On its Web site, Wilsonville Toyota boasts that it offers “One-person help from start to finish: No closers. No finance managers.” A customer testimonial on the site enthuses that the store provided “the best and most open, honest auto buying experience,” the customer ever had.
Dave Jachter, general manager of the Wilsonville, Ore., dealership, introduced no-haggle pricing and eliminated the finance and insurance office when he took over the store four years ago. But he is quick to say that combining sales with F&I is not for everyone.
“This is not easy,” he says. “It involves constant training, constant updating. If you’re not willing to strap it on and work at it for a couple years, it’s not going to work.”
Jachter is part of a movement among some dealers – particularly no-haggle stores – to merge F&I with sales. High-profile public dealership groups such as AutoNation Inc. and Asbury Automotive Group Inc. also are studying the concept.
Customers may like merging sales and F&I. Dealers may see it as a progressive model that speeds the sales process and cuts expenses. But there are too many obstacles to assume such mergers will be widely adopted anytime soon. At most dealerships, the F&I manager is here to stay.
In an unscientific Automotive News online survey late last month, 79 percent of the 221 dealers who responded said the stand-alone F&I office will continue as a viable business model over the long term. More than 80 percent said legal compliance issues make the F&I office necessary. Without an F&I office, 84 percent also said, sales of aftermarket products would suffer.
The dealerships without an F&I office, where salespeople or sales managers handle F&I, remain in the single digits – accounting for 7 percent of respondents.
Just more than 5 percent of responding dealers said they streamlined F&I, requiring the F&I manager to share responsibilities with a sales manager or salespeople. Another 2 percent said they had a traditional F&I office but are thinking about eliminating it or reducing the staff.
Supporters of the F&I/sales combo say it’s customer-driven. Consumers have chronically disliked being handed off to the F&I manager and often would prefer to work with one sales representative throughout the transaction.
A Northwood University study presented at the recent American Financial Services Association conference in San Francisco revealed that technically savvy young consumers are impatient and unwilling to sit through a long presentation. They would skip visiting the dealership altogether if they didn’t have to pick up their car there.
“I believe in time that the F&I manager is endangered,” says Ken Hite, president of Dealer Advisory Group, an industry consultant in Monarch Beach, Calif. “Consumers certainly don’t like the current sales process of sales up, closer-manager, F&I, and then back to sales for delivery. This is very old-school, and slowly you’re seeing this process change.”
AutoNation, the nation’s largest dealership group, has pilots under way that combine the sales and F&I functions at the sales manager or director level. Kevin Westfall, AutoNation’s senior vice president of sales, would not share results of the tests, nor would he estimate when the pilots would be complete.
Last September, Westfall said the Fort Lauderdale, Fla., dealership group was trying to reduce overall head count to allow it to pay the sales force better. At the time, he said he was leaning toward having a sales/F&I manager overseeing salespeople.
Asbury, of suburban Atlanta, wants to serve customers with one sales representative from start to finish. “I know the consumer wants us to get there,” says COO Michael Kearney. But he believes his operation will need to be nearly paperless to make the process work.
In response to the downturn, publicly held Lithia Motors Inc., of Medford, Ore., streamlined operations at its stores, cutting its F&I staff and requiring sales managers to share more responsibility for F&I. Lithia’s sales managers arrange financing for customers, and F&I managers sell aftermarket insurance products, says John North, Lithia’s controller. The sales manager also subs for F&I managers when they’re off work.
Brad Bickle, CEO of Stanley Automotive Enterprises, which operates 14 domestic-brand dealerships and two used-car lots in small Texas cities, took a similar approach to Lithia’s. Bickle trimmed staff, renamed the F&I manager the “business manager,” and required sales managers to share the load with the F&I office.
The business manager meets and interviews customers early in the transaction. The restructuring helped double the Stanley group’s F&I income to $1,000 per vehicle last year, Bickle says.
“Customers felt more comfortable when they were being asked: ‘Tell me about you. Tell me about your needs,’” he says.
But more typically, dealers say they experience a drop in sales when they drop the F&I specialist.
Jachter says previous stores he worked for averaged $900 to $1,000 per transaction in F&I profit with a traditional F&I manager. His Wilsonville Toyota started with $350 a car in its first few months as a no-haggle, no-F&I manager operation and has had to work hard through persistent training to bring the average up to $700 to $800 per car.
Ken Zelada, now a general agent for Insurance Plus in Los Angeles, has worked with large dealership groups as a trainer and program developer. He says the stores that eliminate the F&I manager limp along with lower sales. For stores with a concentration of riskier, subprime customers, replacing the finance manager is “tougher and not recommended.”
Dealerships typically lose F&I revenues without an F&I manager, even if most of their customers have prime credit ratings.
“In some of the stores, they have eliminated the position and have gone to typers who are paid an hourly wage,” Zelada says. “The immediate results were a drop in dollar-per-car average of over $500 and an increase on contracts in transit of over five additional days.”
Others worry more about legal compliance than lost sales. Most dealers surveyed said regulation was the biggest threat to their F&I business. In January, several federal rules affecting the finance office kicked in. More are on the horizon.
Brian Leary, finance director and trainer for Larry H. Miller Management of Sandy, Utah, says the many disclosure requirements also make it risky to eliminate the F&I manager. Many of the states where the Miller operation does business also have licensing requirements. Says Leary: “If we had to license all the salespeople, it would be daunting.”
Leary also says F&I managers have “a different skill set” from salespeople, particularly in acting as liaisons with lenders. If salespeople handled deals from start to finish, he fears relationships with lenders would deteriorate.
I find it funny how most places said that the sales of aftermarket stuff would “suffer”. Ever go to buy a new TV or appliance and the salesman asks you to buy the extended warranty? Couldn’t they do that too?
Also, what kind of legal compliances are we talking about?
I do agree that going back and forth between F&I and the salesman can wear people out and make them want to leave, so streamlining the process can help.
But, are those “regulations” as bad as these guys are making it out to be, or are they just so stuck in a rut that they refuse to change.
Would you guys be more willing to visit dealerships that offer this streamline process?