As 2018 draws to a close, dealerships already have an eye on the potential issues that could be facing them in the new year, particularly in the F&I office. The headlines over the last year have been dominated by rising interest rates, the challenges of selling to the Millennial buyer, and increasing profits in a market that has seen decreased sales YOY.
Not a bad year but not a great one either.
So how does your store plan NOW for a profitable year in finance? Let’s look at three issues on the mind of most dealers when looking at 2019 and how to address them…
Rising Interest Rates
Much has been written in the automotive media (and everywhere else for that matter) about the effect that the Fed is having on the market. Rates are rising for everything from credit cards to mortgages to car loans. The 0% finance offers are disappearing fast with only 10-12% of lenders offering them this year versus 20-25% in 2017. Your buyers are feeling that crunch, too.
F&I managers must be ready to handle this by being able to effectively educate the buyer on why and how lenders set rates. Most buyers may hear on the news or read in their social media feeds that the prime is only moving rates a quarter at a time and they will assume that mean lenders will move it the same small amount. Be ready to explain how it works in a way that helps them see you as an advocate and not just the bearer of bad news.
Also, be ready to offer other options such as leasing (if it makes sense for their financial situation) and increasing their down payment. Be as creative as you can when helping ease the sting of a higher rate.
Selling More Product
Isn’t this ALWAYS the focus of every F&I manager? Absolutely. However, industry experts seem to agree that achieving those higher PRU’s is getting harder each year. Time to think outside the box…
- Offer packages or bundles as part of the menu process. Have a tiered menu with higher priced packages including everything first and ending with a ‘basic’ package. The psychology of selling would show that buyers almost always pick the mid-range package of just about anything due to the perception that taking the smallest plan makes them look cheap and the higher plan make legitimately not be feasible. This may be a viable alternative to the list approach.
- Drill down on the interview. Ask deeper questions to get the information on their driving habits (VSC), financial reserves in case of an emergency (credit life if you are allowed to sell it), and whether or not they will park their new car in a garage (GAP insurance). Start the new year with a commitment to a comprehensive but efficient interview process and the profits will follow.
- Commit now to ongoing training. Franchise or independent dealer, training should be one of the top priorities moving into the new year. There are many F&I ‘schools’ in the industry that can help your staff with the latest menu selling techniques and tips to connect with buyers in a way that insures higher product penetration WITH a higher CSI. Make the investment and help empower your F&I managers to make more for the store and for themselves.
Connecting with The Millennial Buyer
It seemed you could not turn on the news or look at your news feed on Twitter and NOT see an article about the emerging power of the Millennial buyer. How do you sell to them? What are their preferred ways of shopping and buying? How do you reach them?
For the F&I managers, though, this group presents an interesting challenge. Millennials prefer, more than Boomers or Gen X-ers, to most of their information online before making any major financials decisions. They will research everything they can about extended warranties, GAP, etc. before coming to the dealership. They don’t want to be sold and they will already have their guard up before meeting the F&I manager.
Simple strategy for this? Be proactive on social media and your dealerships website. Make F&I a presence in both platforms. Assume the role of educator by explaining the products available and how they benefit buyers. Consider an F&I chat to answer questions. Post on dealership profiles like Twitter and Facebook with stories about how aftermarket products helped customers. Millennials spend a large portion of their day on these platforms and will be looking up the dealership’s web presence…make F&I a part of that and your staff will see less resistance to their presentations.
Bottom line…no one ever increased profits year-over-year by doing more of the same.