Cohan spoke by phone last week with Special Correspondent Jim Henry.
Why isn't everybody selling service contracts in the service lane?
It took time for this to evolve. But who better to talk to the customer, if you have the right service adviser? ... The service advisers did not want any part of selling F&I products. It's their credibility on the line. It also took forever to be selling those products. It's a very cumbersome thing to do.
What's so cumbersome?
We started and stopped, in the last 15 years, probably five or six times. It never gets off the ground because the service advisers rebel against this time-consuming situation, where they end up having to turn over the customer to the F&I department, which is the last thing they want to do.
If the service writer turns the customer to the F&I department, doesn't that lead to conflicts over who gets paid when the customer buys a service contract?
Exactly, the fight over pay is why the old way never really got any traction in dealerships. ... I can tell you this: It's the most important part. Everybody else wants to keep this compensation as cheap as possible, but we do a flat fee and we also pay them on the gross profit margin.
How much do the service writers make per contract?
It's $75 flat, plus they share in the profit margin.
But how do you fix the problem of turning customers over to F&I?
Now, it only takes a service adviser three or four clicks, right on the service adviser's own computer screen, and a few minutes to see if a customer is interested. If the customer is, the service adviser can handle the whole transaction.
The service adviser can also give the customer enough information so that they can take it with them and look at it later. Some customers don't take advantage of it right away. They can do a bit of research on their own if they wish.
Who's your vendor on that? Doesn't everybody offer that?
I really looked. I've been to NADA [the National Automobile Dealers Association convention] and visited a bunch of vendors and looked, and Eos [Group] is the only one I've seen that could pull it right up on the service writer's screen. There may be others.
How long have you been using that in the service department, and how's it going?
For about eight months now, including about a two-month transition. We probably now average up to about 25 contracts per month . That's with five service advisers.
Is that up to your expectations?
We really thought it would be one of those things that would be, like, single-digit penetration, but it's been much better than that, around 11, 12, 13 percent penetration.
How does that compare with the F&I department?
In the F&I office, it's more like 38 to 42 percent. This has turned out to be a pretty cool thing.