F&I Management & Training

"Referrals are a key issue for finance and insurance operations"

In most cases, when people buy a car they have borrowed money to fund the purchase – but if they aren’t using you for finance, your business is losing out.

When customers talk to dealership staff there is still reluctance to admit they are using finance, since customers feel they can always “do a better deal for cash”.

This is where sales executives need to focus on more than just moving metal, with good qualification based on simple routine conversations with customers during the sales process.
They aren’t particularly challenging questions, but they could make all the difference.

Questions could include: How did you fund the purchase of your current car? When does the current finance on your existing car end? What extended warranty did you have on this car? What is your budget for a monthly payment?

Make this a core part of the sales process as early as possible, along with discussions about other core products such as warranties, so customers are considering a service package from the dealer – better than being sold one thing at a time in a never-ending sequence after agreeing to buy a car.

Referrals are a key issue for all finance and insurance operations.

A referral is an introduction to the business manager at the time of sale, or a promise of a follow-up phone call.

Once it has been established that the customer is either captive or can be converted to dealership finance, the business manager’s involvement is required to structure the repayments.

The success of your business manager is going to be dependant on the quality of customer qualification and referrals.

It is vitally important the sales man-ager gets closely involved in monitoring the quality. The best advice is do not let the quality slip – not even a little.

Dealer principles need to work closely with the business manager and the reward will be a consistently high finance penetration.

Ask the right questions

Do you feel your sales executives are afraid to ask relevant probing questions, because they’re afraid of losing the deal?

Many sales execs will openly admit to it. Often they are happy to leave the customer to sort out their own finance.

How much is this costing your dealership? Sales executives need to build rapport with their customers, but they must not lose sight of the fact that their objective is to sell the car – along with all the other services your dealership has to offer. All qualifying questions must lead in that direction.

Business managers should not be left out of important decision-making procedures regarding sales and processes. It could prove costly.

Business managers should be involved with any changes in the approach of the sales team and be able to offer coaching and guidance.

Create a level playing field

When It is a fact of life that customers buying finance will nearly always query a payment.

A few clicks on a mouse are often enough for customers to bring up a range of rival quotations.

How a dealership responds to these is critical.

Firstly, try quoting two payments. Often, the customer will feel more comfortable with the lower one and the negotiation is more likely to succeed. Two payments can be introduced by having, for example, differing deposits or lengths of contract.

A surprising amount of extra money can be made by adding just a few pence to each monthly payment.

Dealers often struggle to get within a customer’s budget when considering 24 or 36-month payment terms, but why not 38 or 39 months?

But the argument is still likely to come back to rival lenders and how they compare to your deal.

The business manager needs to have access to the rates and offers being provided by other lenders.

If a customer says “I am having my funds through XYZ Building Society”, the business manager can keep the discussion flowing by bringing out the information from the rival lender.

While the headline rate may be comparable or even cheaper, the business manager should be able to identify whether they are being compared on a level playing field, for example by reviewing whether there is mandatory credit insurance or high document fees.

The additional card up your sleeve is that when the finance is arranged at the dealership, there will be no delay to the car’s delivery date.

But getting the best deal for your customer starts with your negotiations with finance providers.

These days, finance and insurance commission is a vital part of dealership profitability.

It is in every dealership’s interest to take the time and trouble to carefully consider the package offered by their mainstream finance company.

In many cases, particularly where there is manufacturer involvement, the deal may be nationally agreed or uniformly structured for all dealers of that marque.

That will often facilitate the need for a second finance company for used car and other business that may be inappropriate for the tied manufacturer’s representative.

Even if tied to a manufacturer scheme, there is still potential to enhance the scheme in qualitative ways.

What is an ideal finance company package?

A core requirement for the ideal finance company is competitve base rates.

It is absolutely vital that base rates are such that they are not undercut by neighbouring or competitive dealers.

Also important is a generous, but fair commission structure.

A degree of flexibility in the agreement is vital if finance income is to be maximised.

This could include the ability to write below base rate and use a finance subsidy as necessary.

Dealers should be able to make use of document fees for a larger balance or be able to offer a particularly low rate of finance to dispose of an over-age used car or a difficult piece of stock.

It is vital that your finance company can cope with this and provide support.

One of the most critical factors in winning, however, is a speedy response and satisfactory level of acceptances.

A two-hour turnaround for proposals should be achievable.

The rejection rate will vary according to the location and the type of customer and often the level of their deposit in relation to the value of the car.

But you would be wanting to meet with your finance company to discuss as a problem any rejection rate in excess of 15%.

Another source of dealer frustration is a vehicle debtors list littered with finance company balances.

In most cases it is down to dealer and document error. However, in a small proportion it can transpire that general incompetence and tardiness at the finance company results in an unacceptable delay in getting paid.

There is a vast amount of detail to agree in any finance company package.

But it is necessary to consider every aspect.

The package, should be detailed down to the individual headings and agreements sought at every stage to ensure all the points are covered and agreed, carefully and with clarity.

It is also imperative the package is reviewed regularly.

DATED: 24.05.10

FEED: AM