What's an F&I pro worth?

On average, F&I managers earn fatter paychecks than people in most other key dealership jobs, a NADA study shows.

Published in Automotive News March 10, 2014

Are F&I managers overpaid?

Brett Hopkins, CEO of Ken Garff Automotive Group, thinks about a third of his group's F&I managers are. So he's cutting their compensation.

Hopkins objects to paying more to fill F&I manager positions than other businesses, such as banks, pay to acquire people with similar credit and financial acumen.

"It's a very important position in the dealership," but "there's no reason to pay a premium," Hopkins told Automotive News last month at the National Automobile Dealers Association convention in New Orleans.

Ken Garff Automotive, of Salt Lake City, sells 25 brands in more than 40 dealerships in six states. At the group's smaller stores, Hopkins says, F&I managers outearn the other department heads.

That reflects a national trend. On average, F&I managers earn fatter paychecks than people in any other key dealership position except the general manager, according to the 2013 NADA Dealership Workforce Study Industry Report.

Paying F&I managers well helps dealerships recruit and retain highly skilled employees, experts say. But the result can be skewed compensation formulas in which F&I managers earn a higher premium against their department profits than managers of other dealership departments do.

"The typical F&I producer today sits in his office and waits for somebody to bring him something. A sales manager has to deal with five people before he closes one. There's a lot more skill involved in becoming a very successful sales manager than in becoming an F&I manager," says Garry House, director of NCM Institute, a dealership consultancy in Overland Park, Kan. "F&I managers are overpaid, and sales managers are underpaid. There needs to be a change in the balance."

House says pay plans have not changed with the times, especially now that consumers are researching vehicle prices on the Internet. Transparency in pricing, he says, is enabling consumers to negotiate cheaper car deals, resulting in thinner profit margins on car sales and lower commissions for salespeople. While pricing transparency is good, he says, it can keep salespeople from getting a "fair shake."

"We have not adjusted to it in compensation," House says. "The formula is flawed."

But consultant Chip Maher, who advises the National Automobile Dealers Association 20 Group Program, says dealerships recognize the value of having a highly skilled F&I manager. Most dealerships, he says, rely heavily on an F&I manager to drive F&I profits. Plus, he says, F&I is the biggest area in which dealers could be exposed to a lawsuit.

"I have not heard of a dealer complaining about having to pay a good F&I manager," Maher says.

Hopkins: F&I manager pay didn't drop as much as sales managers during downturn.

Changing model

NADA's report shows that in 2012, the average pay for an F&I manager was about $128,400, topping the $122,500 of sales managers and the $106,400 of service managers.

F&I manager compensation rose 8.4 percent from 2011 to 2012, exceeding the pay gains of service managers, up 8.0 percent, and sales managers, up 6.5 percent, says John Lyboldt, NADA's vice president of dealership services.

F&I managers led in gains partly because price-savvy consumers are changing the retail model, Lyboldt says. Over the past two years, as pricing transparency has shrunk profit margins on new-car sales, sales managers' compensation has been negatively impacted, he says. Meanwhile, F&I profit margins have remained consistent or have risen, positively impacting F&I manager compensation.

Hopkins has witnessed a similar effect at Ken Garff Automotive. He says the group's sales and F&I managers both saw their compensation decline as car sales tanked during the 2008 and 2009 downturn. But F&I managers' pay didn't drop as much because F&I profits remained consistent. Since then, he says, the group's car sales have recovered dramatically while its F&I recovery has been less robust. Still, the F&I managers continued to outearn other managers at the group.

House says dealerships struggle with how to tweak compensation formulas to make them more equitable. Most F&I managers, he says, are compensated based on a percentage of two factors: their product penetration, meaning the number of F&I products they sell, excluding financing, against the number of people they see; and the F&I dollars earned per new vehicle sold at the dealership.

"Their compensation has typically been based on just the revenue that F&I produces," House says.

Today, though, he says, some dealerships are looking at blending the revenues of all departments on the retail side of the business -- new-car sales, used-car sales and F&I -- and paying the managers of those departments the same percentage of that blended number.

