In Current Market Conditions, F&I Starts In The
by: Randy Sobel
Oh, how the times are changing! Not too long ago when I was training
an experienced group of top producing salespeople, the F&I manager
observed that I was instructing on how to get more down payment. After
the seminar, the F&I manager came to me, red faced and angry, and
told me firmly that my techniques would cost him money. He explained
that the more money financed with the longest term would make him more
in finance reserve.While I knew he was correct, the sales department was
fighting a different battle.
About six months ago, salespeople started seeing their good credit
clients turned down at an alarming rate. There are very few things that
are more demoralizing to a salesperson than to have worked very hard to
make a sale; only to have an F&I manager say he cannot get it
financed. Just as real estate banking created their current challenges,
we are responsible for participating in ours. Hindsight would ask, who
had the great idea to stretch our terms, advertise and finance with zero
down, and absorb whatever the reverse equity position is into a new
I spoke with an F&I person who was out of the industry from 2002
to 2006.When he came back as a sales manager, he was amazed at what the
banks were buying. Was it because there was that much money available to
lend, the banks were being competitive for our business, the government
instructed the lenders to lower their buying standards, our loss ratios
with the banks were very low, or a little of all of the above?
The challenge before us today is not as difficult as it may appear.
After the first three months of 2009, I am happy to report that floor
and show traffic is still bringing in new buyers to our industry.We must
make a deliberate change in how we market and sell our products to these
new and first time buyers.
NO MORE ZERO DOWN
First, we must take down the signs that say, “ZERO
DOWN.” The banks are not buying these deals at a high enough rate
to warrant the loss of a larger number of clients who we’ve set up
for defeat. Since these are clearly payment buyers who are mostly
concerned with, “will this new payment fit with my other monthly
bills,” showing them a low payment is more important than showing
them zero down.
Give your clients credit for knowing that the more they put down, the
lower their payments will be. It is ok to go back in time and advertise
very low payments with a large amount down. Our clients know that if
they do not have all of the down payment we are requesting, then they
must do the best they can to keep their payments low enough to fit
within their budget.
If asking for more down payment to get more deals financed for
yourself and your dealership does not motivate you enough, do it for
your clients. Your clients will be in an equity position sooner, pay
less interest, have options to trade-up with less of a reverse equity
position, and your portfolio with your lenders will be strengthened,
which will allow you to help more clients purchase.
GETTING A DOWN PAYMENT
The next question we must address is where we ask for down payments, and
then we can go after how we ask. Think of the last time you sold your
product and then after realizing that the client was in love with your
product, they had nothing to put down. Again, this was not a problem a
year ago, but is a huge problem today. The lenders today do not want to
finance our reverse equity or our profits. We cannot afford to wait
until a client loves our product to ask for a down payment.
Out of respect for our client, we must give them the opportunity to
provide a down payment.We will not be able to show the best product for
our clients’ needs if we do not find out what they want to put
down. In other words, if we think they want to put down $2,000, we may
only show them Model X. However, if we ask for a down payment before we
show a product and find out that our client has $10,000, we may very
well show them Model Y, which fits their needs better.
Some word tracks that have proven to be effective in the correct
context are as follows.
“So I don’t waste your time showing you the wrong model,
how much were you thinking you wanted to put down, $20,000,
Let the numbers offered be one-third to one-half of what you think
you want to show. Again, this protects your client’s right to see
the nicest product, be in an equity position sooner, and pay less
interest. It’s even ok to explain these benefits to your
Our technique of asking for a large downpayment is called
“anchoring.” It refers to the principle that the way we ask
questions greatly influences the answers. It is a selling principle that
protects the client’s time and money.
Here is another down payment word track, which we teach that gives
the client three reasons to put money down before we show them the wrong
“As far as your down payment goes, certainly you’ve got
your tax and license that you’re responsible for (Pause) as well
as your remaining balance on your trade of $5,000 that you’re
responsible for as well (Pause). So, as far as your down payment goes,
were you thinking you wanted to put down $15,000-$17,000,
$17,000-$20,000 (without hesitation continue), certainly the more you
put down, the lower your monthly payments are going to be. So, were you
thinking you wanted to be like most of our customers and have really low
payments? (Pause and let them answer positively). Well then, to get your
payments really low, were you thinking you wanted to put even more down
like $22,000-$28,000, $28,000-$30,000, $40,000, $50,000,
In this example, anchoring gives your client three reasons to put
money down. First, they have their fees for which they are responsible.
Second, they have their trade balance owed and probably reverse equity.
And third, they want the lowest payments possible if they are like most
While we teach many ways to ask for down payments at the end of the
selling process as well, the best time to protect and respect the
client’s opportunity to purchase the best product for them is
before showing the wrong product.
MAKING MORE DEALS
The F&I manager at the beginning of this article, who was
angry six months ago when we were teaching salespeople to ask for more
down, is singing a different tune today. After seeing that we have
doubled his down payments in his store, he was the first to thank us. In
today’s market, we need more and larger down payments to give our
lenders the loan structure and confidence to finance our products.
Remember, this is how our normal business and banking relationship
used to be. Shorter terms and more down payments were the norm. Not too
long ago, our lenders loss ratios were so low that they loosened their
lending requirements.We do not need to say that things are tough today,
they have just returned to normal! With proper sales techniques, we are
in “business as usual.” The real question is, does your
current staff have the skills to handle today’s clients, or are
they using last year’s selling techniques on today’s changed
clients and lenders?
Randy Sobel is president of Sobel and Associates, Inc. He is an
RV Learning Center faculty member and a frequent speaker at the RV
Dealers International Convention/Expo and state association conventions.
Sobel and Associates, Inc. currently provides training for Management
and Salespeople in over 400 RV Dealerships throughout the U.S. and
Canada. For questions, please call (800) 952- 1765 or (253)