Car Buying Articles

Confessions of an Auto Finance Manager

A Former F&I Guy Explains How He Did


Part 2: Tricks of the Trade

The office for my new job was in a mobile home parked at the back of the car lot. It can look inconspicuous, but what goes on in the F&I office is the lifeblood of the car business. Before you enter the finance office, a car deal has really just been a lot of talk. But in F&I, all the verbal promises are put in writing, the customer signs and the contract legally binds the buyer to make all the payments.

Dave, who ran the finance office at my new job, wasn't the stereotype of the sneaky F&I guy. He had a good sense of humor and was very relaxed with his customers: a little too relaxed, I thought. If he just pushed a little harder it seemed he could've sold a lot more products.

In the beginning, I just sat in the back of the room while Dave handled the customers. Meanwhile, I got to observe Dave's sales techniques, such as the way he started the F&I process.

Setting the Tone
Dave would usually glance down at the contract and then look up at the customer and say, "Oh! So you're the folks who bought that black Suburban. Man, that's such an awesome car!"

What he was doing was showing the customer that he cared about their purchase and shared their excitement, as if they were on the same team.

This opening was important because it set the right tone. Often they had been test-driving and negotiating all afternoon and, basically, they just wanted to get the hell out of there. So Dave had to refocus them on the excitement of the new car so he could sell them a slew of additional things.

Most salesmen know that once a customer starts saying yes, it's easy to keep them saying yes to other things. We called this being in the "yes mode," and we tried our best to exploit it.

Dave would start by asking the customer a question he knew they would say yes to, like: "Do you like this car?"

Obviously, they would say yes since they had just agreed to buy it.

"I bet you'll really enjoy taking this car on vacation."

Of course they said, "Yes."

So then he'd ask, "So I'm sure you'll want to buy an extended warranty to protect your investment?"

And they often said, "Yes."

Running F&I on My Own
After only 10 days of training, Dave went on vacation and left me in complete charge of all the finance work for the dealership. I was nervous because I wasn't detail-oriented. And a car deal involved dozens of documents, which I needed to get the customer to sign correctly in multiple places. And if you didn't get everything right, the DMV would reject it.

I made endless checklists to remind me to dot all the i's and cross the t's. But as I gained experience, I became more confident. I even decorated my office to make customers more comfortable. I put up pictures of the beach and some inspirational sayings: fun stuff to relax people.

The Flow of the Deal
The F&I process actually started before I even met the customer. The salesman gave me the credit application to run while they were still negotiating. Often, I'd go out and take a look at the people to get a feel for them. That way, when I met them in the F&I room I could break the ice by making some small talk. For example, if I saw one of them wearing a Green Bay Packers hat, the first thing I'd say to them was, "How about those Packers?" In my time in F&I I talked about all kinds of things I had no real interest in: deer hunting, football, hockey — even cooking.

If the customer's credit score came back over 700, we wanted to make sure they bought a car as quickly as possible and got them out of there. We would tell the salesman to "spot them" (let them take delivery on the spot) before the bank formally approved the loan.

On the other hand, if the customer had really bad credit, we knew there was no way we could sell them a car. So the two ends of the spectrum (the really good and the really bad) were easy to deal with. But the vast majority of customers fell somewhere in between, and it required a lot of work to get them financed.

Dealership Financing
Most people wanted to finance their car by taking out a loan or leasing it. The dealership had access to wholesale lending rates, called the "buy rate," and loaned this money to the customer at a few percentage points higher, which we called the "sell rate." This was a huge source of revenue for the dealership and it was about 50 percent of the commissions I earned.

Bumping up the interest rate was easy to do because most of our customers didn't know what rate they qualified for. If I sensed that they were uninformed, I could offer them, say, two points over and they would agree to it. If a customer had good credit but didn't know it I could say, "We ran your credit report and, well, I guess you've had a few problems. But I'll do my best to help you out."

A Lucrative Sales Pitch
After the loan was arranged, I tried to sell the customer extra products and services. This was a grueling process but it was where a lot of my commissions came from. The biggest item for me to sell was the extended warranty.

Usually, I'd begin by asking, "How long do you folks plan on keeping your new car?" The answer I wanted was: "I'm going to keep it until the wheels fall off." If I heard this I could easily sell them an extended warranty. But if they said they always traded in after three years I was screwed.

I found a little detail that helped me sell extended warranties. I'd say, "Did you know that your new car has more computer chips in it than the space shuttle?" People were amazed. Then I'd continue, "It's a sophisticated piece of machinery and it's expensive to repair. A transmission problem could be $3,000 or higher."

The other way to sell the extended warranty was to say, "It's cheaper if you buy it now and you can always cancel it if you change your mind." But most people never cancel, because they simply forget about it.

Next: Part 3: Lessons From the Other Side of the Desk

Most Recommended Comments

By tel703
on 03/02/11
3:51 PM PST

As with any industry, there is good and there is bad. Ours is no different however I do believe, regardless of the type of industry, the majority of company's in business today are conscientious, straight forward and honest in their dealings with their customers. To act in any other fashion is not only wrong; it is a recipe for failure. Some of the points raised by the author of this article imply his employers were unfortunately those in the minority. Case in point: • employing convicted felons • allowing finance departments to operate with no internal profit caps • improper disclosures As for his 10 items of advice on things not to do: • #3 Don't buy the service contract - I disagree. For some customers a service contract can and often is a life saver. Factory coverage will expire based on which ever occurs first; the years or the mileage. The average customer in our market drives 18,000 to 20,000 miles per year which means their 3 year 36,000 mile factory warranty expires in two years or less. In addition, the longer term power train warranties while good are limited in coverage. • I agree customers should do their homework regarding financing however there is nothing unethical about charging a fee in the form of a rate markup for securing and processing loan arrangements for a consumer. In fact in our market, it is rare that a customer can obtain a lower rate than we are able to offer them even after a rate is marked up. And rate markups cannot be excessive as they are regulated by the individual lender. • GAP insurance is just as valuable on a retail contract as it is a lease contract based on the amount of equity going into the deal In conclusion, I agree completely with the statement, "When the F&I process is done right, and the customer is informed, it works."

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By atiaga0903
on 02/22/11
10:36 PM PST

good article. i do disagree with him saying not to buy extended warranties. a warranty is a good idea expecially if your on a budget and 5 years down the road you have a $3,000 car bill. but, as he said, do not take the first offer for the warranty. make an offer for the warranty, it shows the f&i guy that you would consider buying it but not at retail. a fixed budget at $420 a month car payment with a warranty than a invariable budget of $410 a month car payment with no warranty. : )

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By redcanyonkim
on 11/10/11
5:33 PM PST

This is the inside scoop from an auto dealer's Finance Manager on how they make profit on the deal - great to know.

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