Commenting on the advances of automation in a time before mobile devices, famed architect Frank Lloyd Wright said, “If it keeps up, man will atrophy all his limbs but the push-button finger.” While F&I as a separate department may not be dead yet, in many dealerships, it has definitely begun to atrophy. In some cases, it’s already on life support.

In an effort to “improve” the customer’s purchase experience, some luxury manufacturers are having sales managers handle the purchase from start to finish. Some menu providers would have you believe that all you need to make F&I soar is some flashy software and a big touchscreen. The right menu can create an advantage, but it can’t replace real talent.

In recent years, some of the larger dealer groups have asked their sales departments to assume a number of the duties and functions that have long been the responsibility of the F&I office. In some cases, credit applications, pulling credit bureaus, submitting deals to lenders and quoting monthly payments and interest rates are often done before the F&I department is even contacted.

He Said She Said

A few years ago, the standard complaint by F&I managers was, “The sales department doesn’t turn everybody over to us.” The sales team would inevitably counter with, “The F&I department takes too long with each customer.” These arguments have evolved. Today, many F&I managers complain, “The financing has all been arranged, terms agreed upon, the deal submitted and an approval obtained before I ever see it,” while the sales manager responds, “The customer demands to know the exact interest rate and payment before they’ll buy the car. The F&I department needs to focus on selling their products.”

When this philosophy prevails, F&I becomes a separate department in name only, with the F&I manager merely typing up the finance terms the sales department has already negotiated with the customer. The sales desk has taken the “F” out of F&I. And then they wonder why they have constant turnover in the finance office!

How do today’s consumers want to buy a car? On payment (because we taught them how), with no down payment (because every other ad says they can), at zero interest (because every OEM’s captive offers it), with sales tax, license, etc., included in the payment, and the financing arranged and explained before they sign the buyer’s order.

Because the auto industry started involving the financing in the sale of the car, customers want a deal on that, too. They will buy the car, if the sales desk includes low-cost (read: no-profit) financing. Hey, who needs the CFPB? We can eliminate finance reserve and kill off the F&I department all by ourselves.

This just highlights the need for a consistent, compliant, and transparent process to quote interest rates and negotiate the sale. Eliminating rate markup is not the answer, nor is removing financing from the F&I department. All that does is reduce the F&I manager to someone who is there solely to try and get the customer to buy additional products after the sale is done. The customer doesn’t perceive the F&I process as adding any value.

When an F&I manager does not review the credit application and bureau with the customer, they have not heard the customer’s story regarding that information. Nor do they know enough about the customer’s past or their financial situation to make an effective product presentation based on the customer’s needs. For the customer, the F&I process now becomes nothing more than a series of product sales pitches, because the F&I manager doesn’t have the information necessary to match specific products to specific customer needs.

The F&I department also plays a vital role in protecting the dealership. Every dealership, and every department in that dealership, needs a check and balance system. Just as the accounting office is the F&I manager’s check and balance, the F&I department must be the check and balance for the sales department. All it takes is one desperate salesperson coaching customers to inflate their income or a rogue sales manager power booking cars to put a dealership out of business.

Someone from outside the sales department must confirm the information on the credit application is correct and make sure every deal is structured properly for a particular lender — prior to submission to that lender. In fact, one of the most important responsibilities of the F&I department is to build and maintain lender relations.

To maximize both front- and back-end profits, and to protect the dealership, every department must operate within certain parameters. The most successful dealerships establish written guidelines for the sales and F&I process and require both departments to adhere to those guidelines.

Combining the efforts of sales and F&I could negatively affect customers by narrowing their financing options. F&I professionals must be trained to demonstrate the value of all types of financing, including dealer-arranged financing.

Combining the efforts of sales and F&I could negatively affect customers by narrowing their financing options. F&I professionals must be trained to demonstrate the value of all types of financing, including dealer-arranged financing. 

Division of Labor

The sales desk should be responsible for ensuring that (1) the customer has made a commitment to purchase/lease the vehicle at the price/payment agreed upon, (2) those figures have been reviewed with the customer, (3) the salesperson contacts the F&I manager immediately upon the customer’s commitment to purchase, and (4) the customer is then introduced to the F&I manager. Please note that (5) they are not responsible for converting outside finance customers or submitting deals to one or more lenders.

The F&I department must (1) help every customer — whatever you’re selling, the focus must be on helping every customer, not selling them more stuff — and (2) secure the sale. F&I must do everything possible to put the deal together, hold the deal together, and protect the front-end gross profit, then (3) make a profit! Making money in F&I still comes down to offering every customer every product every time and helping them see why in their case a particular product may be of particular importance.

Additionally, the F&I department must (4) protect the dealership. It’s critical that someone know the applicable laws that impact both the sales and F&I department, help ensure compliance by everyone involved in the sales and F&I process and (5) establish and maintain lender relations. An F&I professional must develop and maintain a professional relationship with every lender, based upon honesty, integrity, and mutual respect. Lastly, F&I should (6) train the sales team to ensure a consistent sales and F&I process and protect the dealership from potential litigation.

The Critical Path

The F&I process should be an informative, educational, and consultative part of the purchase experience for every customer. The F&I department adds value to the customer’s purchase experience by having a clear understanding of their financial situation prior to submission to a lender. F&I adds value by educating the customer as to the reason for their score, and how it affects their interest rate. F&I adds value by helping customers understand the criteria a lender uses to evaluate credit.

And, of course, F&I adds value when it helps customer’s obtain acceptable financing — not just type up what has already been agreed upon. Finally, F&I professionals helps a customer see how F&I products will benefit them specifically, not to mention the benefits of financing through a source other than their own bank or credit union.

Financing is a product. And like any other product, it must be sold by someone trained to that purpose. The interest rate is the price of the financing. Whether you’re selling cars, financing, or a vehicle service contract, you don’t start with the price, you end with the price.

Salespeople, sales managers and F&I managers cannot fall into the “If I could, would you?” trap of selling the price, the payment or the interest rate, and not their product. You don’t become a successful dealer by pushing a button on a screen, and you will never maximize retail sales, front-end gross, or F&I income when the sales department controls the financing button.

Allowing an F&I professional who is familiar with the customer’s financial situation to discuss their repayment, risk-management and vehicle-protection options in the F&I office will increase sales, profits and customer satisfaction with both your sales and F&I processes.

Ronald J. Reahard is president of Reahard & Associates Inc. and ranks among the industry’s leading F&I trainers, authors, consultants and speakers. [email protected]