As dealers work to bolster F&I profits, it's vital they keep a close watch on chargebacks.
Dealerships can be charged back, or asked to repay, commissions received for performing two F&I functions: negotiating car loans that end prematurely, such as through refinancing or default; and selling F&I products that customers later cancel.
While dealers can't prevent all chargebacks, they can adopt protocols that limit occurrences, especially those related to F&I product sales. Those protocols include the careful monitoring of not only all F&I sales practices but all metrics, too, not just the figures generated by F&I service providers, dealers say.
Dealers who routinely absorb significant chargebacks "are defeating the purpose of the profit center," said second-generation dealer Eric Obaugh of Charlie Obaugh Chevrolet in Waynesboro, Va. "Percentages do spike from time to time, but you don't want to see them pop up [regularly], and you don't want to see 30-, 60- or 90-day cancellations." He added: "We track and look at chargebacks every day."
Software and performance metrics are important tools to track F&I performance, but dealers also must invest their own time and resources in working to limit chargebacks, dealers say. Menu selling, advanced F&I staff training and frequent F&I reviews with product providers are critical to steady F&I income.