In his new book, Perfect Dealership, Max Zanan, president of Total Dealer Compliance, lays out his recommendations for auto retailers. Here are edited excerpts from his chapter on F&I. The opinions expressed are his.
'Incorporate a certain amount of fear' and other advice from an F&I insider
Every dealer should start by appointing a compliance officer and giving that person the necessary authority to enforce corporate policy and procedure as well as to conduct the required training. The compliance officer must oversee the finance department and check deal folders, listen to audio (if available), and watch the video interactions of all finance managers and customers. Good management requires vigilance. There is a way to be fair as you quietly monitor all operations around you. Unfortunately, you'll need to incorporate a certain amount of fear into the process -- simply by making your F&I people aware of these controls -- to keep things level.
In keeping with what they can generate, finance managers are highly paid professionals -- $250,000 a year is not inordinate and is commensurate with an old Wall Street salary. At the same time, the talent pool is pretty shallow, and dealers must make sure that they are getting the best candidates to fill the position.
The first and most important step will be to conduct a background check and a drug test. The background check should also include a criminal and a credit check. It is a good idea to test for prescription drugs. The second step is to actually check the candidates' references. I wouldn't just call previous employers as it is not as effective as calling lenders that dealt with the applicant. Lending sources will tell if the candidate submitted clean deals and if there were any issues like power booking and credit application falsification.
Unfortunately for the auto industry, there is very limited professional training for this work. Again, there is no degree in F&I at a local university, so, in most cases, it is on-the-job training plus the sales training provided by F&I vendors.
We encourage all of our dealers to employ finance managers who have successfully completed [Association for Finance & Insurance Professionals] certification. AFIP certification helps finance managers learn federal and state laws that govern F&I, just as it helps them to adhere to an established code of ethics. Dealers should either hire AFIP-certified professionals or demand that their existing finance managers obtain this certification. Moreover, there are regular courses provided by your local dealer association, and dealers should take advantage of this training and send their finance managers to these courses on a regular basis.
If you look at dealership websites, you will see that they offer a lot of information. For example, you can research cars, make service appointments, and get an appraisal on a trade-in. Almost never will you see any information about service contracts or ancillary products that the dealership sells in its F&I department.
This needs to change as the consumers demand and expect more transparency. Moreover, providing information about F&I products will speed up the F&I process in the dealership and increase customer satisfaction with the buying process.
As online car buying is perfected, there will be a need to develop online presentation for each and every F&I product being sold. Dealers need to start preparing and implementing these presentations as soon as possible. This is an inevitable change. Properly presented F&I products will sell themselves.
Tie-back is another excellent strategy. Tie-back requires customers to come back to the selling dealer service department for all repairs as long as the breakdown is within a predefined radius -- typically within 50 or 75 miles of the selling dealership.
This approach is great way to control claims and load the dealer's shop.
A "disappearing deductible" is another great strategy to ensure that customers come back to the selling dealer service department. Basically, there is a $0 deductible if the customer comes back to the selling dealer versus a $200 or $300 deductible if the customer goes somewhere else.
Finance managers that have excellent product knowledge will be able to explain to the customer the beauty of a disappearing deductible.
Oftentimes customers need to cancel F&I products they bought, and the cancellation process in many dealerships is not the greatest. These dealerships are guilty of giving the customer a runaround, and that's unacceptable. In most cases, if these products were properly presented and explained, there would be no need to cancel them. There must be a written cancellation/refund process, and every finance manager has to follow it. Better yet let the compliance officer oversee the cancellation process.
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