Two years ago, James Seale tried something different. Would a revamped and lower-paying compensation plan for finance managers hurt product sales and department productivity?
Seale, general manager of Southwest Kia in Mesquite, Texas, says the answer is now clear: No.
The dealership switched from an all-commission pay plan for finance managers to salary plus bonuses. Finance managers now typically make $7,000 to $8,000 a month instead of the $12,000 or $13,000 a month previously paid in those positions. But they get more time off, and productivity is going up, Seale says.
"What we're finding out is we don't have to pay the higher amounts to get the same production," he says. "And we've got happier people because they're not working 80 hours a week."
Instead, finance managers typically work 40 to 45 hours a week. There has been turnover -- some finance managers didn't like the new plan -- but that's not all bad, Seale says. The turnover has allowed the dealership to promote good performers from the sales floor to finance. They typically are younger employees recruited straight from college who don't expect the higher compensation levels the dealership used to pay.
Southwest Kia is one of many dealerships experimenting with ways to get more bang for the buck in the F&I department. Some dealerships have merged sales and finance responsibilities into lower-paid hybrid positions. Others have hired junior-level F&I staffers to defray some of the workload.
The experimentation makes many finance managers uneasy. But finance manager compensation is generally increasing as dealers put more focus on boosting gross profits from the F&I department, says Ted Kraybill, president of DeltaTrends, a Clearwater, Fla., consulting firm that manages data collection and analysis for the National Automobile Dealers Association Dealership Workforce Study.
"As the margin on car sales gets thinner and thinner, the dealers are looking to F&I products to increase their profits," Kraybill says. "If they're selling more of those products, the F&I managers are making more money."
According to the 2012 study, F&I managers made a national average of $118,899 in 2011. Compensation ranged from a high of $135,491 in states such as Texas to a low of $103,162 in Midwestern states such as Michigan. (See map, Page 37.)
The 2011 national average is up 33 percent since 2008 when F&I managers made $89,497 on average as industry sales began to crash. That was the last NADA study completed before the 2012 study.
At mass-market brand dealerships where the margin squeeze is the greatest, F&I managers now typically make more than sales managers, Kraybill says.