In a market where dealers struggle with attaining vehicles at lower price points, F&I managers should be proactive when acquiring inventory.
Though F&I managers have limited control over how many vehicles are sold at their dealership per month, the right inventory makes all the difference when it comes to getting customers approved for financing.
George Angus, president of F&I consulting firm Team One Group, advises F&I managers in his weekly newsletter to go to auction with the buyer, or sit down with that person beforehand to highlight the mix of inventory that fits their finance customers. For the most part, dealers would do well to observe the additional input.
"They certainly want to buy cars that can be easily financed," Angus says. "You just need to take an active role and let them know which units those are."
When F&I managers believe their dealerships don't have the right inventory for these buyers, they should be vocal about what lenders are looking for to meet their customers' needs, Angus says. Acquiring the correct inventory leads to faster sales for customers, especially those in lower credit tiers.
"There is no question that the right inventory is essential in the current lending market," Angus says. "However, you need to get involved."
It was easier for dealers in recent years to obtain small vehicles for customers with low credit scores or those who wanted cars with historically lower gas mileage at lower price points. Because the new-vehicle market is becoming so expensive with technology advancements and the shift toward trucks and SUVs, experts say customers turning to smaller used cars find there aren't as many choices as there have been in recent years. And, the prices of those vehicles are on the rise.
Used-vehicle pricing, especially for compact and subcompact vehicles, isn't likely to drop moving forward. Even as demand makes it easier for dealerships to sell the small used cars on their lots, the difficulty acquiring these vehicles -- and the inability to transfer the additional cost to customers -- are causing headaches for dealers.
Some automakers' plans to slash small cars will increasingly affect affordable inventory. Chrysler cut vehicle production on two of its small cars in 2016, which is starting to affect the used market now. Ford is so invested in the SUV and truck market that it plans to ax all of its North American car lineup in the next few years, excluding the Mustang and a Focus hatchback, though rising gas prices could price out the customers they're hoping to appeal to. Wholesalers have reported a decline in the variety of vehicles they are receiving, despite the rich mix of vehicles coming off lease and off fleet. Dealers are grounding small, gas-conscious vehicles with more urgency than ever, spurred by the potential ramifications proposed tariffs could have on new-vehicle pricing.
F&I managers should heed warnings of market condition clouds in the sunny skies of a strong economy. Inventory problems are likely to worsen as time goes on, as a storm of rising interest rates, rising gas prices and rising used-car prices brews beyond the horizon.
Although inventory management doesn't traditionally fall under the purview of the F&I manager, acquiring vehicles that customers with marginal credit can actually finance may be one of F&I managers' best bets for securing F&I profit and for boosting overall sales.