Here to tell us how you can revamp and re-invigorate your dealership’s F&I strategy for 2020 is Becky Chernek. Becky is an F&I Expert, President of Chernek Consulting, and host of F&I Today right here on CBT News.
Jim Fitzpatrick: Hi everyone, Jim Fitzpatrick with CBT Automotive Network. Thanks so much for joining us today. We’re so excited today to have Miss Becky Chernek. I know that you know this face and this name. She’s always on CBT News and she’s got her own show, F&I Today with Becky Chernek. So welcome back into the show.
Becky Chernek: Thanks for having me, Jim.
Jim Fitzpatrick: Sure. This time I’m on this side of the desk, interviewing you, rather than you sitting here interviewing others, so this is quite a joy. Thanks for taking the time out of your busy schedule and joining us.
Becky Chernek: My pleasure to be here and thank you again for having me.
Jim Fitzpatrick: Great. So let’s kind of jump right in here. What have you seen … There’s been a lot of trends out there in F&I that dealers have been following, some good, some not so good. We’re going to talk about those today. What have you seen over the last year that kind of jump out, that relating to F&I managers and relating to the F&I department, that you say, “Not really sure about that one.”
Becky Chernek: Well, we can talk about digital retailing, what’s happening there and that touchpoint, meeting customers on their terms even before the customer makes their way into the F&I office.
Jim Fitzpatrick: That’s a big issue for dealers today, isn’t it?
Becky Chernek: It really is. And they don’t know how to take it. They’re still trying to work through that because again, we want to protect the golden goose, and that’s F&I. So how do we walk that customer through that journey online to make sure that we are keeping, retaining that business, retaining more customers, converting more customers to our financing.
Jim Fitzpatrick: So right now, is it kind of a hybrid with the F&I manager will reach out and talk to the customer, as well as them being able to do it themselves online? What does that look like today?
Becky Chernek: It’s kind of scattered about because you have different cultures and you have [evanine 00:01:58] people quite getting the idea behind the know-all strategy. Meeting customer on their terms, no matter where those terms are that be online and they’d comforted customer’s home or office, that sort of stuff. Or we’re still back to square one with the traditional veteran F&I person who says, “You know what? I’m not talking those terms until the customer makes their way into the F&I office.” Because again, it’s all about what? Protecting my territory, protecting F&I at all costs.
Jim Fitzpatrick: What do you say to the F&I manager that says, or the dealer I should say that says, “We’ve got to address F&I on the customer’s turf or on the customer’s terms otherwise they’re not going to come into the dealership. And maybe I’ve got to do it because I’m X, Y, Z Toyota and ABC Toyota over here actually does do everything online.” So how do you sit there and stand on your ground? And say, “No, we’re not going to talk F&I until somebody is actually in the F&I office as a buyer taking delivery?”
Becky Chernek: Well, here’s the thing, they don’t have the control like they once did. And you’re right, customers have the ability to obtain financing any place they want to. So this is exactly what I talk to dealers about, because again, customers can walk into that dealership with a check made out for the exact amount. This is how they want to do business. Dealers have to provide either the traditional or nontraditional methods to obtain that business. So by trying to protect that F&I department, in essence what’s happening, they might not even sell a car. You see?
Jim Fitzpatrick: That’s right. Do you think it’ll cost dealers a lot of money in the backend, or? What’s this going to look like in five years? Are we sorry we ever did this?
Becky Chernek: Well see that’s what dealers are very, they’re scared about because again, I mean, I had a conversation just the other day at an ABA20 meeting that I had, and they were all talking about, “You know what? We’re putting our our vehicles online, costs us profits by doing that. And so now you’re talking about putting F&I online, I don’t know about that, Beck.” And yeah, so there are really being careful minded about how this whole thing and putting themselves out there.
Jim Fitzpatrick: That’s right. It is scary. Let’s switch gears a little bit. It seems as though some dealers are cutting down their F&I menus. Have you seen that out there to be more individual or to dish up a more individual quote or F&I menu for a specific customer?
Becky Chernek: Well, a couple things are going on with that. First of all, I mean even in my training I make it a point to make sure that dealers cut the fluff out, get rid of-
Jim Fitzpatrick: What would fluff be?
Becky Chernek: The accessory items, all these aftermarket items that by the time they get done and we’ve got 10 products on our menu. And who has time to go ahead and review all those 10 products for a menu? They don’t. So they get into that step selling mode and takes away from anything and everything having to do with menu selling anyway.
