Sign In  | My Account

 


  

ARE YOU MISSING F & I PROFIT OPPORTUNITIES?

By Christopher Leedom

What is the most overlooked profit opportunity for an independent dealer? If you said finance and insurance income you are correct. I am amazed at the number of dealers missing the boat when it comes to profit opportunity from F&I profits. Every month we talk to dealers who are recognizing little or no income from F&I products. So ask yourself, how much additional profit potential is there for your dealership?

Some dealers think that only franchise dealers have the opportunity for what we commonly call “back end” profit. Not so. Our Independent Dealer Twenty Group benchmark number for F&I profit per retail vehicle sold is $402. So if you sell thirty units per month this represents an additional profit opportunity of over $12,000. And that is per month!

Many dealers think you need a “department” to take advantage of F&I profits. Not so! You simply need to ask customers for the sale. If you have a small sales staff of only two or three sales people offer additional commission to them for selling a service contract. We have a member of our Twenty Groups that has added over $50,000 over the past twelve months by just asking. Try this experiment. For the next twenty cars you sell ask each and every customer if they would like to purchase a service contract to protect their vehicle against mechanical breakdown for two or three years. Let them know that you offer a nationally recognized service contract that protects your customers from unexpected financial loss due to mechanical breakdown. If you were not selling F&I products before this experiment you will be a believer. If only five people say yes you should make about $2,000 (or more).

Now for those of you that are already offering these products here are some industry statistics for you. Service contract penetration should be 40 to 50 percent of retail sales. You should make about $400 to $600 of profit on each service contract. Finance income may be available from the lenders you deal with so check with your representatives. Finance income (money paid from banks for a selling interest rate) usually averages $200 or more per unit financed. We have independent dealers that are recognizing over $700 per unit in total back end income. And this is often on top of front-end profits in excess of $1,600. Don’t sell yourself short.

If your not sure how to sell these back end products or if you are unable to determine a mix of products to sell give us a ring. We will be glad to help you recognize these profits. There are many excellent national providers that will help you understand how to market and promote these products. And then watch the profits add up.

| Home | Sales | Marketing & Advertising | Inventory | Service | Industry News | Finance | Aftermarket Products |
| Titling & Accounting | Buy Here-Pay Here | Classified Ads | Training & Education | Business Operations |
| Consumer Corner | Compliance Department | About This Web Site |