From Chris Meier’s perspective, the current economy has made F&I products even more important for an auto dealership—and its customers.
With continued limited vehicle inventory, buyers are paying top dollar for their new vehicles. “People who are accustomed to trading up to a new car every three or four years may find themselves in an unusual situation,” says Meier, dealer principal at Herzog-Meier Auto Group in Beaverton, Oregon.
“Because they paid a premium price today, once the industry’s supply issues lessen and the regular depreciation cycle returns, they’re going to see that steep depreciation hit—and probably feel obligated to keep their current car longer than they’re used to.
“That makes it so important for a dealership to offer buyers a robust voluntary protection product like a vehicle service contract. That mechanical-breakdown coverage helps protect their investment over a longer period of time.”
Similarly, Meier says, given today’s new-car prices, buyers making a significant down payment, $5,000 to $10,000, on their new vehicle still may find themselves needing GAP coverage to protect themselves from a financial burden in the event of an accident or total loss if the value of their car is worth less than the amount they owe on the loan.
“Service contracts and GAP coverage are the two most important products you can offer to your customers, in my opinion,” says Meier, who also is the current Oregon state director for the National Automobile Dealers Association. “And that conversation with customers is much easier to have, and the value easier to explain, given that they’re paying substantial dollar amounts for vehicles today.”
F&I is especially important not only for today’s buyers, of course, but also for a dealership’s bottom line. “One of the priorities for dealer principals and their leadership teams is to maximize profits in a consumer-friendly way,” says Larry Guy, national training manager for Allstate Dealer Services.
For Chris Long of Northwest Dealer Direct, an Allstate Dealer Services agent in Seattle, maximizing the effectiveness of F&I starts at the beginning of the sales process. “There has to be the right culture for making profit in F&I,” Long says. “That starts with the dealer. And so much of the success of F&I is controlled by the salespeople and the sales managers.”
Meier agrees that for greatest success, dealerships need to start the F&I conversation early. “We don’t want salespeople selling F&I products,” he says. “But it’s important that salespeople help the customer understand that they’re not just purchasing a vehicle—we’re going to give them the opportunity to protect that purchase. That’s as deep as we want the salespeople to go.
“That way the customer goes into F&I more receptive and ready to listen and understand what’s available,” Meier adds.