How small-town dealer tripled his F&I take
Process took time, money and total team commitment
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When Ford Motor Co. offered dealers free training to sell finance and insurance products in 2010, Joel Higley turned it down.
He had hired his own F&I trainer the year before.
"I would have done [Ford's program], but I got a little proactive because I needed to do something fast," says Higley, owner of Higley Ford Sales in Windom, Minn.
In 2009 Higley's average per-vehicle F&I revenue for new and used cars was a dismal $198, far below the $600 average of those in his NADA 20 Group. But by the end of 2012, Higley's average had rocketed to $658, putting him in third place in the group.
Higley's success is the result of several changes. He
• Took the time and spent the money to train his F&I manager.
• Established a proper turnover process from the sales department to the F&I office.
• Rewarded vehicle sales staffers who generated an F&I sale by following that process.
• Reviewed customer rejections of F&I products to devise a future approach.
• Kept F&I product offerings small and simple.
• Sold extended service contracts in the service lane.
• Pushed premium extended service contracts more often.
Higley's success inspired other stores, such as Gene Steffy Ford in Columbus, Neb., to adopt some of his practices.
"We always used the excuse we're a small store, we don't have the volume to support F&I," says owner Joe Steffensmeier. "He's a small store, and he was a lot more successful than us."
Gene Steffy Ford sells 400 to 500 new and used vehicles a year. Higley Ford sells about 380 new and used vehicles a year.
"We knew we were then capable of it, too," Steffensmeier says. Indeed, Steffensmeier says he doubled his per-vehicle F&I revenue since the end of 2011.
"You don't have to add a big new showroom. F&I is right there, and if you get the people and the process in place, it makes a big difference," Steffensmeier says.
At first, failure
Higley's father, Steve Higley, ran the dealership from the late 1980s to 2006. He initially did not see value in F&I products.
It took years of nagging by the younger Higley, but in 1996 his father finally agreed to offer customers extended service contracts, life and disability insurance, and guaranteed asset protection, or GAP, which covers customers for negative equity if their vehicles are totaled or stolen.
To this day, those are the only F&I product offerings at Higley Ford.
"We were terrible. We sold maybe one extended service contract a month, and I was the only one selling it," Higley says of those early days.
Higley's father did not push F&I sales because he believed the store's vehicle sales volume was too small to make money on F&I products.
Windom, Minn., is a small town about 150 miles southwest of Minneapolis with a population of about 4,000. Higley says most of his customers are repeats.
After four years of struggling with F&I sales, Higley hired an F&I manager in 2000. "We failed," Higley says. "My dad didn't push it, and I was busy selling cars. We didn't train him."
Training essentials
The F&I manager quit in 2005, and Higley hired Julie Peters. He immediately sent Peters to a two-week F&I sales training program in Chicago.
"But we weren't pushing the numbers," Higley says. "In 2009, I realized Julie was capable, but I needed to train her more. I needed to bring someone in to teach us how to build an F&I department."
Higley hired a trainer to work with Peters regularly for a year. That trainer instilled a turnover process at Higley Ford that Higley says has made all the difference.
"F&I can't stand alone. You need the salesmen to stand together," Higley says. "The key now is we always introduce financing and extended-service contracts during the sales process. The salesperson stays involved in the sale even in F&I until the customer walks away."
And Higley pays the salesperson $25 for each extended service contract sold if the salesperson introduced the contract during the sales process. Also, if the customer finances through the dealership, the salesperson gets a percentage of the F&I manager's commission from that for introducing financing during the sales process, Higley says.
Previously, the salesperson would close the deal, then drop the paperwork on Peters' desk with no customer information attached or customer screening done. Today, the turnover is much different, Higley says.
"When we turn them over, we say, 'Julie, they are interested in financing and maybe there's a plan we can put together to get them an extended warranty,''' he says. "Now Julie's rockin', and that's really where the turnaround came."
Find out why
But if a customer says no to Higley's F&I product offerings, the next thing the trainer taught was to find out why. After that, figure out how to get a yes in the future.
"We had one today where he said, 'We'll be back in two months to buy it,''' Higley says about an extended service contract. "So we're going to send them a letter in two months to come back. If they say they'll buy it in a year, we say, 'Prices change in a year.'''
Another change Higley made was to have his service advisers push the sale of extended service contracts.
"When a person comes in with an $800 repair bill, my service manager will say, 'You know an extended service contract would have paid for this,''' Higley says.
Since 2009, only three extended service contracts have been sold from the service department, but it's "three contracts we wouldn't have sold otherwise."
Higley also started pushing premium extended service contracts over the powertrain or base coverage.
"Our previous F&I manager sold a lot of powertrain and base care. He told Julie, 'You'll never be able to sell premium; it's too much money,''' Higley says. "But we learned to sell it because a lot of customers were coming in and repairs weren't covered. We had some anger there."
The premium extended service contract could cost customers up to $3,200 depending on the vehicle and coverage, compared with a more basic contract that costs about $1,400.
But Higley says his customers are happier in the long run because the premium plan covers more of their service repair bills.
All these changes came at a price.
Higley estimates he spent $10,000 to $12,000 in training for a year.
But Higley had about $198,000 in F&I gross revenues in 2012, and the department now accounts for about 15 percent of his dealership's total annual gross revenues. That compares with about $37,000 in 2008, with F&I accounting for only 4 percent of his total gross annual revenues then, he says.
And in 2005, Higley's gross profit per extended service contract was $436. As of November, it was $1,178.
But it's not all perfect.
Higley knows he needs to improve his system to make follow-up calls to customers and pitch extended service contracts more aggressively.
Only twice in eight years has Higley sent letters to customers promoting extended service contracts. He sold just one from that effort.
"We need to revisit that," Higley says. "Sometimes when you've moved the needle and you've got it where you want it, you tend to settle a little. But you have to stay focused on what's the next thing we can do to make the F&I department strong."
• Hired an F&I trainer
• Improved the turnover process from sales to the F&I office
• Offered vehicle sales staff incentives on F&I sales
• Kept F&I product offerings small and simple
• Analyzed why a customer said no
• Sold extended service contracts in the service lane
• Pushed premium extended service contracts over basic coverage
You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on 
