Some dealerships gain after closing F&I office
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In 2010 Motor City Lexus of Bakersfield closed its finance and insurance office. But that didn't mean the store stopped selling F&I products.
Since then, its F&I revenue per vehicle is up, customer satisfaction scores are rising and store expenses are down.
"The idea to have no F&I managers was born from a cost savings perspective of thinning out the layers of management," says John Pitre, general manager of Motor City Auto Center in Bakersfield, Calif. Motor City sells Buick, GMC and Lexus vehicles.
Dealers who use salespeople to sell F&I products and sales managers to handle the financing rather than have an F&I office do it all, say the process benefits customers and the dealership.
It shaves time off the sale process. It provides continuity for the customer, who works with the same salesperson the whole time. That builds rapport and a willingness to buy F&I products. Finally, it saves the dealership thousands of dollars in salary typically paid to an F&I manager. And salespeople like it because they earn higher commissions off the back end of the deal.
"The continuity is important," says John Sawyer Jr., sales manager of Portsmouth Ford-Lincoln in Portsmouth, N.H. "For the customer, it's honest. There's no smoke and mirrors, you don't see a salesperson running back and forth to a manager. You don't have to feel like you're being sent off."
Sawyer's store has not used F&I managers since 1992. It works well with the one-price sales process the store uses, he says. Sawyer says his F&I penetration rate is 40 percent and F&I per-vehicle revenue has consistently grown, though he declined to disclose it.
 | Dorfman: Don’t forget training. |
Bigger piece of pie
Motor City Lexus' F&I manager left two years ago for maternity leave with no plans to return, Pitre says.
"We all looked at each other and said, 'I don't think we need to replace her,''' Pitre says.
Pitre decided to train his sales managers in regulations and financing to handle the financing part of a deal and teach his 10 salespeople to sell F&I products from an automated menu.
The staff was on board with the plan because Pitre split the former F&I manager's commission between his two sales managers, giving each a $2,000 a month raise. He also gave them a slight boost in their back-end gross percentage to 5 percent from 2 percent. "It's just a bigger piece of the pie," he says.
For salespeople, their average back-end spiff went from about $75 to $125 a car, Pitre says.
"We had a $300 increase in gross profits per car so it was easy to justify it," Pitre says. "The more they sell, the more they get."
And he estimates the store saves about $50,000 a year in salary expenses.
Combining sales and F&I can work as long as it's done the right way, says Larry Dorfman, CEO of EasyCare, an F&I product vendor.
"Because many stores take too much time in F&I, there are some customer experiences around the country where stores are going back to a salesperson or sales manager doing F&I," Dorfman says. "That's wonderful as long as they're fully trained in regulation and financing" and their sales volume is low enough to handle the extra work, he says.
It's seamless
Motor City Lexus' F&I manager-free system works for four reasons:
1. The store sells about 1,200 new and used vehicles a year. That volume is low enough to allow scheduled deliveries so a salesperson and a sales manager can handle the F&I process without a finance manager.
2. Most customers of Lexus are easy to secure financing for because of good credit ratings.
3. Once a customer agrees to buy a vehicle, the salesperson presents the automated F&I menu and explains all the products to the customer. It happens quickly, consistently and early in the sales process so a sale is more likely, Pitre says.
"Salespeople can't skip the step because they have to go through it for the sales manager to complete the paperwork. So the customers are seeing 100 percent of the product, 100 percent of the time," he says.
4. The customer stays at the salesperson's desk the entire time.
"If they stay with their salesperson, who they are familiar with, they're more relaxed," Pitre says. "They trust them when the salesperson says, 'I think you should get this.'"
Once the customer makes an F&I product choice, the salesperson gives it to the sales manager, who has been working on the finance paperwork. The sales manager factors in any additional costs and hands it back to the salesperson, who takes it to the customer for signature. "The whole process is 30 minutes shorter than having a finance manager involved," Pitre says. "It's very seamless."
| Going F&I manager-free | ||
| Since Motor City Lexus of Bakersfield shifted vehicle finance duties to sales managers and F&I product pitches to salespeople in 2010, the store has seen higher F&I revenue per vehicle and lower costs. | ||
| 2010 | 9 mos. 2012 | |
| Per-vehicle F&I revenue | $600 | $900 |
| CSI scores (percentile rank) | 95 | 99 |
| Annual F&I manager expense | $100,000 | $50,000 |
You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on 
