Successful F&I in the future will require leveraging technology and presenting options as well as delivering a transparent and seamless customer experience.

From humble beginnings, the F&I department has grown to become one of the most important sources of revenue and profit for dealers, offering a whole range of products services from extended warranties to rust proofing and now, anti-microbial protection products, as well as maintenance plans and loan insurance.

Since the COVID-19 pandemic hit the North American economy hard in March, dealers, like many other businesses have found themselves adapting to a very different landscape. Many had to temporarily close their showrooms and rethink strategies in how to contact and do business with customers, while at the same time taking stock of their business plans and operating procedures. And with many OEMs temporarily suspending vehicle production and many consumers out of work, one of the hardest hit aspects was F&I.

The silver lining

Yet it’s not all doom and gloom. In a recent webinar hosted by Templeton Marsh, entitled Post Pandemic—Generating Immediate Revenue with F&I, Managing Partner Samir Akhavan, interviewed Derek Sloan, President of Sym-Tech Dealer Services, a well-known F&I provider in the Canadian automotive retailing sector.

Sloan provided some very interesting information, not only in how COVID-19 is changing the face of automotive retailing and the role of F&I within it, but also how dealers can use the current situation to their advantage by leveraging technology and sales strategies to deliver an elevated F&I experience that benefits both the dealer and customer.

Sloan noted that much like many business sectors, automotive F&I sales essentially fell off a cliff in April and that right now, at the end of May, things are only starting to improve.

One of the biggest concerns, is ensuring that people stay safe and Sloan commented that overall, dealers have done a remarkable job during the pandemic in protecting both their employees and their customers. Yet, as we slowly transition to a “new normal,” how customers want to be served when it comes to vehicle purchases remains very much front of mind.

Considerable opportunities

With more people working remotely than ever before and trends pointing to an uptick in personal car ownership post-pandemic, there are considerable opportunities for dealers in the F&I space.

With profit margins on new vehicles at historic lows and downward pressure expected on used car prices, the role and profitability F&I is likely to become ever more pivotal. According to Derek Sloan, perhaps the biggest question is, “how do we ensure we keep the profits in our F&I departments and we also serve our customers at the best level possible?”

He noted that traditionally, F&I departments operated on the concept of step-selling. One product at a time is presented to the customer after they’ve agreed to purchase the vehicle,” said Sloan. “Those products are then reviewed and the customer can decide whether or not they want to buy them.”

Sloan said that today, with companies like Sym-Tech offering as many as 14 different F&I products, step-selling simply isn’t a practical way to sell to the customer. Sloan also said that prior to COVID-19, customers on average were still spending 45 minutes or more in the business office and that having already spent a considerable amount of time agreeing to the purchase of the vehicle, the last thing they often want is to be sat in a chair for another three quarters of an hour while another salesperson rattles off a menu list of protection products on top of what they have already committed to purchase.

Sloan said that such an approach, especially when you have a whole suite of F&I products, tends to create fatigue and a low level of satisfaction for customers, reflected in a number of consumer surveys (he referred to one statistic where only 17 out of 4002 customers surveyed said they had a positive experience related to F&I).

Given that scenario then, how can dealers take the reins to ensure the F&I department remains a critical part to the sales process as well as becoming far more satisfying for their customers?

A key one is awareness. Sloan noted that today, we live in a research society where consumers like to find out as much as possible about a particular product or service before they commit to it. A vehicle purchase is typical, with consumers spending much time online, looking for a particular model, analyzing trim and equipment levels and options before deciding to contact a retailer.

Sloan said that one of the biggest obstacles when it comes to F&I is that consumers are not often aware of what products are available or even if they are, have very limited information about them.

“If the customer has an increased awareness of F&I products and has the opportunity to do research on those products prior to the purchase of the vehicle, they are more apt to purchase those products,” said Sloan.

Access and convenience

Additionally, he notes that access and convenience also play a critical role, part of the reason why digital third-party providers have made such inroads into the retail landscape over past two decades.

As vehicle sales continue to shift more and more into the digital and virtual realm, ensuring that F&I is integral to that process is key. Sloan noted that there are three key metrics that drive F&I profits:

• Products per deal,
• Per vehicle gross profit
• Customer satisfaction (CSI)

It’s really important to stress that F&I is not just about making money.

— Derek Sloan, President, Sym-Tech Dealer Services

“But that it is also about customer loyalty and creating a fantastic customer experience, so that you have repeat buyers. The process you put in place has to have all of those pieces,” added Sloan.

Sloan also noted that it’s important to distinguish “digital” from “virtual” experiences. Digital refers to a transaction performed with the aid of technology but where there is no actual human interaction involved—a good example can be a consumer going on an OEM website and spec’ing their new vehicle with the options available.

Virtual refers to human interaction performed through technology, often such as a salesperson in the dealership talking with a customer through an interface.

And with many consumers likely wanting to maintain social distancing practices when it comes to sales transactions—at least for the foreseeable future—creating a virtual experience that actively engages them will be essential for conducting successful business.

Seamless integration

The key for F&I noted Sloan, is the seamless integrating of both digital and virtual experiences together, with the virtual element including a highly trained F&I manager that projects an image of confidence, competence  and integrity, reinforcing a customer’s decision for choosing a particular product from the F&I suite.

Which leads into another crucial factor, allowing consumers a la carte options when it comes to selecting from an F&I menu.

“We’re a big fan of menus and have developed our proprietary menu technology which custom presents options to customers based on their specific needs,” said Sloan.

He noted that it’s critically important for dealers and their F&I managers to be able to virtually present different F&I products and pricing options for customers, allowing them to make choices and select the options that most appeal to them. “It is less about trying to sell,” said Sloan “and more about presenting prescriptive solutions based on specific customer needs and habits.”

Additionally, utilizing the tools available through companies like Sym-Tech and ensuring F&I managers and salespeople are trained to use them effectively will lay the groundwork for future success. This, along with solidifying [and growing] collaboration with OEM partners will allow dealers to remain competitive in the face of disruption, whether it comes from third party start-up companies or as a result of further cultural and economic changes.