F&I Income Opportunities

by: Jan Kelly

Traditional products and services are changing as you read these words. Changes occur for a variety of reasons, every sale is only as good as the ability to secure funding for the goods or services sold.

Service Contracts
They are the corner stone of the F&I line up. This mechanical protection is instrumental in building customer retention, as customers usually return to your service department for work. It is great when they can return to have something repaired and not worry about the cost. The dealership makes the first revenue from the difference between the policy’s wholesale and retail prices. The dealership retains the profit up-front and the store remits the net
wholesale cost to the service administrator company. The remaining revenue will benefit the parts and service departments, because customers likely will return to your dealership for service.While the policies do not cover normal maintenance, they do cover repairs to major systems and appliances. As always, a best practice is to have the F&I person read the entire policy for exact information to identify actual coverage. In this case, it is far better to under promise and over deliver.

Roadside Assistance
It is a perfect partner to service contracts.While some policies have this type of coverage as an option, there remains an opportunity to sell the coverage to the end user. Read the policies to identify the differences. The income potential is the difference between the wholesale and retail prices. As with the service contracts, dealerships remit the net premiums with the policies. Real profit comes upon receipt of funding.

Tire and Rim Coverage
This is still available with some companies. Due diligence is recommended as with any F&I product or service. The income potential is the difference between wholesale cost and the retail price to the customer. Some of these companies offer to pay someone directly per policy besides the dealer. A best business practice is to secure the dealer’s written permission for any company to pay anyone directly for selling the policies.

Credit Insurance
Many insurance carriers and F&I producers overlook this traditional policy and income stream. To sell it, you need an insurance license, along with continuing education. Each state’s department of insurance regulates the premiums and commissions. This is a profit center for credit unions and banks making direct loans to customers.

Guaranteed Asset Protection (GAP)
GAP insurance is another equity protection product that dealerships sell to customers who paid less than 30 percent down. The policy pays the difference between the market value and the loan balance in the event of a total loss situation. Many policies pay the customer’s insurance deductible and maybe two months of vehicle payments. Read the policies for exact coverage. The income potential to the dealership is the difference between the wholesale rates and the retail price. Please note that some states regulate this product.

Protective Coatings
This is another product that is now in the mainstream F&I line up. This may be comprised of exterior and interior undercoating and windshield coverage. This should benefit more than just F&I in the dealership. It is usually brought into the store through parts, service applies the product to the vehicles, and F&I makes a profit when it’s sold. Remember, the customer must have a sufficient down payment in order to include this in the retail installment contract.

As I remind F&I producers, this product has three expense centers: the product, the labor to apply it, and the cost of the warranty.

Physical Damage Insurance
This insurance is something that everyone needs, and the F&I person should give an RV specific quote, so that the customer can make an informed choice about which policy they want to have covering their RV. The F&I person should have an insurance license. If they do, the store can realize a commission from the original sale and renewal commission upon the policy renewal by the customer. Dare to compare the coverage between the RV specific policies and the insurance riders available through the customers’ auto policy. There are many differences in protection and coverage. Income potential is either a referral fee, or a commission depending upon the producer’s insurance license.

Talk to your representatives for exact differences. Afterwards, I am confident that you will share my point of view that no one can take better care of your customers than you. These policies and services are merely tools that allow you to provide world-class service to your family of RV owners.

While an independent agent brings most of these policies and services to your store, some of you may want to eliminate the middle man and do business directly with the insurance company yourself. Before you make that choice, read next month’s article about the value of independent agents.