"The stores are trying to put everyone on the same pay line," House says.

Outpacing the pack
Nationally, F&I managers earned more on average in 2012 than people in most other key dealership positions. F&I managers also had the highest income growth.
 Overall national averageYear-over-year change
General manager/operator$309,665N/A
F&I director/lead F&I manager$128,4348.40%
Sales manager$122,5496.50%
Service manager$106,4398.00%
Parts manager$87,5681.70%
Sales consultant$63,7997.80%
Service adviser/writer$62,4823.40%
B-level service technician$54,0643.20%
Parts consultant$46,7902.20%
Source: 2013 NADA Dealership Workforce Study Industry Report

Dealers need to keep a balanced compensation plan throughout the dealership to retain talented managers across all departments for long-term profitability, says Ted Kraybill, president of ESI Trends in Largo, Fla. ESI Trends, formerly known as Delta Trends, designed and managed the study for NADA.

For instance, Kraybill says, the sales manager's role in the dealership reaches further than the F&I manager's does. And a good sales manager can contribute to longer term profits.

Sales managers "need to be recruiting, they need to be building a team, they need to be developing people," Kraybill says. "With Gen Y, there's a bigger demand for coaching and mentoring, so sales managers, if they do their job well, can impact in a broader sense the profitability of the dealership."

Still, dealerships gain a recruiting advantage by offering lucrative compensation programs for F&I manager positions, Kraybill says.

"We can start to recruit away from banks and places like that to get good F&I managers and people who understand credit and credit apps," he says.

“It's a very important position in the dealership,” but “there's no reason to pay a premium.”
Brett Hopkins
CEO, Ken Garff Automotive Group

Paying a premium

Dealerships often must offer lofty pay simply because they're workplaces some recruits may view with distaste, Kraybill says.

"There's a definite cost to dealers for the reputation of the industry," he says.

For instance, Kraybill says, he recently switched banks. The woman setting up his new account pitched him identity theft protection.

So he asked her: "'Have you ever considered doing the same thing in a car dealership? Helping a customer to arrange financing, helping them with insurance products and so forth?'

"She just looked at me and said, 'Dealerships are kind of sleazy,'" Kraybill says.

"I said, 'Let me guess. You're probably making somewhere around $75,000,' and she said, 'I wish.' I said, 'What if I told you that 50 percent of the people who do what you do in a car dealership are making $120,000?' She said, 'I'd think about it.'

"So what was her threshold? How much do we have to pay her to consider her going to a car dealership?"

Those are questions Kraybill wants to study next with NADA so the industry can improve its ability to recruit talent without paying a premium, he says.

Hopkins says that as a dealer, recruiting and retaining quality F&I managers remain important because of the margin compression on new cars.

But it's also important to balance that need against a compensation plan that is fair and doesn't ding the group's profits.

"We do rely on F&I for half of our profits in sales. So it's a very important position," he says. But, he adds: "We want to make some margin off of that, and off of that margin, we're paying them a commission."

Financial swaps
GM Financial (formerly AmeriCredit)
BusinessU.S. focusGlobal
SpecialtyMostly subprimeMostly prime
ProductsLoansLoans, leases, commercial
Ally Financial (formerly GMAC)
StatusSemi-independent captiveIndependent
BusinessGlobalU.S. focus
SpecialtyDependent on incentivesMostly standard rate
ProductsMortgages, autos, banking, insuranceAutos, banking,insurance

ATTENTION COMMENTERS: Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

Email Newsletters
  • General newsletters
  • (Weekdays)
  • (Mondays)
  • (As needed)
  • Video newscasts
  • (Weekdays)
  • (Weekdays)
  • (Saturdays)
  • Special interest newsletters
  • (Thursdays)
  • (Tuesdays)
  • (Monthly)
  • (Monthly)
  • (Wednesdays)
  • (Bimonthly)
  • Special reports
  • (As needed)
  • (As needed)
  • Communication preferences
  • You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.