F&ICommentary & Insights

F&I
Oops They Did It Again

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Oops, they did it again.  I just unpacked my new desktop computer, screens, camera, and enough cables for you, me, and every adult on the planet. (Well, not quite but definitely an abundance!) Along with my new goodies, I purchased, and I quote, the “Download Microsoft Office Home and Business 2021 All Languages Online Product Key License 1 License.” (Please note “Business” is part of the title here.)  So, when I bought this, I had an expectation I could use it for my WORK as a consultant, because I run a “Business.” When downloading the product, it wouldn’t sync with my Outlook. At. All. (There’s no telling how many times I attempted this with different variations and permutations.)    After six (6) hours on the telephone and online chats with Dell and Microsoft “support,” and my web host provider, I learned I had purchased the wrong product. After much typing and chatting and phoning, I finally learned from these fine folks, you see, “Business” doesn’t actually mean I am able to use it for a “business,” because I was informed that “Business” is really the “Home” version. Insanely aggravating, right?  Silly me, I thought the word “Business,” actually meant you could use it for a business. The software I purchased was $229.24 for a one-time charge but now Microsoft told me the new price for you know – business business - was $99 per year. Honestly, after six (6) hours struggling with tech support, I really didn’t care, I just wanted this nightmare to end. (Doesn’t that sound like a customer coming out of F&I after a long transaction?) And please allow me to mention I resent the word “support” here because none was given!     My Microsoft situation is a textbook bait and switch advertising ploy and is in breach of federal laws. I’m sure Microsoft has plenty of lawyers to argue about this. (By the way, if you’re a class action lawyer looking for a new case, Microsoft might be your next target…) This story illustrates two (2) important considerations in running your store: 1.     If you are having customers accuse you of bait and switch advertising, examine both your website and your other ads, including television, radio, internet etc. (Have you, as the dealer, looked at your online reviews recently? This is a terrific way for you to “listen” to customer feedback.)  If the terms are not “clear and conspicuous,” then likely the ad would be considered deceptive in some way. Because of competitive pressures, I know some dealers who advertise this way intentionally (so BEWARE!) and some who do it unintentionally. Either way, if you pay attention to Joe Public’s feedback, you will learn about process kinks at your store, and you can improve on procedures and avoid false advertising accusations and problems.   2.     In my experience, there is (almost) always a disconnect between the advertising and the sales staff, which leads to claims of bait and switch. The ad agency or in-house ad person should be training the sales staff on advertising specials and how terms were calculated mathematically. When Sally arrives at the lot and requests the advertised deal, then the sales person should be able to articulate clearly “how the deal works” and understand how to communicate this to Sally courteously and effectively. Otherwise, when Sally is told she cannot get the deal, (for whatever reason the sales agent creates), she will be (rightfully) upset. This is a classic scenario where the dealership can make improvements and avoid pitfalls by conveying information to the customer clearly and concisely. This potential negative situation occurs when the sales agent simply doesn’t have the information to properly do their job.This is easily fixed through training.   There are both federal enforcement agencies concerned with these issues, as well as the state Attorneys General.  As an example, Pennsylvania’s Attorney General, Josh Shapiro issued an advisory on March 3, 2022 warning of unfair and deceptive practices which violate the Pennsylvania Consumer Protection Law. Here are three (3) salient points specifically about dealers directly from his advisory: Represent and advertise goods or services at their actual price, comply with the terms of warranties given to the buyer; and not engage in fraudulent or deceptive conduct which creates a likelihood of confusion or misunderstanding. Sell a motor vehicle under the terms or conditions, including price or warranty, which a motor vehicle manufacturer or dealer has advertised or otherwise represented. Disclose any hidden charges in any advertised price of a vehicle, as well as the expiration date of any advertised price. Don’t be the dealer who ends up saying: “Oops!...I did it again, I played with your heart, Got lost in the game…”  It didn’t go well for Brittany Spears in 2007 and it won’t go well for your business either.  If your sales staff gets lost in the game, and plays with customers’ heart, you are going to create irate prospects, which (1) you won’t sell, so you will lose the sale and, (2) even worse, these bait and switch behaviors will attract regulators and lawyers.   Then, it’ll be your “Oops,” which will lead to a hefty fine, lawsuit, or worse…both!
dealership sale
Connecting & Collaborating to Grow to Boost Your Dealership

