What does it mean to be ethical?
Compliance is clear cut, and it's long been a focus for dealerships. Ethics, on the other hand, is more subjective. The two aren't interchangeable, but they sometimes overlap and always go hand in hand.
Auto finance can be a complicated space for a consumer to navigate, and many F&I professionals of the past wanted to keep it that way. In the 1970s, unethical behavior at dealerships was often concealed and even applauded. Some finance managers disclosed that they had been taught deceitful business practices, such as payment packing, inflating incomes and overcharging for F&I products, in training schools.
While deceptive business practices have not been eradicated, today's auto retailers show a monumental departure from those of the past.
A boom in automotive retail regulations over the last couple of decades fueled an era of compliance training, which, in turn, improved dealerships' ethics.
Compliance refers to following the law, while ethics centers on doing the right thing for its own sake. F&I trainers advocate training employees in both, which ultimately requires following one rule of business — be honest, not deceptive.
But in an industry as complicated as automotive finance, what makes a practice deceptive isn't always easy to pin down. Even at the federal level, an agreed-upon definition has yet to be finalized. The Bureau of Consumer Financial Protection said this year it would be looking into what makes a practice abusive under its governing document, the Dodd-Frank Act.
Nevertheless, F&I experts agree that conducting compliant and ethical business practices is the best way to retain customers, protect profits, maintain a healthy workplace and obey the law.
A few bad apples can spoil the bunch, many sources said, but the majority of F&I managers play by the rules. Still, dealerships should put measures in place to create an ethical culture.
In this section, Automotive News highlights the evolution of F&I ethics; how ethics factor into recruitment, training and pay plans; when to leave a company because of unethical behavior; how nontraditional dealership roles promote an ethical culture; and more.