Success stories: How dealers vastly improved F&I sales
September 3, 2008
Filed under Uncategorized
Powersports Business spoke to three powersports dealerships that have seen rapid growth in their F&I revenue during the past year. In each case, we asked what measures the dealer principal took to improve their back-end profits.
a change in thought
Bill Nation’s store previously operated like many other dealerships in relation to F&I sales.
After a salesman wrapped up a deal, they would then attempt to sell an F&I product to the new bike buyer. Nation, the part owner of Pro Italia, described that F&I selling process like this:
Salesman: “Do you want a warranty?”
New bike buyer: “No.”
Deal done. F&I revenue opportunity gone.
That has changed dramatically in the past year as the European dealership has added, for the first time, a full-time F&I salesperson.
“It’s just too hard,” Nation said of a new unit salesman converting to a F&I salesperson once a consumer has opted for a particular model. “We found once the salesman worked with the customer on price, everybody was kind of worn out.”
The decision to add to his staff was not an overnight decision for Nation, who admits having spent years getting chastised by members of his 20 group for not having a full-time person dedicated to F&I.
“We could never believe you could support a person doing it. That really was our stopper,” Nation said of his reluctance to adding a full-time F&I staff member.
The move has paid off for the Ducati and MV Agusta dealership. Nation says the store is averaging around $600 per unit on F&I now, leaps and bounds over the $50 or so of the past.
“It’s transformed things,” he said of the decision to add a full-time F&I salesman.
That doesn’t mean it was a particularly easy move
Nation had to spend thousands on renovating his small store to accommodate the new person and their desk. Plus, the dealership’s first F&I hire did not work, lasting mere weeks. The second hire, however, has paid dividends.
Not only are the store’s F&I profits up, but Nation has seen a positive impact on his sales staff.
“It helps to have the two sales guys freed up to sell rather than be bogged down in waiting for the (credit application) approval to come back,” he said.
To help the new F&I department, the dealership worked with RPM One, an F&I provider based out of Florida, to develop a prepaid maintenance program that would work for both parties.
“We worked with RPM One to develop the right pricing for Ducatis because they’re a different animal,” he said. Ducati buyers “don’t ride as much, but when they do service them, it’s expensive. So RPM One was helpful in that aspect in getting us a program we could actually sell.”
the auto industry effect
Mike McBroom, the longtime owner of a metric powersports dealership, saw what his Neosho, Mo., powersports store was grossing in F&I last year — roughly $350 per unit — as not by any means the best of all worlds but not too shabby either.
“I talked to (the dealership group) America’s Power Sports and they said, ‘We can get $600 a unit,’” McBroom said. “And I said you’re nuts. Nobody can do that.”
McBroom’s perception, however, has changed thanks to new F&I staffing and considerable help by Zurich, an F&I provider. Last year, Zurich came to McBroom and offered to put in a selling system that the company was bringing to the powersports market after using it in the auto world.
McBroom agreed to install the program, which would not only include the selling system but also staff training. “They evaluated (the F&I) department and our people and said here’s what you got right now and here’s where you need to be and here’s what we think you need to do to get there,” he said.
Part of that entailed hiring two F&I managers from the auto industry. McBroom says those staff changes have been hugely important in the growth of the stores’ F&I revenues. With Zurich’s help in training the new staff members, the Neosho’s store F&I revenue has gradually increased during the past seven months from $350 per unit to $900 per unit in July.
McBroom also has seen growth at the Destination store. Besides offering Zurich’s warranty and tire road hazard program, McBroom sells his own prepaid maintenance and Safeguard’s GAP program.
“This F&I has made the difference in making a profit and not making a profit in this store this year because our (new unit) sales are off,” he said.
a three-month risk
A risk with a potential minimal financial downside, but plenty of upside, convinced David Roosevelt to take a leap in terms of F&I staffing. The owner of Ducati Seattle this year added a full-time F&I staff member for the first time to his dealership, which carries new motorcycles and scooters. “The RPM 20 group convinced me that, if nothing else, it’s an X dollars amount experiment for 90 days and you’ll know if it works or doesn’t work,” Roosevelt said of hiring a full-time F&I person. “So that’s how I proceeded and took the risk. And it has definitely paid off.”
In fact, Roosevelt’s store has tripled its F&I revenue from a year ago. The possibility of seeing such an increase was not a complete surprise to Roosevelt, who at one time worked shortly as a finance manager at an auto dealership. “I certainly knew the value of it by all means,” he said of boosting back-end profits, “but had trouble getting my arms wrapped around the additional cost of adding to the payroll.”
The full-time F&I employee also has helped the dealership increase the number of in-house finance deals it now does. That percentage has tripled, edging up to 35 percent.
“By doing everything in-house, you control more of the sale,” Roosevelt said. “You have a captive customer. You can do quicker deliveries.
“So the whole mantra for us is making it easier to buy. That’s the bottom line.”
There have been some costs — beyond just added payroll — in adding the F&I staff member. Roosevelt had to make changes in the store’s office space, an adjustment that continues as the dealership tries to make F&I office more customer friendly.
That space, thanks to the risk Roosevelt took, now qualifies as the highest generating revenue real estate in the store.