|Once upon a time not too long ago, sales managers, particularly in big stores, were known as “desk men” (few women used to be sales managers). If you were good at “desking deals,” it meant you were very adept at negotiations and you knew how to structure a deal.|
Deal structuring was all about trying to maximize profit for the store and getting the deal bought. Often times this meant switching the customer to a cheaper car, getting the customer a co-signer or getting more down payment. This was done before the customer went into the F&I office.
Some of you are saying “that’s what we do at our store now.” To that I say congratulations. But there are some of you saying “what’s he getting at?” What I’m getting at is that in a captive finance transaction, the sales manager plays a powerful role in whether any money is made in F&I and, in fact, whether the car gets sold at all.
The primary job of the sales manager in a captive finance transaction is to present F&I with a viable deal. A viable deal is one that a bank will buy in a form substantially similar to what was submitted. It is structured so that the customer who comes into the F&I office is quoted an interest rate that is reasonable based upon his or her credit history. Also, it’s a deal where the F&I manager can sell F&I products with the expectation that the bank will approve them with the front end gross remaining.
Some dealerships complain about constantly being “line five’d,” meaning the bank puts a cap on the amount of money it will provide on a deal. The dealership then has to decide what to cut. Often this happens because some sales managers believe their job is to allow the customer to structure the deal. They feel as long as the customer says “yes” they have done their job: They then ship the deal to F&I and let the F&I manager try to get it bought by their finance source.
The consequences of bad deal structuring can hurt your dealership. When a customer is on too much car and you are trying to hit the customer’s stated payment limit to keep the deal together, you end up negotiating with yourself. You cut the front end gross, take out the F&I products and put more in the trade than you should.
Here are some steps that will help you structure better deals:
Select The Right Vehicle
Pull Credit Early
Ask For Down Payment
Develop a Retail Rate Matrix
Agents and dealers should be taking time to review their complete lineup of F&I program offerings and portfolio of services to ensure they have the right makeup of value-added products for customers.