Adam Kraushaar is making more money selling finance and insurance in the midst of mayhem.
Kraushaar owns six dealerships in Toms River, N.J., one of the areas most forcibly struck by Hurricane Sandy in October. Many of his employees and customers were displaced and devastated. Kraushaar's stores and inventory were not damaged, but his dealerships lost power for eight business days.
"This has been an absolutely awful experience," says Kraushaar, president of Lester Glenn Auto Group, which also has a Hyundai store in Manahawkin, N.J.
"Initially we were playing therapist as much as we were car salespeople," he says.
Despite the devastation, Kraushaar and other East Coast dealers say they are boosting F&I revenue right along with selling more cars. The most popular F&I products are guaranteed asset protection, or GAP; extended-service contracts; and total loss protection.
"In situations like this, people see the value of insurance a little more,'' Kraushaar says. "We don't give a hard sell."
Selling those products along the East Coast is remarkable given the region's high lease penetration rate. For the first nine months of this year, leases accounted for 27 percent of retail deliveries in the Northeast compared with just 19.3 percent of retail deliveries in the entire country, according to R.L. Polk.
Lease deals often don't lead to sales of the most common F&I products. Customers rarely buy extended-service contracts because their lease typically expires before the vehicle's warranty ends. And they don't buy GAP because it's included in many leases. Other products, though, such as wheel-and-tire protection, are of value to lease buyers. And East Coast dealers say wheel-and-tire is experiencing a sales uptick.
Sales of new and used vehicles are growing as consumers replace vehicles destroyed in the storm.
"With sales up, F&I is also doing very well," says Paul Larson, owner of Larson Ford in Lakewood, N.J.
And the financial ruin that can go along with losing a home or a vehicle is making insurance products valuable to many people, dealers say.
The most valuable seems to be GAP, which pays the difference between what a customer owes on his or her car and what the car is actually worth if the car is totaled or stolen.
"People are conscious now of GAP insurance and extended-service policies," Larson says.
Larson's F&I revenue per vehicle is still basically flat versus a year ago at $900, but Larson says, "as we sell more cars" the monthly F&I revenue is rising. Before the storm hit, monthly F&I revenue averaged about $70,000.
As of Nov. 27, his monthly F&I revenue was "well over" $100,000, he says.
Larson Ford sells about 1,300 new and used vehicles annually.
GAP sales at Larson Ford are up about 15 percent in November vs. October, before the storm, says Tracy Black, the store's business manager. November sales of extended-service contracts are up 15 to 20 percent compared with October.
A big reason for the uptick, Black says, is that post-Sandy, customers are starting to realize how quickly water can destroy the numerous electronics in their vehicles.
Lester Glenn Auto Group’s Adam Kraushaar, left, and John Perillo Jr., right, with three members of the Lavallette (N.J.) Police Department. The dealership provided the truck for the police.
A little easier
At Kraushaar's stores, which sell Hyundai, Buick, GMC, Chevrolet, Subaru, Mazda, Chrysler, Dodge, Jeep and Ram vehicles, November new-vehicle sales, as of Nov. 28, were up by 65 percent compared with a year earlier, he says. Used-vehicle sales are up by 75 percent. He sells about 13,000 new and used cars a year.
The post-Sandy sales surge has contributed to a rise in Kraushaar's average F&I revenue per vehicle. That figure has risen to about $1,000 in November compared with $775 a year ago, he says.
"We're definitely seeing it's a little easier to sell GAP, that's for sure," Kraushaar says.
At Causeway Ford-Honda-Nissan in Manahawkin, N.J., sales of GAP, total loss protection policies and extended-service contracts are up by about 33 percent each, estimates owner David Wintrode. Total loss protection pays the total value of a vehicle if it is stolen or totaled in an accident, Wintrode says.
"Everybody's been once burned, so they're going to be very sensitive to these products now," Wintrode says.
But the downside to the heavy sales volume is that sales managers have had to help finance managers at Causeway, Wintrode says. For example, on the Saturday after Thanksgiving, Causeway sold 48 vehicles, Wintrode says.
"Everybody wants to take delivery," Wintrode says. "It created quite a jam up in the finance and insurance department processing that many deals with that many people."
But with everyone helping to pitch and process F&I products, customers were handled efficiently and, Wintrode says, no customer complained. Wintrode estimates his November new-vehicle sales are up by about 40 percent vs. a year ago. His used-vehicle sales also are up slightly, though restricted by tight inventory. He sells about 4,000 new and used vehicles annually.
Keeping up with the sales volume is twice as hard for those finance managers who offer a customized F&I menu. That's because few of the recent deals included trade-in vehicles.
Without a trade-in vehicle, it's harder for some finance managers to gauge a customer's driving habits and determine which F&I products to offer that might provide value, says Black of Larson Ford. So Black, who molds menus to customers, has to spend more time than usual talking to each customer to learn his or her driving habits.
"A lot of times you want to preload a menu and judge it by their previous driving habits," Black says. "Now you're waiting to print the menu. You don't want to offer someone a 10-year/100,000-mile extended-service contract if that's not their driving habit."
At Chapman Ford-Lincoln in Egg Harbor Township, N.J., owner Bill Kassner says while business has been "overwhelming," the lack of trade-in vehicles has not hindered selling F&I products because most of his buyers are loyal repeats.
"They had to replace their cars because of a tragedy, so they are pretty much duplicating it," Kassner says. "It's been easier because we say, 'Would you like to just do what you had before?' And they say, 'Yes.'"
His per-vehicle revenue on new vehicles is $685 and on used $853, which he says is up slightly from before the storm. About a third of his business is leasing, yet his F&I sales have held steady and even risen with the sales of extended-service contracts.
"It's been a surprisingly easy transition," Kassner says. "The people just want it to be easy and painless because they just want to get on with their lives."
The storm's mayhem was a teacher for dealers as well as customers.
Kraushaar's location in the heart of a devastated community helped him see things differently than he had before Sandy. He encouraged his finance managers and salespeople to take a more human, softer sales approach in all areas of the business.
"Everyone put their priorities in place," Kraushaar says. "It was amazing the human side we all kind of had. Selling cars and the competitiveness of selling cars took a backseat to just getting through it."
Dealers coping with Sandy's aftermath offer these tips for working with customers after a tragedy.
• Be a therapist as well as a salesperson.
• Use a soft-sell approach.
• Many customers won't have a trade-in. Spend more time interviewing them to learn their driving habits and determine which products will give them value.
• Make it easy and duplicate what returning customers had before.