The Importance of Maximizing the F&I Dollar in a Market Where Front Gross is Compressed By Jacob Newman, Ethos Group The retail automobile industry is perpetually evolving, and recent years have been particularly dynamic. The industry has faced challenges such as the uncertainty of COVID-19, microchip shortages and fluctuating interest rates, all amidst the rise of AI discussions. These unprecedented events have significantly impacted the industry. A recent challenge that has resurfaced is the compression of gross profit on automobile sales. This is not the first, nor will it be the last time we encounter profit reductions. Several factors contribute to this trend: replenished inventory levels offering customers more choices, fluctuating interest rates and new tariffs whose impacts are still being assessed. Additionally, overall consumer sentiment in the market plays a significant role. Given this set of circumstances, the profitability of the finance department is crucial. Increased finance production significantly impacts the overall health of the retail automobile dealership. Consider this: Is it easier to improve finance production by a few hundred dollars per transaction or to increase unit sales by 15%-20%? Increasing unit sales requires more resources and additional expenses. In contrast, enhancing the finance program’s value proposition by just $5 per transaction can yield substantial income. For instance, a $5 increase per transaction over an average term of 60 months generates an additional $300 in revenue per automobile sold. Although the impact of this increased production can be a lifeline for a dealership that is struggling with profitability, when evaluating the profit generated by the F&I department, it is essential to adopt the correct perspective. The finance department should prioritize customer satisfaction and high-retention products that encourage repeat visits to the dealership’s service department. The more frequently a consumer returns to the dealership after purchasing a vehicle, and the better the dealership does of addressing their concerns, the higher the likelihood of the customer returning for future purchases. Repeat and referral customers are crucial for the survival of dealerships during challenging market conditions, such as the Great Recession. These dealerships thrived due to a loyal customer base that consistently chose their services over competitors. While the profit generated by the finance department is vital for the financial statement, it is even more critical for the long-term stability of the dealership. Profit is not the primary goal; rather, it reflects the effectiveness of the dealership’s processes and the execution by team members. When the team collaborates to enhance the value of products sold in the finance department, we achieve greater success in selling those products. Consequently, the better the consumer experience, the more likely they are to return to the dealership for future purchases. For more information on how Ethos Group can help your dealership develop more leaders in your F&I office, sales management tower and your sales floor in 2025, please contact: Chris Nesseth at cnesseth@ethosgroup.com or (319) 270-4779, or Austin Shane at ashane@ethosgroup.com or (319) 296-8760. SCAN THE QR CODE FOR AUDIO. 34 Illinois Automobile Dealer News
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