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By now we have become all too familiar with the realities of limited inventory, looking for alternative ways to help customers and create profit can give you the boost you need to get through lean times with a little more ease. With our normal trade-in cycles disrupted, customers are facing expiring warranties, increased maintenance, and repairs. The place customers are still doing business face to face is service, putting extra emphasis on needs discovery and solution sharing in the service drive can benefit the whole dealership. Working Together to Grow When we think about Finance and Service it may seem like they operate in completely different worlds, they should be symbiotic. When was the last time you saw F&I Managers and Service Advisors working together to grow in opportunity areas? There is much to gain from these departments understanding how they can support each other’s growth and working hand-in-hand. Service Advisors are the long-term salespeople in your dealership, they see more customers per day than any other sales point in the store, with the most one-to-one consistent contact with customers they have more opportunity to grow relationships and trust. When it comes to building value in service contracts and warranty products with customers, educating Service Advisors in F&I product areas could be key in planting the seed for future purchases and selling contracts from the service drive. Knowledge is Power Consider the exponential increase you will see in service and warranty contracts when you educate your Service Advisors on your F&I products. “Extended warranty” calls have been a long-standing joke for years, they’ve even been made into memes, there must be people buying when the phone rings for us to keep hearing “I’m calling about your car’s extended warranty”. Often those calls are inconvenient and come when customers are not amid vehicle maintenance or repairs. Imagine this offer coming at a time when it is most needed, while the customer is in the service drive, presented by a trusted source; a knowledgeable Advisor could give customers immediate value, relief from repair costs, and peace of mind. Training is Key Providing your team with training on how to drive F&I products will help Advisors refer to those products and their benefits when working with customers, the more familiar customers are with what the warranty and service products provide, the more likely they are to consider purchasing. Often, when introduced to products in F&I, customers have already been bombarded with purchase information, they get to the service and warranty portion and it is more money, more decisions, and they are overwhelmed. Customers are not always in the right frame of mind to process the value of those products. You do not have to train your Service Advisors to sell like F&I Managers, that is where the F&I team comes in, a referral from the Service Advisor to F&I will allow Finance to finalize the details while the customer’s vehicle is being serviced. Having service Advisors who are knowledgeable on the features and benefits of service and warranty contracts is not just an investment towards increased profitability, it is investing in greater customer satisfaction. When your team on the drive has a complete understanding of the products your customer has purchased in the finance office, it eliminates confusion, frustration, and conflict from misunderstandings over coverage when it comes time for customers to use their products. With added training, advisors are equipped to head off potential complaints and dissatisfaction when they can quickly identify misaligned customer expectations,  Building collaborations between F&I and the Service Drive is a solid investment in the future of your dealership, each department builds value for the other and customer loyalty to the dealership. The two also lay the groundwork for and maintain ongoing long-term profit. 
insurance
Do You Understand the Components of Your Garage Insurance Policy?

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Flavor: Something we crave in our daily routine. Try this flavor-filled description: “There’s a sense of cornmeal next to sawdust, oily vanilla, and a hint of fresh honey sweetness that entices your senses. It takes on a caramel corn sweetness as the vanilla carries you towards sweeter woods and cherry fruits. The end is short and sweet with a distant wisp of orange oils next to a slight minerality.” Recently, I found this depiction in an online article on Uproxx. Do you know what’s being described? (You’ll have to read the whole article or skip to the bottom for the answer.) With an increase in the complexity of flavors, I would proffer that you discover more appreciation of the product through the layers of taste. And so it is with your garage insurance policy. The more you understand it, the more you will appreciate it and have the taste for it.  I recently studied a garage insurance policy for a client. (Try not to be jealous.) I found 107 items in the policy which were questionable and needed further investigation as they were important for the dealer. As it turned out, at least 26 were actionable. My initial review drove the premium down from $109,641 to $81,511. Based on that audit, here are eight (8) select items for you to consider: What is the total value of your land + building + used vehicle inventory (not floor planned) + parts + blue sky? Your liability umbrella should exceed that total number or the business is underinsured in the case of a catastrophic accident. Do you have enough employee crime coverage to satisfy a claim resulting from someone stealing a vehicle? Do you have an aggregate over your vehicle weather deductible to act as a “stop loss” in the event of a large loss? (For example, if you have a $1000 deductible and 600 vehicles are damaged, you are out of pocket $600,000. If you had a $250,000 aggregate, you would write a check for the $250,000 and not the $600,000.) Have you compared your vehicle physical damage coverage limits to your actual inventory to determine if you should adjust the policy up or down? Did you know this exclusion is in most policies? “Loss caused by an ‘employee’ if the ‘employee’ had also committed ‘theft’ or any other dishonest act prior to the effective date of this insurance and you or any of your partners, ‘members’, ‘managers’, officers, directors or trustees, not in collusion with the ‘employee’, learned of such ‘theft’ or dishonest act prior to the Policy Period shown in the Declarations.” How much are you paying for Med Pay coverage? Isn’t it duplicative of your basic liability coverage? If you eliminate the coverage, how much money could you save? Are you paying an extra premium for higher limits on your uninsured and underinsured drivers policy (than you are legally obligated by your state) to pay? How much will this save you? Also, have you considered a separate, higher limit to protect the owners? Are you accurately self-reporting the number of dealer tags? Getting the flavor here? Make it a priority to review your policy with someone knowledgeable who will go through it and explain everything to you. While it may be distasteful upfront, you’ll be glad you did while gaining an understanding of what provisions the policy contains. And, it’s not ice cream that was being described above.  It was bourbon!
red car protected
Bubble Wrap: Follow the Logic Filled Road

