Car Buying Articles

Confessions of an Auto Finance Manager

A Former F&I Guy Explains How He Did


Part 4: New Job, Same Issues for Shoppers

Ordering From the Menu
After a while, I heard about an opening at a larger dealership across town. I landed a job there and hit the F&I jackpot. At my new dealership, I used a new sales technique called "menu selling," which revolutionized the process. I grouped all the products I sold into packages and gave them fancy names like the Platinum, Gold or Bronze package. I would pitch it by saying, "I understand your salesman quoted you a payment of $400 a month. But, let me take five minutes to go through a few options, and you can choose which one works best for you."

Then I'd say, "The first option is the Platinum plan, a five-year loan at 8 percent, which has a seven-year/70,000-mile extended warranty. It includes life and disability insurance and also offers paint protection and undercoating. That only raises your payment to $480 a month." Then I'd describe the Gold package with a payment of $440, and the Bronze at $420.

Here's the funny thing: Half of the customers would pick one of the plans without asking any further questions. That means I just sold three things with a five-minute spiel, whereas previously it took half an hour and I wound up sounding like a broken record. The power of menu selling is you are focusing people on which of three things they want and they don't realize they don't have to choose any of them.

Wrong Price Point
After a few years of closing deals in the finance and insurance office, I began to realize that 90 percent of my customers made the same mistake when buying a new car: They didn't know the price they should be paying for the car itself.

As the Internet has come of age, there are all kinds of ways to research price, including TMV and Edmunds Forums, where buyers share pricing information. If buyers know the invoice price of the car, as well as any incentives available at the time and allow the dealer a profit above that, they can estimate what they should pay.

Packing Payments
Another big mistake I saw customers make was agreeing to be a "monthly payment buyer." The majority of car buyers are going to finance the car instead of paying cash, and they want a payment that will fit in their budget. The salesman knows this and works with the sales manager and F&I guy to leverage their power against the customer.

Let's say the customer has asked for a $400 a month payment. The salesman will ask, "Up to?" and the customer often says, "Well, maybe $450." The salesman takes this information to the F&I guy and the sales manager.

Assuming the customer has good credit, the sales manager will say, "OK, tell Mr. Customer that $500 will make a deal." If the customer agrees to this higher price, the salesman turns this information over to me in F&I. I knew all I needed to do was find products and services to fill up that extra $100. I just needed to justify the extra expense by selling them an extended warranty, inflating the interest rate or juggling the numbers to add up to the total payment. That's "payment packing."

The Most Dreaded Phone Call
I don't want to imply that things always went smoothly in the F&I room or that the customers were easy to deal with. There was one type of scenario I always dreaded because it led to some horrible situations.

As I mentioned earlier, we had some customers whose credit was weak but who might still qualify for financing. However, it could easily take a few days to shop all the banks and get a solid answer. We didn't want to let customers get away, so we made a "spot delivery" and let them drive off in the car while we continued shopping for a loan. But if we were unsuccessful, things got sticky.

We had to call the customer and tell him to bring the car back to us. If he protested, we reminded him that he had signed a form for "acknowledgment of conditional delivery." This was a document we always had customers sign that said if we couldn't get the car financed at the terms we agreed on, then they would bring the car back. The customers usually said, "Sure, sure, whatever" and signed it, but later they seemed to forget about this form.

The most dreaded phone call in my business was when you had to call the customer and tell him to bring the car back. Customers often became really emotional when they had to return cars. They had already shown the car to their friends and family and had developed an attachment to it. Now the dealership was taking it away from them.

Parting Advice
After about six years, I became restless and decided to go into another line of work. Looking back, I feel funny about all the mistakes I saw my customers make: mistakes that stretched their household budgets thin and put stress on their lives and relationships. While it struck me that the F&I office is a necessary part of dealerships, it's up to car buyers to educate themselves about how to safely navigate the tricks and sales pitches they might encounter.

I can't change the car business and I know that the F&I room will be a part of the process for a long time. But I do hope that my story has better prepared you for your next car buying experience.

Here's one piece of advice that will head off all other problems. While being educated on the process is important, it's also essential that you pick your dealership and salesperson carefully, and pay close attention as your F&I officer presents your contracts. There are good people in the car industry. Find them and give them your business.

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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