or “finance” is “Once we have found unit you fall in love with, you will see our Business Manager” to make sure that Delivery is a delightful as it should be”
· 100% of customers, cash or finance, talk to the Business Manager 100% of time
· For cash buyers, the first thing that the Business Manager offers is “If you are paying cash, you must have great credit, wouldn’t you at least like to see what your options are and maybe save that cash for some extra fun in your lifestyle?” – note that 80% of “cash buyers are not paying with “liquid” cash, so they are actually prepared to finance in some form
· 100% of buyers are presented with a full set of relevant protective product options with initial profits on those products ranging from 120% to 350% of dealer cost – penetration rates on protective products (the number of deals on which one or more protective products are sold should be 65% + on finance deals and 35% + on cash deals
When dealership leadership declares the importance of F&I profit, lays out the goals, and targets, and ensures that the team is properly trained on the techniques, F&I Profit with exceed 5% on unit sales.
We can help you do that – either through training or by taking it over for you (which will be cheaper than in house!)
Contact us today at info@dealerprofit.com. We will help!
About Dealer Profit Services
As a premier F&I Services Provider, Trainer, Consultant, and Comprehensive Compliance Program supplier, Dealer Profit Services, a member of the Brunswick family, 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. Learn how to use Dealer Profit Services F&I Delivery Services – Click here. Get your Comprehensive Compliance Program here - just click. Learn more by visiting dealerprofit.com, email info@dealerprofit.com, or call (470) 326-0966.
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