Although it is impossible
to present accurate statistics, my educated guess would be
that more than 90% of all automobiles purchased in this
country are financed.
Depending on the economic demographics of the dealership's
customers, most dealerships control upwards of 50%, as much
as 85%-90%, of their customer's financing.
Viewing the F&I Department as a profit center, it is fair to
say that converting customers to your financing is extremely
important in today's competitive environment. You are
competing with banks, credit unions, and even insurance
agents to capture the consumers' finance business.
When I was a Finance Director, working day-to-day with some
of the biggest players in the industry...there were several
guidelines and processes that we used to keep the customer's
finance business when they expressed an interest in
financing elsewhere.
First of all...never allow a sales person or a manager to
discuss interest rates with a customer until you have
qualified and quantified their credit. In other words, when
you are converting a customer to your financing, be sure you
can do what you say you can do. I used to go berserk when a
sales manager would assure a customer that we would match or
beat their rate when we had never seen their credit bureau.
In today's legal minefield, you don't need anyone making
commitments you are not able to honor.
AND...there are reasons other than a lower rate that make
the dealership's finance sources more attractive, even
though the rate may be higher.
True cash deals are almost nonexistent. When I get involved
with a dealership and the Sales Managers tell me that a
large percentage of their deals are true cash, that is
usually not the case in reality...those people are getting
that money somewhere. More often than not, after a little
investigation, I find that a large percentage of those
"alleged cash deals" were, in reality, home equity credit
lines.
Depending on the dealership's demographic market, the other
competitor for the customer's finance business is their
Credit Union. Although, zero percent has made new car
finance difficult for these outside sources to compete with
the dealers, they are usually extremely aggressive in the
previously owned arena.
Before you start negotiating with the customer to keep their
finance business be sure they can actually get the rate and
terms they are telling you. Remember, it is not uncommon for
a consumer to tell the dealership something that is untrue.
Personally, I always go directly to the credit union's
website and print out their current rates. Of course there
are books and charts sold commercially that you can show the
customer BUT a printout from their credit union's website
has mega-credibility. As often as not you will find the
consumer is confused about what their credit union offers
and they really can't get the rate and terms they are
telling you. I can't tell you how many times I have seen
Managers give away profit unnecessarily, competing with a
rate the consumer actually can't get.
Always pay attention to whether or not the credit union rate
is a fixed rate or a variable rate loan. (Many home equity
loans are variable rate loans) You never-ever need to
apologize for a higher fixed rate loan versus a lower
variable rate. A variable rate loan is an inferior loan and
you should be able to explain the benefits of a locked-in
rate that will never change regardless of the economy.
NEVER TRY TO MATCH OR BEAT THE CUSTOMER'S INTEREST RATE
UNTIL YOU'VE INVESTIGATED AND EXHAUSTED ALL OF THE OTHER
REASONS WHY THEY WOULD FINANCE THROUGH THE DEALERSHIP'S
SOURCES.
A good finance manager will keep "An Evidence Manual" to
show the customer what I call "Third Party Verification"
that you are telling them the truth. For years I have always
kept and updated an evidence manual with newspaper and
magazine clippings, articles from the Internet, etc. AND,
most importantly, I kept copies of every credit union's
contracts and paperwork to show the customers the harsh
stipulations and penalties some credit unions have built
into their contracts that the dealership's lender do not
have in their documents. Many times I have converted
customers to dealership financing at a higher rate just by
comparing the back of the contracts. There are at least
fifty good reasons I can readily come up with off of the top
of my head why the consumer is better off financing with the
dealership.
In my Advanced Finance Schools, we are finding that today's
managers, even though they are "Menu-Driven" have, for the
most part, lost a lot of the finesse and persuasive sales to
sell the customers on the reasons why the dealership's
financing is a better value. The F&I menu is fine for
presenting the packages and financial options in a legal and
ethical format BUT I am afraid, as an industry, we are
losing the art of salespersonship (I made that word up) in
F&I that puts the money on the books and keeps it there.
JIM
Contact Jim Ziegler at
800.726.0510
Ziegler SuperSystems, Inc
3950 Shackleford Road - Suite 100
Duluth, GA 30096
800.726.0510
www.ZieglerSuperSystems.com
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