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We have all ordered a product that was shipped to us most likely in a cardboard box. Inside that box, the product we ordered, was probably covered in bubble wrap. You’re familiar with it, right? The transparent, pliable plastic material with the regularly spaced, protruding air-filled hemispheres whose sole purpose is to protect the fragile contents of the box. Bubble wrap provides exactly the right level of cushioning protection needed to make sure your products arrive safely after being shipped. Most of us own a smartphone these days. It’s probably fair to assume, many of us purchased a protective case when we bought the phone. We can’t keep our phone in the box it came in wrapped in bubble wrap if we want to use it. So, we bought the case, which is the functional mobile version of bubble wrap for our phones. Did we buy the case because we thought the product was bad or would break? No! That’s why we shelled out the $1100 for the latest greatest gadget.  The phone was expensive and we know that at some point, we are bound to have a clumsy moment, where we drop the phone, or worse yet, it falls out of a backpack or pocket. The thought of the phone striking down on the ground and cracking the screen is horrifying. This is especially true if you don’t have AppleCare. Therefore, we spend a small amount of money to protect our investment and keep it safe. The bubble wrap and phone case are to the phone, what a service contract is to a vehicle today.  Costly repairs have skyrocketed due to onboard computers, high-tech electrical equipment, sensors, switches, diodes, radar, cameras, and touch screens – all of the non-maintainable components. Vehicle service contracts not only protect the vehicle, but they protect the consumer by creating AND forcing a budgeted monthly plan. It is because of this agreement to pay for the covered repairs that a consumer can have a fully managed payment option, thus increasing the probability of a pleasant ownership experience. The Necessity for a Vehicle Service Contract The more ways you can explain how consumers protect themselves and their investments, the more buy-in you will have because they will identify with these logical behaviors. You are simply leading them down the logic-filled road. The more things you can get them to agree with you on, in terms of protection, the more likely you will demonstrate the necessity for a vehicle service contract.  You wouldn’t ship valuable fragile items without packing peanuts or bubble wrap, would you? Is anyone walking around without a case on a cell phone? These are just two small, everyday examples most of us overlook as an avenue down the logic-filled road to commonality and “agreement in principle”. When we arrive at “common Grandville”, we connect, and the transference of enthusiasm and excitement happens. The next part is simply using logical mathematics to illustrate how much better the protected payment is, especially because of the increasing costs of breakdowns due to the replacement factor instead of just repair. There are many different ways you can try to convince a consumer that they need a vehicle service contract. There are so many closes, and honestly, they all have their own validity and effectiveness in their own way. The problem is getting comfortable with how you explain it. If you don’t understand the comparison, you are making or can’t effectively communicate it in a way where you break it down to something so basic and common, the consumer will feel like you are trying to mislead them or they will altogether not follow along and will likely decline because they are afraid of making a bad decision, not because they don’t see value in it.   By scanning the above QR code with your smartphone, or following this link you can watch THE BUBBLE WRAP CLOSE! Practice it and customize it to your liking. I think it is just one more tool in your belt when pushing to improve your effectiveness in the business office. Go forth and profit! #bing #morewinning
hammer on car
2021: Will Your Car Dealership Go From Success to Hot Mess?