Jim Fitzpatrick: One dealer that we spoke to on that said that he packs those items in there and knowing that most customers are not going to do it so that the next rung down, the most common purchase item or I should say category, they go for knowing that, “Well we just put those in there to make the next one down look like a savings.” Do you see any validity in that?
Becky Chernek: Well it does… Yeah, maybe credit life with disability doesn’t go into the second option, which drops the payment down. But again, what ends up happening by having too many products on the menu, you have F&I people picking and choosing what products to offer the customer if menu selling is not happening. What’s happening is more of a step selling procedure. This is why I’m saying if you want to maximize profits, do menu selling the right way, get the fluff off the menu.
Jim Fitzpatrick: This is a question that was written into us and sometimes we’ll throw those at you, “Should F&I managers be promoting themselves individually on social media? What’s your take on that?
Becky Chernek: I do think that there should be a voice out there. And in fact I saw a great voice from a dealer on LinkedIn who had their F&I person and they were doing a presentation of sorts and it was really good. It was very positive minded. The thing that I like about it, if it’s done correctly, is that it promotes good will. And people buy from people that they what?
Jim Fitzpatrick: Yeah. Know, like and trust. Yeah.
Becky Chernek: Why not?
Jim Fitzpatrick: Exactly.
Becky Chernek: So I think that that could be a good venue, but it has to be… Again, you don’t want to be throwing out everything out there, but it could be almost like a clinic.
Jim Fitzpatrick: Sure. And also I think it’s got to be one where the F&I manager has to be aware that the very consumer they just delivered a car to may see them on social media, probably will see them on social media and now that they just spend an hour and a half with them in the closing booth and… The stories get shared back and forth and, “Oh, I’ll follow you on Facebook or what have you.” So that whatever the F&I manager puts out there, just keep in mind that the consumer is going to be looking at that as well. So instead of congratulating yourself or one of your team members on a $3,000 back end in the F&I office, just know that your consumers are going to, “What was that me they’re talking about?” Or, “I didn’t know they made that much money in F&I.” So keep it very consumer friendly. Not so much industry friendly.
Becky Chernek: No, it has to be consumer friendly, like a customer walking into a dealership for a clinic. When this stuff goes on social media and how they pound their chest about this 3000 front and back end deal is not a good thing. Yeah.
Jim Fitzpatrick: Give us your, let’s say your top three ways dealerships can get better at F&I in 2020. I know it’s a very loaded question, but just kind of hit the high points. If you had three things, three areas for dealers. If you met a dealer in an elevator and says, “Hey Beck, give me three things that I should focus on.” What would those be?
Becky Chernek: Well first of all, I would talk about getting F&I out of that office and get him on the desk with the sales manager. Let’s get engaged. Let’s really-
Jim Fitzpatrick: With the sales manager, not the sales person?
Becky Chernek: Well, the sales people too. I’m good with that and I think that the F&I people have to do more training, getting involved in that training. Be a part of the sales meetings, whether they like it or not, they have to be. And they have to get involved and be on that desk, take the TO, whatever that it takes to help that salesperson out and even… And the reason I said the desk managers, because two heads are always better than one. That way we minimize all the mistakes up at the desk and make sure that we’re getting more deals purchased and our deal structure is better. And that means we’re selling more cars and maximizing profits.
Becky Chernek: The other is, I want more cash TOs. We have to be more responsive to those customers who are or we’re thinking is paying cash and not wait until the customer comes in with that check.
Jim Fitzpatrick: It’s too late.
Becky Chernek: It is too late, right?
Jim Fitzpatrick: Yeah. If it was Becky Chernek Auto Group, would you pay your salespeople on backend? Money.
Becky Chernek: Yes.
Jim Fitzpatrick: You would?
Becky Chernek: All day long.
Jim Fitzpatrick: Okay. A percentage or a flat or what would that look like?
Becky Chernek: Sometimes it’s a flat. Now here’s what we do used to do. I don’t know if you remember this or not, but when we would kick off in some of the stores, we would actually pay on a menu. If in fact it got option one, all the products on option one, pay salespeople 100 bucks. Option two, 75. I don’t know if you remember that. The third option was 50, do you remember that?
Jim Fitzpatrick: Yes.
Becky Chernek: And it worked. It was great. And if you didn’t give me my interview, oh, you don’t get it. There you go. You were tough.
