Compliance And Disclosure Priorities: Crystal Motor Car Company Has Rigid Policies In Place

Steve Lamb, dealer principal of Crystal Motor Car Company in Homosassa, Fla., is serious about keeping out of the “bad press limelight” haunting numerous other dealerships that were caught in unlawful business practices. Lamb spent almost four years in F&I management before becoming a used car manager and finally, a dealer. F&I is so important to his business, no salesperson can become a sales manager without F&I training and management experience.

Crystal Autos started with one Chevrolet store in 1984 and has since grown to five stores. Lamb’s wife, Jewel, handles the marketing for all stores and is the dealer at Crystal Nissan. In 1999, Lamb bought out his partner; four years earlier, Lamb had crossed paths with Randy Crisorio, president and CEO of UDS (United Development Systems). Lamb liked the company’s F&I products including the extended warranty, which he called “the best warranty on the market,” as well as the compliance training, the menu selling and the company’s ability to advise and recommend new F&I managers.

Because of this, Lamb empowered UDS to take control of Crystal Auto’s entire F&I department. Prior to the change, Lamb spoke with all his F&I managers asking for feedback. The response was positive, which lead to a smooth transition. That year, Crystal dealerships averaged $500 per car in F&I profits. Now, said Lamb, “We are averaging a solid $850 per car, companywide, in F&I profits.”  

About five years ago, the Crystal dealerships also began working closely on F&I Ethics Certification. Compliance became a priority for Lamb when he started reading articles in magazines about “dealers getting themselves in trouble by not paying attention to what was going on in their F&I offices. The last thing I wanted to do was make Crystal a target.” Thankfully, said Lamb, “We’ve managed to avoid any lawsuits, knock on wood.”

Compliance went from just being a topic in a magazine article to the key issue at all Crystal stores. F&I managers follow a careful process of 100 percent proper disclosure to every customer, so every buyer knows exactly what is being purchased.

Compliance Strategies
When anyone new is added to F&I management at Crystal, he or she must achieve certification in both menu presentation and F&I ethics within 30 days.

For F&I ethics, candidates are given the Regulation Z/Truth in Lending booklets from the Federal Reserve and educated on which sections apply to the automotive industry, including: the state’s Deceptive and Unfair Trade Practices rules, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, Lemon Laws, the Graham-Leach-Bliley Act, privacy safeguard requirements and OFAC Requirements. “There is a mountain of rules and regulations that need to be followed,” said Crisorio. “All of this is part of the compliance examination.” Both the training and examinations must be renewed every two years.

Every quarter, compliance audits are conducted at the Crystal stores. “UDS auditors will pull anywhere from 40-to-50 deal jackets out of accounting and take them apart in a million pieces, looking for anything that may point to a disclosure or compliance issue,” said Lamb. “Not only are we holding ourselves accountable, I am having an outside person—another set of eyes—performing the audit.” For example, when a customer chooses a menu product, they must initial and sign next to the product name. This confirms they were shown the entire menu.

With a little help, Crystal developed an F&I policy manual that managers must read and sign. There may never be catastrophic lawsuits aimed at Crystal, but that is the point for Lamb. “We want people to say, ‘This company really is trying.’”

Menu Presentations
The dealership menu presentation begins with the salesperson and customer meeting the F&I manager at the closing booth instead of the customer being abruptly turned over to F&I. Next, customers are invited to the F&I office. Ryan Young, F&I manager for Crystal Chrysler Dodge Jeep, has no brochures or banners displayed in his office. Instead, he has O, The Oprah Magazine and Sports Illustrated on his desk. “The goal is to have a nice, clean appearance. The magazines are there so you can find common ground with people. It puts them at ease,” he said.

Instead of launching into a pitch about products, the manager first goes over all terms that have already been agreed upon including interest rates. Every customer is also checked against the OFAC list. Once this is completed—and only then—a menu is presented. As the process begins, Crisorio emphasized, “We teach the managers to lay the products out there and let the customer make a decision. We also teach them to offer different payment terms. We don’t want to lead the customer anywhere but where they want to go.”