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I’m not one to sugarcoat a crisis, but the pandemic has created at least one happy consequence for car dealers — vehicle shortages . With people everywhere urged to avoid public transport and chip shortage, car sales have hit a record high and demand continues to outpace supply.  So after years of making very little selling new cars, dealers are finally laughing all the way to the bank. No matter the franchise, no matter the location. Car dealers everywhere are having their day in the sun.  Do you know what that means? Some will get burnt.  Whether it’s in 6 months or 12 months, manufacturers will catch up and flood the market just like pre-pandemic days. And the car dealers who did nothing but bask in the glow of their success? They’ll start to feel the heat.  The best car dealerships know that success has a nasty habit of breeding complacency. So while the foolish rest on their laurels, the wise are working to future-proof their businesses.  The best are using this opportunity to examine what’s working (and what’s not working) in their business; their strengths, and their weaknesses.  They know that it won’t be long until competition for buyers is back on, and they’re taking proactive steps to finesse their operations; now, not later.  They’re getting ahead quite simply by getting ahead.  Make sure you’re one of those dealerships. Otherwise, instead of laughing all the way to the bank, you’ll be crying all the way to the bankruptcy court.  Now is the time to ask yourself this: What is your dealership doing to improve and prepare your operations for the future? Remember that when demand exceeds supply, sales training and excellence take the backstage. If you’ve got the cars, the customers will come. But when things reset, will you be out of practice? Out of shape? Out of step with the car dealers that took the time to get organized and stay ahead of the game?  If you’re not sure how to answer that, consider how much time your dealership spends fine-tuning these all-important aspects:  Sales Processes How regularly are you reviewing? When you review your sales, are you considering not just quantity of sales, but quality ? Are you confident in your staff’s product knowledge? Are they confident in their product knowledge?  F&I Product Lineup  When was the last time you took a good hard look at your finance and insurance product lineup? Are you sure it’s up to date and working hard for your business? How about your reinsurance structure? It all adds up. Readiness to Buy  No well-meaning car dealership would wish failure on another, but the hard truth is that not all dealers will survive the downturn. Are you ready to mobilize cash quickly when the opportunity comes to buy a dealership?  Advertising and Marketing  Sure, you don’t need it right now. But when supply outweighs the demand, dealers will be competing to turn customers' heads. Will you be placed to shout the loudest? Plan out your advertising and make sure you’re ready to make that investment when the time comes.  These are just some of the strategies that will separate the winners from the losers. The good news is that there’s still time to decide which side of the line your dealership will be on.  These good times are well deserved. But don’t expect them to last. Even more importantly, don’t get caught out when the tide starts to turn. Use today’s flush to build a better, more resilient business for tomorrow. 
cash deal
Have You “Lost Interest” in the Cash Deal?

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After a recent F&I Master’s class, I came back to the dealership better, stronger, and faster than before. That class taught me about having a conversation with purpose. So, since we are having a conversation anyway, let’s make it count? This is the biggest opportunity on cash deals to move the needle. Especially if you are working in a high-line store catering to affluent customers with higher credit scores.  The One Pay Lease Many business managers forget the least used tool available – The One Pay Lease. To a cash customer, this is a way to purchase the vehicle by writing the dealership a check for the total of payments on a 36-month single payment lease. Nobody talks about this and even fewer people are proficient at this technique. This is what separates the average managers and professional grade F&I pros.  Explain the advantages for a customer to consider a single payment lease as opposed to simply writing us a check. It costs far less because there is less interest and lower rates. This makes it less expensive than a traditional lease and paying cash for people who enjoy driving the newest cars. Lastly, the credit approval is easier since they get all the payments upfront.  The Cash Deal in Disguise The cash deal has evolved and sometimes is a “finance deal in disguise.” People actually walk in with a shoebox filled with dirty 20’s and 100’s that they have been hoarding during the pandemic. Now that the world isn’t ending, they want to get rid of it and come into our dealerships in droves with cold hard cash. It’s a great reminder, if you collect $10,000 or more in cash, report it by properly filling out the finCen8300 form. If you aren’t sure, my advice has always been, “when in doubt, fill it out!” What is a cash deal in disguise? That’s when you get the cash buyer who is really just using an outside lienholder. You will still need to present your options menu however. Most F&I managers will print up a CASH menu and start their presentations.  After reviewing how much each product is in terms of overall total cost, they are forgetting that if the customer is using an outside lender, the customer is ultimately going to be making a payment. In this instance, it’s still important to review with your customer, based on the terms of their own financing, what the base payment will be and then what impact adding these protection items can have on that monthly payment. Ultimately, closing the sale on a payment, even though it’s “cash”. Present these as finance deals with different payments and you’ll be surprised how much more product you will successfully enroll your customer in. Show it to them in terms that make sense to their budget. On true-cash deals, sell the value in the product - that’s all you can really do. When they use outside financing, appeal to their budget and explain how much this will benefit them. How does cash affects pricing? I get asked all the time if customers can get a better price if they pay cash. My answer is always the same. “We give the same great pricing to ALL of our valued customers, regardless of how you choose to pay for the vehicle.” Other than the occasional factory rebate that is connected to financing, the dealership’s selling price is the same whether it’s cash, lease or retail installment sales contract. Having an attitude of gratitude. Appreciate and welcome the cash deal. Best part about a cash deal? Not worrying about funding issues! The only thing you have to do is be a great salesperson. As Jim Rohn once said, “if you stoke the fires of their desires, and you’ll not fail to make the sale!”  Remember, if a person can sit down at your desk and stroke a reader for $85,000 - they can certainly add $5,000-$10,000 more for whatever protection options they want. Don’t be afraid of the cash deal or the cash buyer. Those are usually disciplined, persistent, highly intelligent people with four common traits: capacity, ability, stability, and equity. They want to buy; they just can’t be sold. You’ll have to earn it the old-fashioned way, by being genuine and serving them with the heart of a teacher and the right spirit of intent. Remember to try a one pay lease for a great cash conversion, present the outside finance deals like regular finance deals, and on true-cash, put on your selling shoes and tap in! #bing #morewinning