Fewer customers may mean more time to sell

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Robertson: More time for sales.

Dealers wince at the prospect of slowing vehicle sales. But there could be a bright spot: With fewer customers, F&I managers will have more time to focus on sales penetration for add-on products.

“In good times, when an F&I manager has tons of customers, he gives each one a pretty good effort at pitching the product,” said Dave Robertson, executive director of the Association of Finance & Insurance Professionals. But, he said, managers may spend less time than they would like selling to customers because they need to get to others in line.

As sales slow, though, F&I managers will have time to work harder with customers and boost penetration. That will be increasingly important as lenders, product providers and dealers, worried about the potential for tighter regulation of F&I add-on sales, set “markup thresholds on products,” Robertson said, putting pressure on F&I managers to sell more products to keep profit up as retail margins fall.

Industrywide, one product that offers an “upside” in sales is the service contract, said Scott Karchunas, president of Protective Asset Protection. In 2015 extended service contract penetration on new vehicles was 43 percent, data from the National Automobile Dealers Association show, which means 57 percent of customers did not buy one, he pointed out.

The key to driving growth is product development — what’s sold and how, said Larry Pomarico, senior vice president of sales for SouthWest Dealer Services. The digital menu presentation is becoming more sophisticated and customizable, he said. And with loan terms stretching as far as 84 months, customers are recognizing the value of F&I products that protect the vehicle. “The days of the backyard mechanic are behind us,” Pomarico said. “It’s basically a computer module driving down the road now,” and that makes vehicle protection an easier sell.

Prospects look good for selling F&I products on used vehicles, too, he said. As new-vehicle sales tighten, used sales likely will rise, giving dealers more opportunities to sell F&I products on them. “Our used-vehicle F&I numbers are as strong if not stronger than new,” he said.

In the long term, though, whether F&I penetration rises or flattens, if vehicle sales fall, F&I income would decrease, Robertson said, adding, “F&I can’t do anything until you sell a car.

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Fewer customers may mean more time to sell