Should sales staff initiate F&I?
Why some experts say it doesn't work
As dealerships scramble to sell every product they can, friction often builds between the salespeople on the showroom floor and the finance experts in the F&I office. They depend on each other yet in some ways they work at cross-purposes.
To sell vehicles, salespeople strive to convince customers that their new cars are the best ever. To sell extended service contracts and other F&I products, F&I managers remind customers that bad things happen and that vehicles -- including the ones the customers have just agreed to buy -- break down.
To bridge that divide, dealerships wrestle with having salespeople initiate a conversation about F&I products before customers reach the F&I office. Some F&I insiders embrace the move, especially if a customer looks like a good F&I candidate. Others say it's dicey because salespeople, in their zeal to close the deal, could say things to customers that might not comply with finance rules. And still other F&I experts say the solution lies somewhere in between.
F&I trainer George Angus says that salespeople shouldn't even mention F&I products. Decades ago, he didn't feel that way.
"When I was a sales manager, a general sales manager, I used to teach salespeople to do an introduction: 'This is Bob, our business manager. Hey, Bob, be sure to tell Mr. Jones about that service contract.' What we found -- this is stuff from the '70s -- as we entered the consumer age, all it did was create sales resistance," says Angus, F&I products head trainer for Team One Group in Scottsdale, Ariz.
"The message the customer heard was, 'Hey, this guy's going to try to sell you a service contract.' We want the presentation to be controlled by F&I, so we know exactly what was presented, exactly what occurred."
That way, he says, "We know the salesperson didn't say anything wrong. We're convinced that works the best."
Loe Hornbuckle keeps sales and F&I separate: “We actually train our salespeople not to bring it up.”
Dealership F&I chief Loe Hornbuckle also believes in keeping sales and F&I separate. "We actually train our salespeople not to bring it up," says Hornbuckle, director of finance for Holmes Automotive Group in Shreveport, La. The primary reason, he says, is the sheer number of salespeople who work at the group, which carries Honda, Jaguar, Land Rover, Mercedes-Benz, Sprinter and Volvo and sells about 2,500 new and 1,560 used vehicles a year.
With large sales staffs and a lot of turnover, he says, there's increased risk that sooner or later a salesperson is going to cut corners ethically or simply not know what procedures the group uses to comply with state and federal finance regulations.
"You can hold a smaller number of finance managers more accountable than you can 25, 30 or 40 salespeople," Hornbuckle says. "Also, you like to think as you rise in an organization and get to be a manager you can expect more of people. And with that many salespeople, you're eventually going to have an outlier -- and in F&I you can really get in trouble when you have an outlier."
Also, he says, salespeople are motivated to close the deal first and worry about everything else later.
"Their goal is not necessarily to make as much as possible; their goal is always to sell. They will throw in everything but the kitchen sink to get the deal closed. Sometimes salespeople are the worst at holding grosses," Hornbuckle says.
"For that reason as well as for legal accountability reasons," he says, the group keeps sales and F&I separate.
But Stephanie Cooper disagrees. Cooper, finance manager for Timbrook Automotive in Cumberland, Md., believes it's OK if salespeople mention F&I products in passing, especially if a customer looks as if he or she might be interested or a good candidate. "My salespeople are supposed to address it, then sidestep it," Cooper says.
"For instance," she says, "Kias come with a 10-year/100,000-mile warranty. Customers are aware of it because of advertising. It's OK if a salesperson says, 'That's a 10-year/100,000-mile limited powertrain warranty. It also comes with a 5-year/60,000-mile limited factory warranty. We have options to get you an additional step.' But I really would rather they not sell anything."
Cooper cites other examples of when it's OK for sales staffers to mention F&I to customers.
"If somebody says they like that dark color or something, the salesperson may say, 'We have a product to help you protect that.' Or if somebody is looking at a used car with 45,000 miles, they may say, 'We can get you protection out to 100,000 miles. Stephanie can talk to you about that.' They're encouraged to get that person to me as quickly as possible," she says.
Cooper says salespeople at the group's dealerships earn a percentage of the profits from F&I. "The first thing after a customer leaves, [salespeople] are back in my office asking, 'What'd we make, what'd we make?'"
That scene might be less likely to happen at First Texas Honda in Austin, Texas. The dealership takes a hybrid approach to sales and F&I: Highly trained salespeople, dubbed Elite by the dealership, take customers through the entire sales and F&I process, while less experienced sales employees hand off customers to an F&I manager.
Beau Barrett, senior sales team leader at the dealership, says one of the toughest parts of the hybrid approach is recruiting high-caliber individuals who can learn sales and F&I plus work well with customers.
Since 2010 when the dealership adopted the hybrid approach along with no-haggle pricing, he has had the most success with personnel hired from outside auto retail who can be trained from the ground up. "Our success rate with new hires from other dealerships hasn't been very high," he says.
Outside hires who have been successful, he says, make up a diverse group, including 20-somethings and middle-aged employees, ex-waiters from high-end restaurants and former financial planners. Monthly sales volume for new and used vehicles combined is about 450 units.
"We have just two or three people hired from other stores -- maybe only one or two -- who have worked out," Barrett says. "They might not realize they have bad habits; that's just how they were brought up in the business."
First Texas Honda has 33 salespeople. Twelve are Elites and three are in training to become Elites. The rest are journeyman salespeople. Eventually, Barrett says, he would like 70 to 80 percent of the store's sales personnel to be Elite.
Barrett says changing to a hybrid sales and F&I system and no-haggle pricing has paid off. In November, the store's average F&I revenue per retail unit was around $900, he says. Before the change, "it was $600 or $700 with a goal of $800," he says.
Barrett says other factors probably contributed to the dealership's increase, including a new location. "But even before the move, our market share and our penetration increased," he says. Customers relax when they realize they don't have to go through a turnover to the F&I department, which customers have been taught to dread.
"The customer does not get turned over to somebody in a box," Barrett says. "They do not have to sit in front of The Hammer and hope this doesn't go south."
You can reach Jim Henry at email@example.com.