Jim Fitzpatrick: I think that there’s dealerships out there that don’t pay on the backend still. I mean, not all obviously, but, and I think that’s a mistake. I think that the salesperson needs to be taken care of in that area and as you know, we’ll take shorter deals on the front end. We’ll do a no gross deal on the front end because we know we’re sitting on a four pound deal on the backend. That the desk manager and the sales manager knew going in, “Oh, this guy wants to finance the car for 72 months and it’s a $60,000 vehicle with no money down and here he already agreed, or she already agreed to pay 7% or whatever the number is, and you’re like, “Oh my God, it’s a huge deal.” Even though they were hung up on what the deal of the front was going to be, I want to pay for the car, a cost or invoice less all the incentives.”
Jim Fitzpatrick: You still going to do the deal because of the back end. But why should that sales person be penalized when the house is making that kind of money? I’m probably going to get some emails on that one, but I don’t care. I mean, I think at the end of the day to make a stronger salesperson and to get this to a situation where, or to get the sales position such that it is a good paying job.
Jim Fitzpatrick: And I’ve talked about this many times here on CBT News where we need to increase that level of salespeople out there and say, “Look, this is a great job. You can make $100,000 a year if it’s done right.” But it can’t be, “How do we screw the sales person out of the commission? We don’t pay him on the dealer fee, we don’t pay him on the backend, we don’t pay them on the dealer money, we don’t pay him on the…” Before you know it, the guy’s selling a car, the girl’s selling a car for 60 grand and making a hundred dollars flat or $150 flat. What’s that all about? The dealer wouldn’t do it, I wouldn’t do it, you wouldn’t do it. But some reason we expect the sales person to do it. And then we turn around and go, “Wow, this is a 70% turnover on showroom floor.” Really? Imagine that.
Becky Chernek: We’re not taking responsibility. [Frank Ronetti 00:11:50] . He’s one. He’ll tell you and all. And I mean here he sells, he was also on the F&I Today Show and I believe he was also on your show as well. What a great humble sales associate. And he sells more than a hundred cars a month. But again, it’s all about education. It is also about training our sales associates, not keeping sales associates in the dark. So this is the problem that we have, that we continue to have. “Well, they don’t know anything about this product, so why should we compensate them on anything that they’ve ever… If we sell a product in F&I, why are we compensating that salesperson? What did they do to get it?” Well that’s their fault. They should be training sales associates, not necessarily on selling the product in of itself but-
Jim Fitzpatrick: At least setting it up.
Becky Chernek: Yeah. Planting the seed, understanding it. Because if they understand it and the customer has questions, chances are they’re going to sell more.
Jim Fitzpatrick: Absolutely. Yep. And I was great at that. I mean, I think is what led the dealer that I was working for to put me in F&I after selling vehicles was because I’d set the F&I person up so well to sell the extended warranty. The whole time from the time I greeted them, I would talk about the extended warranty, A, because I was making $50 spiff on an it and B, if I sold the most I could get a trip to the Bahamas. So I was like, “Hey this is pretty easy.” You know? So from the time I would greet the customer and do the walk-around presentation, I would always be pitching that extended warranty or the service contract from the get go. So it wasn’t even a question when they went into the box whether or not they were buying it. You know?
Becky Chernek: You know what? Me too. Back in the day especially with customers were purchasing a pre-owned vehicle, I made darn sure that they would take advantage of a service contract because I didn’t want him back in my service department, and then mad at me. And that was the whole thing about that. And of course, I got paid on that too.
Jim Fitzpatrick: Yeah. Becky Chernek, F&I expert and president of Chernek consulting. For dealers that are out there that are listening to her talk about these issues that you couldn’t find anybody better in the F&I industry in the United States for that matter to help you in your F&I department and to make more money to maximize backend. So I know this firsthand because we worked together many moons ago and it’s the real deal.
Jim Fitzpatrick: So this isn’t an F&I person that’s coming out of a big insurance company, out there, right out of college. Okay, go help dealers generate their backend profit. We’ve seen those, right? We love them and we love big insurance companies, but at the end of the day, you’re the real deal and kudos to you for building a great, satisfied customer base out there. And all the dealers that we’ve spoken to that you’ve worked with in 2019 have said, “Thumbs up. Thanks for bringing her to us every week through F&I Today.”
Jim Fitzpatrick: So we appreciate all your input and all that you’ve done for the industry. And seriously, it’s 2020, dealers. Get ready for a great year, but it really starts by getting your F&I department in order and this young lady can help you with that. So thank you so much for joining us.
Becky Chernek: Well, thank you so much, Jim, for having me. I really appreciate it. Thank you.
Jim Fitzpatrick: Absolutely.