For years General Manager Brian Beattie had been bothered by the pay plan structure for finance and insurance officers at Patriot Subaru.
"The sales managers do the deal and arrange the financing," Beattie said. "So I thought, 'Why am I paying F&I officers on the finance reserve?' We've been paying them that way for 12 years, but they weren't getting any better at selling product. They were just relying on whatever the reserve was."
So in January, Beattie turned the F&I office upside down. He stopped paying F&I officers any portion of the finance reserve. Gone was the team concept of sharing in the profits. In its place was a competitive plan that rewarded F&I managers only on the products each sold.
"I was trying to work on what's going to motivate these people to bring it to a different level to make sure the whole department grows as well as the whole organization," Beattie said. "I loved the team aspect of the old system, but if somebody's carrying the load and somebody's not, but they're all getting paid the same, that's not fair."
The change led to an increase in F&I profit of up to $200 per vehicle. Customer satisfaction scores are rising and F&I managers' performance is up, as is their take-home pay, Beattie said.
Patriot Subaru, in Saco, Maine, about 7 miles south of Portland, sells about 2,400 new and used vehicles a year. That breaks down to about 200 sales a month split among three F&I officers, giving each 66 chances or so a month to sell F&I products, earn spiffs and "make a very good living," Beattie said.
His new F&I pay plan is quite different from the old plan. Under that plan, F&I officers were paid a commission on the total profits generated by the F&I department. The total included finance reserves set up by the new-vehicle sales manager, not the F&I team.
"So if they did $50,000 total in [back-end revenue], the F&I team all got paid a percentage on that even if one of them was bad," Beattie said. "They shared in the team."
Individually, he would pay small spiffs for selling various products. For example, an F&I officer could earn $20 extra for selling an extended service contract, $10 for selling guaranteed asset protection and $25 for selling paint-and-fabric protection, he said. But the spiffs didn't inspire significant gains.
When Beattie made the change, the first thing he did was whack the reserve, he said.
"The only one who gets paid 2 percent of the finance reserve right now is the person I consider in charge of the finance department," Beattie said.
Now F&I officers are paid a percentage of the profits from their individual product sales, which amounts to $400 to $900 a deal on average, Beattie said.
He also changed his method of paying spiffs. He no longer pays a straight dollar amount for selling a certain product, such as $20 for selling an extended service contract, but rather a bonus amount based on the average number of products, of any type, an F&I manager sells. So, for example, if an F&I officer averages one product sold per deal, that person gets a set bonus amount for that average. If the person's average rises to 1.5 products per deal, the bonus amount grows, too.
"I have given them some incentive to diversify products per deal now because the more products they can sell, the more bonus they get," Beattie said.
He said one of his F&I officers consistently averages 1.25 to 1.5 products sold per deal, which that person was not doing under the old pay plan.
"I have people who are better performers than others who are making more money, rather than everyone making the same amount of money," Beattie said.
'We had to do something'
And the average F&I revenue per vehicle has risen by $150 to $200 since Beattie changed the pay plan. F&I total profits were up 20 percent through November compared with the year-earlier period, he said. Customer satisfaction scores have "gone up a little bit," too, Beattie said.
When Beattie wants to sell more maintenance plans, he puts an extra cash spiff on that product on top of the other bonus payouts to encourage F&I officers to promote it. In such cases, he will tack on an extra $20 if they sell such a plan. He said the changes were necessary to increase store profits.
"We had to do something," Beattie said. "You're losing the ability to make money on the front end of the car deal with [today's competitive pricing], so you have to find a new way to make money."