If you’re a small-aircraft pilot, you know the value and importance of the preflight checklist. Every flight, you verify items like having enough fuel in the tank to checking the degrees of the takeoff flap. Missing one step can lead to serious consequences. Using a checklist for per vehicle retailed (PVR) transparency is a smart practice also. Its use can help your F&I department achieve two critical goals:
- Obtain the highest margin potential possible within the framework of sound F&I practices and policies
- Provide a transparent and legal transaction for buyers that also protects you
When you’re looking at PVR on random deals from the last month, remember the following six points. Dealers who adhere to all of them will stay compliant with the Consumer Financial Protection Bureau (CFPB), so they should be part of your checklist to ensure transparent PVR.
- Comply with Regulation Z: Part of the federal Truth in Lending Act, Regulation Z requires disclosure of loan details and base payment disclosure. Details include the amount or percentage of down payment; the number of payments, the finance charges, and the total end-of-term payment.
- Use a credit score–driven rate matrix: For customers who expect to finance (at an interest rate to be used to compute preliminary payments prior to accessing their credit score), the interest rate quoted should be a mid-level default rate, and used on all such transactions. If a customer balks, work from a rate based on actual credit score report.
- Use standardized dealer participation: When the dealership employs a bank to finance a customer, the buy rate is marked up at the full allowance by the lender. The law allows you to come off this standardized margin rate for individual customers to adjust final payment to (1) match or beat a competitive offer, (2) achieve a final payment that meets the customer’s ability to pay, and (3) match any published promotions. Be consistent and use this rate on first pencil with all customers.
- Use a vehicle-only base payment quote: To clarify what might be included in a customer’s final payment for lending/leasing purposes, disclose to the customer a vehicle-only payment that does not include products.
- Standardize product gross margins and lock-down menus: Use a standardized, consistent margin rate for the products you sell, and use this same rate for each customer to whom you present the products. The law allows you to come off this standardized margin rate for individual customers to adjust final payment to (1) match or beat a competitive offer, (2) achieve a final payment that meets the customer’s ability to pay, and (3) match any published promotions.
- Use a model-compliant menu that shows all products, prices, rates and forms: Use a lock-down menu that includes a display of all presented items. E-menu use will help ensure that the standard, consistent margin rate per product is presented to every customer, and that all customers to whom a product is presented are offered the product at the same margin rate every time. E-menu use will also ensure consistent displays and lock-down rates of all presented product displays, capture the products presented, and create digital evidence of the products displayed with a customer’s acceptance or decline of each of these products.
Always keep in mind the two goals of a finance office at a dealership. First, secure the highest margin potential possible within the framework of the previously described practices, and second, make sure you’re providing a legal transaction for buyers. Using a PVR transparency checklist will help you better accomplish both goals.
Jim Maxim, Jr. is president of MaximTrak Technologies, www.maximtrak.com. Reach him at [email protected].0
From 2003 to 2019, he helmed MaximTrak, a digital F&I platform, which he founded and sold to RouteOne LLC in 2016. Until late 2019, he continued aspresident of MaximTrak and as chief digital officer for RouteOne, bringing to market solutions trusted by dealers around the world.
Jim is widely regarded as a thought leader in business technologies and wealth-building strategies for entrepreneurs and F o rtune 500 companies alike.
He is a graduate of the Babson F.W. Olin Graduate School of Business of Babson College, Babson Park, MA. He is married, with two children.
Latest posts by Jim Maxim, Jr.
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- Digitize Your Dealership Operations Now to Be Ready for 2020—and Beyond - October 12, 2018