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?
dealers think that only franchise dealers have the opportunity
for what we commonly call “back end” profit. Not so. Our Independent
Twenty Group benchmark number for F&I profit per retail vehicle
sold is $402. So if you sell thirty units per month this represents
profit opportunity of over $12,000. And that is per month!
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
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
by just asking. Try this experiment. For the next twenty cars you
sell ask each and every customer if they would like to purchase
contract to protect their vehicle against mechanical breakdown
for two or three years. Let them know that you offer a nationally
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
be 40 to 50 percent of retail sales. You should make about $400
to $600 of profit on each service contract. Finance income may
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
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
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.
will be glad
to help you recognize these profits. There are many excellent
national providers that will help you understand how to market
these products. And then watch the profits add up.