How do you feel about combining the F&I and sales responsibilities?
We took a hard look at our volumes and right-sized the organizations. If we had three sales managers, we may have two. If we had two finance managers, we might go to one and someone to cover the shift on days off. We're not eliminating positions but making sure we have the right person for the volume.
Can you combine sales and F&I?
A lot of dealerships eliminated the special finance manager and e-commerce manager when they went through the downturn. They thought they could distribute those leads among the salespeople. It's important to have people in dedicated positions to maximize that end of the business.
Any other concerns?
Our concern would be licensing. F&I managers are licensed in many states. If we had to license all the salespeople, it would be daunting. It's important to have licensed F&I managers.
Is licensing the only reason you wouldn't merge the functions?
The F&I manager is really a compliance manager in addition to all the other roles they have. They also have to negotiate with lenders and develop a relationship with lenders. It's important to have an F&I manager. If we had 12 salespeople getting deals done, we'd lose that relationship with the lender.
Is your concern about legal compliance also the reason that you discourage making money by marking up the interest rate on car loans?
It invites more chargebacks and cancellations. We encourage people to write at buy rate and get a flat fee. It helps the customer. They are getting a good rate.
Your company monitors finance profit and sets low guidelines for stores.
I've been with this organization three years, and we closely manage our reserve percentage. We don't want to have too much finance profit.
We have stores as low as 10 percent of income from rate -- the lower the better. The F&I manager typically makes money on income produced. It can come from rate or product. We rather it came from product.
Customers get no value in us holding rate. They get value from products.
You also limit product prices. Would you consider no-haggle prices on aftermarket products?
We don't have fixed prices. Sometimes that's a disadvantage to a customer. In a situation where we don't have much of an advance rate and the customer might not be able to buy the product. You have to be able to work with the lender, and the product price has to be flexible.
How are advance rates right now?
Advance rates have improved across the board. There are a few exceptions. For the most part, advances are not as aggressive on near-prime people.
How many products do you sell per transaction?
We have eight products to sell. We don't track that, but I would guess two products per sale.
What are your best-sellers?
GAP and service contracts. We also sell chemicals, exterior paint protection and interior protection. And we sell our own maintenance plans -- offering oil changes and tire rotations. The product has to add value for the customer.
Any promising new products?
We recently introduced identity theft-protection contracts. The increase in ID theft is extreme.
What's your sales penetration?
Right now we sell ID theft protection to 70 percent of our customers. It varies by store. We cap the price at $499 for three years of protection.
Why did you start offering ID theft protection?
So many people are victimized. It takes a long time, and it's a hassle to get it fixed.
How do you promote it?
We educate the customers on the risks. A lot of times the customer has had experience with identity theft or knows someone else who has.
You also use the product to help sell cars, don't you?
We give the customer one year protection free for buying the car from us. They have the ability to upgrade to a family membership that basically covers children under 25 in the household and grandparents living in the household. The program is through the VERO products in Scottsdale, Ariz.