Auto dealers are saying it's urgent to sell more F&I products, such as extended-service contracts, now that the Consumer Financial Protection Bureau seems ready to put stricter limits on how much dealers can earn on customer interest rates, also known as the dealer reserve.
"We've been de-emphasizing dealer reserve for several years," says Tyler Corder, CEO of Findlay Automotive Group in Henderson, Nev. "My guess has been that it would be more highly regulated, and now it looks like that's going to happen."
Corder and other dealers have been warning for months that the Consumer Financial Protection Bureau had dealer reserve in its sights and that it was time to start pursuing other profit streams to compensate.
Last fall, Corder called the bureau effort a train bearing down on dealership F&I sales.
Corder says he has been boosting F&I product sales at Findlay's 27 dealerships as a way to reduce reliance on dealer reserve. His goal is to cut dealer reserve for the group to less than 20 percent of total F&I revenue, down from about 30 percent in 2012 and 40 percent in 2009.
Larry Dorfman, CEO of F&I administrator EasyCare, said last month that reducing dependence on finance reserve is a strong industry trend.
"We tell dealers shame on them if they get more than 50 percent of their F&I from dealer reserve," Dorfman said.
EasyCare is the trade name for Automobile Protection Corp. of Norcross, Ga., which offers extended service contracts; Guaranteed Asset Protection, or GAP; and other F&I products, as well as dealership training.