I have always believed that finance and insurance is a critical linchpin in connecting car buyers back to the selling dealership. As a dealer, you can either practice hope — meaning, you hope the customer returns to your store — or you can create a contractual link with a customer.
A contractual link increases the odds of a customer returning to your store. For example, 70 percent of customers who purchase a vehicle service contract return to the selling dealership for service, paving the way for long-term customer relationships.
The contractual link is created in the F&I office. However, F&I managers are currently paid through a commission-based structure that incentivizes them to sell products with the highest margin without regard to whether a contractual link is created.
Take guaranteed asset protection and appearance products, for example. These products have a high upfront profit margin for the dealership and thus the F&I manager makes a good commission. Therefore, the F&I manager is highly incentivized to sell them. However, GAP and appearance products do virtually nothing to bring customers back to the store again.
F&I pay plans today reflect how dealers think about F&I profitability, which is to focus on profit per vehicle sold, or PVR. What if that focus shifted from how much a dealership can make up front to how much a dealership can make over the lifetime of a customer? This shift in mindset starts to really influence which products you want to sell in your F&I department.