The menu is presented to every customer the same way, every single time. It’s a non-aggressive approach that is clear-cut. “The first thing the F&I manager discovers…is that the customer buys things they never thought they would,” said Crisorio. The certification process prevents employees from reverting to less effective sales habits. Candidates are given a written test and a “mock deal” that is videotaped and later critiqued.

While the menu process Crystal uses is a Web-based selling system, F&I managers present all products on one paper, as four different package options. “The programs range from cheapest ‘Value Program,’ (vehicle service contract, GAP protection, and tire and wheel coverage), all the way up to the ‘Preferred Program’ (all products),” said Frank Hale, F&I manager for Crystal Chevrolet. Customers are shown all package options, one by one. “If they don’t make a selection,” Hale continued, “we have a second page, or a flip side, that allows us to ‘step-sell’ products by going over every item individually, to try to get at least one or two options sold.” All the while, managers ask permission from the customer before moving forward. Once finished, the customer is free to make an informed decision.

Though the process is consistent, managers can still personalize their approach. At Crystal Chrysler Dodge Jeep, Young is aggressive about introducing himself to customers on the floor. He asks questions to find out their driving habits. “If the car they are trading is a 2004 model with 60,000 miles, I may say, ‘Wow, you drive a lot of miles. Is that normal for you?’ By the time they come to my office, they know I’m not a stranger.”

Young averages two to 2.5 products per deal (not including theft protection). He believes vehicle service contracts, GAP protection, and tire and wheel protection are his three most valuable products because they encourage repeat business and breed a long-term relationship with the customer. Young’s top-product penetration for May 2007 was: 74 percent GAP protection, 50 percent to 60 percent extended warranty and 45 percent road hazard. Hale, whose goal is to sell everyone that purchases from Crystal Chevrolet at least one protection, averages about 1.5 products per car. Both managers see a local demand for paint protection. “In Florida, there are all kinds of environmental issues…like ‘Lovebugs,’” said Young. Lovebugs swarm and splatter on windshields and car exteriors, which can cause serious paint damage. Lamb added that factory incentives, like 0 percent interest, can also open the door for more menu selling.

Sub Prime F&I
Each Crystal store has its own primary F&I manager and secondary F&I manager. Several years ago, Lamb was encouraged by Bill Heard to pursue secondary F&I deals. Lamb has not regretted it. “The secondary sale is 30 percent of our business,” said Lamb. “Any dealer that doesn’t have a secondary department and F&I manager is absolutely losing money.” Due to the large rebates offered on retail units, Lamb estimates that his stores sell as many new vehicles to secondary customers as they do used vehicles.

Transitioning to Sales Management
Some on the sales staff are not aiming for a career in F&I, but for sales management and ultimately dealer. Before anyone can even manage the Crystal sales team, they must spend at least two years in F&I management. “F&I is the cornerstone of a well-run sales department,” said Lamb. “If your manager doesn’t understand F&I, he or she will never take the department to the level it can go.” Additionally, “…if a sales manager from the outside doesn't have at least two years experience in F&I, I won't hire him.”

Hiring for F&I
Managers are regularly evaluated based on compliance audits, sales figures and consistency of menu presentation. UDS is free to approach Lamb when an F&I manager is underperforming. In fact, all incoming candidates must be interviewed by both Crystal Motor Car Company and UDS. Currently, all F&I managers except one have been hired from inside the dealership.

New candidates for F&I management must also fit a Web-based profile taken through Profiles International. “No one comes to work for my company without going through [and matching] that profile,” said Lamb. With a degree in psychology, Lamb confesses he was skeptical of profiling “…until my wife and I took one about 15 years ago. We looked at each other and said, ‘This is scary.’” After profiling all their managers, Lamb’s team developed a “model F&I profile” by combining profiles of their top three F&I managers. All three are “…good at paperwork, have a sense of urgency about their job, get along good with the sales force, have a good understanding of products and have good relations with the bank,” explained Lamb.

In the coming months, Lamb admitted he may be faced with an influx of very qualified F&I-trained managers who want to be considered for sales management. He joked, “What am I going to do? I guess I’m going to have to cross that bridge when I come to it.”

Vol 5, Issue 8