Are F&I managers overpaid?
Brett Hopkins, CEO of Ken Garff Automotive Group, thinks about a third of his group's F&I managers are. So he's cutting their compensation.
Hopkins objects to paying more to fill F&I manager positions than other businesses, such as banks, pay to acquire people with similar credit and financial acumen.
"It's a very important position in the dealership," but "there's no reason to pay a premium," Hopkins told Automotive News last month at the National Automobile Dealers Association convention in New Orleans.
Ken Garff Automotive, of Salt Lake City, sells 25 brands in more than 40 dealerships in six states. At the group's smaller stores, Hopkins says, F&I managers outearn the other department heads.
That reflects a national trend. On average, F&I managers earn fatter paychecks than people in any other key dealership position except the general manager, according to the 2013 NADA Dealership Workforce Study Industry Report.
Paying F&I managers well helps dealerships recruit and retain highly skilled employees, experts say. But the result can be skewed compensation formulas in which F&I managers earn a higher premium against their department profits than managers of other dealership departments do.
"The typical F&I producer today sits in his office and waits for somebody to bring him something. A sales manager has to deal with five people before he closes one. There's a lot more skill involved in becoming a very successful sales manager than in becoming an F&I manager," says Garry House, director of NCM Institute, a dealership consultancy in Overland Park, Kan. "F&I managers are overpaid, and sales managers are underpaid. There needs to be a change in the balance."
House says pay plans have not changed with the times, especially now that consumers are researching vehicle prices on the Internet. Transparency in pricing, he says, is enabling consumers to negotiate cheaper car deals, resulting in thinner profit margins on car sales and lower commissions for salespeople. While pricing transparency is good, he says, it can keep salespeople from getting a "fair shake."
"We have not adjusted to it in compensation," House says. "The formula is flawed."
But consultant Chip Maher, who advises the National Automobile Dealers Association 20 Group Program, says dealerships recognize the value of having a highly skilled F&I manager. Most dealerships, he says, rely heavily on an F&I manager to drive F&I profits. Plus, he says, F&I is the biggest area in which dealers could be exposed to a lawsuit.
"I have not heard of a dealer complaining about having to pay a good F&I manager," Maher says.