Hyundai-backed programs double store's penetration, per-vehicle F&I revenue

Dealer: Customers judge a service contract by its cover

Hyundai-backed programs double store's penetration, per-vehicle F&I revenue

Hyundai dealer Andrew DiFeo says his F&I managers can now promote factory-backed products.
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For auto retailers, having factory-backed finance and insurance products to sell sometimes makes all the difference.

It did for Andrew DiFeo, dealer principal of Hyundai of St. Augustine in St. Augustine, Fla.

His store has more than doubled its service contract penetration and average F&I revenue per vehicle since Hyundai Capital America, which oversees financing for Hyundai dealers, introduced manufacturer-backed F&I products a year and a half ago.

"I'm a firm believer in a manufacturer-backed warranty," says DiFeo, using the popular term for extended service contracts. "If I went to buy a Sony TV, it would be the Sony warranty I would want to buy, instead of whatever other warranty the retailer wanted to sell me."

Before the factory-backed program, Hyundai dealers had a shorter menu of Hyundai-branded products, but they were from a private-label relationship with a third-party administrator.

Hyundai Capital America steers Hyundai Motor Finance, the captive finance company for the Hyundai brand. Hyundai Capital introduced the latest Hyundai Protection Program in January 2013. The program features a longer list of products and a more prominent display of the Hyundai brand name. But the biggest change is that Hyundai Capital now bears the risk for what it considers its core F&I products such as extended service contracts; guaranteed asset protection, or GAP; prepaid maintenance and other F&I products -- backed up by insurance, as is standard industry procedure.

Now, DiFeo says, his F&I managers can promote the fact that Hyundai's F&I products are truly factory-backed. "Their main pitch is that it's backed by the manufacturer and good at all Hyundai dealers across the U.S.," he says.

DiFeo says that before Hyundai of St. Augustine began selling the factory-backed products, the store had struggled to find F&I products compatible with its business goals. "We tried two different warranty companies, trying to find the right fit for the products they offered, both for dealership profitability as well as customer satisfaction," he says.

Customers seem to appreciate the difference, he adds, citing as proof higher F&I product sales and good scores on customer satisfaction surveys, which didn't drop as F&I product sales grew.

DiFeo says that in 2013, his extended service contract penetration increased to 47 percent, from 26 percent in 2012 under the previous program. This year through May extended service contract penetration was 58 percent, more than double what it was at the end of 2012. He says this year through May, combined new- and used-vehicle sales were 818, down from 851 units in the same period of 2012. A drop in used-vehicle sales this year was responsible for the decrease, DiFeo says.

He says the store's average F&I revenue per vehicle retailed was up 35 percent this year through May vs. year-end 2013. In 2013, he says, average F&I revenue per vehicle retailed was up 57 percent vs. 2012. DiFeo won't disclose dollar amounts for competitive reasons.

Hyundai Capital's F&I menu has 13 products, including core products GAP, prepaid maintenance and extended service contracts, plus ancillary products such anti-theft etching, key replacement, paintless dent repair, tire-and-wheel policies and different bundled combinations.

For non-Hyundai vehicles sold by Hyundai dealers, such as used vehicles, F&I products are sold under the Power Protect brand. Participating Hyundai dealers with other franchises also can offer Power Protect products for new and used vehicles.

Hyundai's current branded, factory-backed products are administered by Safe-Guard Products International in Atlanta.

Hyundai Capital America is also the parent company for Kia Motors Finance. Korea's Hyundai-Kia Automotive Group controls both brands. The Kia brand has its own branded F&I products, administered by JM&A Group of Deerfield Beach, Fla.

You can reach Jim Henry at autonews@crain.com.

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