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VW’s crisis forced dealer Joe Esposito to improve his F&I business. He hired Regina Hale to teach his F&I managers how to sell more product.
When Volkswagen’s emissions cheating scandal broke last September, dealer Joe Esposito began discounting vehicles to entice skittish buyers. But he knew if he didn’t find a way to counter his losses, his store could wind up in trouble.
“We were taking shorter margins on the new VWs, especially on the customers that were cash buyers,” said Esposito, managing partner of Camelback Volkswagen in Phoenix.
To offset the lower margins, Esposito decided to “home in” on finance and insurance sales.
His decision reflects what other VW dealers are realizing: They must find creative ways to shore up the bottom line as they take a hit on vehicle sales, and F&I is a way to do that, says Chip Maher, principal of CWM Consulting in Richmond, Va.
“I’ve had some comments from dealers that this has been a wake-up call,” Maher said. The message: “Do not be completely dependent on the new-car department”; rather, be “fully absorbed” in all profit areas of the business.
That includes eyeing ways to improve sales in the F&I department, Maher said.
“A good dealer is making $1,200 to $1,500 net per vehicle in F&I,” Maher said. If dealers “are not doing that, they’ll be at a competitive disadvantage in the market.”
The most marked way dealers are increasing F&I revenue is by selling more ancillary products and relying less on finance reserve earned from arranging loans.
That was Esposito’s strategy at Camelback VW, which sells about 2,700 new and used VW cars a year.
In October, he hired Regina Hale, a finance director who “really understands finance” to teach his F&I managers how to sell more product.
He also adopted menu selling so that every customer sees every product available for purchase. Last, he let the sales staffers join in on the profits. He gave them part of the commission on an extended service contract sale if they contributed to the customer buying the product.
It all paid off. The dealership’s average F&I revenue per vehicle is $1,853, up from $1,133 before the emissions scandal, Esposito said.
“That’s not from a lot of interest rate; that’s just selling a lot of product. We got really good at F&I to make up for the front-end shortfall,” Esposito said.
“We made [F&I managers] chase volume.”
Esposito said VW’s crisis forced him to make long-needed improvements to his F&I business.
“Did the scandal freak me out? Yeah, for sure,” he said.
“And were our front-end margins down? Yes. But we put a team together, and we figured out how to make that up.”
VW dealer turns to F&I to offset front-end squeeze
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