Automotive News - September 23, 2019 - Best Practices Supplement - A6

6 | SEPTEMBER 23, 2019

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continued from Page 5

Beyond improvements to the overall sales
process, many dealers have looked increasingly to F&I to keep the bottom line strong.
Appealing new products and a menu approach to selling can help boost the average
F&I profit per vehicle.
"Dealers have shown a tremendous ability
to increase F&I per vehicle," Kerrigan says.
But, she warns, "There's only so much that can
grow."

F&I transparency

Many dealers now focus
on used vehicles, where
profit margins can be up
to three times higher
than those on new cars,
says J.D. Power's
Jonathan Banks.

Continuing to boost overall F&I profit will
depend on increasing penetration - because
despite the increase in F&I profit per vehicle,
Garroni points out that 55 percent of customers still leave the dealership without a service
contract.
Eisenfelder suggests that having a conversaand features," Banks says. "That will allow them
tion with customers who initially refuse prepaid
to optimize the inventory they carry.
maintenance contracts can improve sales of the
"That's a best practice in used cars today: No
products. "If a customer doesn't buy their premore buying inventory based on gut feeling or
what you remember selling well on the lot."
paid maintenance from the dealership, ask why,"
he says. "It will come down to value, process
and experience. And then ask, 'How can those
Consistency
be improved in order to increase penetration?' "
The other best practice Banks recommends
The first best practice in F&I is transparency,
is what he calls omnichannel consistency.
Garroni says. "Be transparent and put every"When a customer comes into your dealerthing out there on the Internet for the world to
ship, make sure you know if they've interacted
see: your inventory, interest rates, F&I prodwith you already - probably online, at your
ucts and prices," he says. "You are selling great
website or on social media or even by emailproducts; why should you be afraid of
ing or texting," he says. "It doesn't
letting the customer see that you
have to be a high-tech solution, but
make a profit?
have a process that allows you to fig"Then set a fair price for your F&I
ure out immediately what a customer
products, go through the options with
came in for and where they interactcustomers to establish value, and let
ed with your dealership."
the customer choose the products that
Then, he says: "Respect the research
work for them. The message should be:
they've already done. Don't try to give
'You make the decision; we're here to
them a vehicle price that's not consishelp you.' "
Eisenfelder: Take tent with what they've seen."
These process and structural imlong-term view
provements are most effective, experts
Maximize used-car profits
say, with an accompanying long-term approach
Besides F&I, many dealers have turned their
to sales and service - and an eye on long-term
attention to used vehicles, where profit margins
profits.
can be up to three times higher than those on
For instance, Eisenfelder says, "Dealers tend
new cars, says Jonathan Banks, vice president of
to focus on the competition to sell new cars
vehicle valuations and analytics for J.D. Power.
rather than maximizing dollars over the ownDealers can maximize their used-car profits by
ership period of each vehicle sold."
using data, Banks says.
First, dealers should analyze sales data to
understand specifically what sells in their
A better way
market - what models, packages and options
The approach to F&I, he says, is a case in
are most popular. But technology also now alpoint. Eisenfelder suggests that too many
dealership employees - in sales, F&I and serlows dealers to access VIN-level data on the
vehicles they see in trade-ins and at auctions
vice - are trying to make money off the initial
and strategically select inventory based on
F&I sale. The dealership as a whole can miss
what sells on their lots.
out on the long-term value of vehicle service
"Smart dealers will leverage the granular data
contracts and extended warranties that bring
they have available on a vehicle they're considcustomers back to the dealership for years for
ongoing service and often for their next vehiering purchasing, to help them understand their
market demand for things like content, color
cle purchase.

It's a concept known as lifetime customer
value, used by many retailers.
"Are we trying to make money off a transaction or earn money from a long-term relationship?" Eisenfelder says. "The value of a customer having a prepaid contract is tremendously more than the money made off that
one initial purchase."
Similarly, in service, the best practice - and
perhaps a more profitable one - is to approach the customer with a long-term view.
Say a customer comes in for a routine inspection, expecting to pay a flat fee, and the service
department instead finds three or four things
that need to be fixed.
Eisenfelder suggests making a menu of the
fixes, prioritizing safety issues and giving the
customer options about what needs to be fixed
now vs. what can be addressed in two or three
visits down the road. "I'm paid to hit the home
run as a sales adviser," he says, "but there may be
a better way of approaching that customer that
is more profitable in the long run.
"Our franchised dealers are great at trying to
maintain a car in mint condition. But as a vehicle ages, consumers become more price-sensitive. Maybe it's OK to simply keep a 5-yearold car in good working condition. As the vehicle ages, we need to meet the customer where
they are."
Despite the hand-wringing about margin
compression, industry leaders say the dealership business remains excellent, with robust
profits and a solid future.
"The car business is a good one, though it will
continue to be more challenging," says Justin
Harmon, dealer principal at Columbus' Bob
Caldwell Automotive. "I know some dealers
are losing money, but I also talk to dealers who
are making more money than they ever have."
Kerrigan agrees. "Fortunes are going to be
made in auto retail for the next two decades for
those who continue to innovate the business
model and reduce the expense structure."



Automotive News - September 23, 2019 - Best Practices Supplement

Table of Contents for the Digital Edition of Automotive News - September 23, 2019 - Best Practices Supplement

Automotive News - September 23, 2019 - Best Practices Supplement - Intro
Automotive News - September 23, 2019 - Best Practices Supplement - A1
Automotive News - September 23, 2019 - Best Practices Supplement - A2
Automotive News - September 23, 2019 - Best Practices Supplement - A3
Automotive News - September 23, 2019 - Best Practices Supplement - A4
Automotive News - September 23, 2019 - Best Practices Supplement - A5
Automotive News - September 23, 2019 - Best Practices Supplement - A6
Automotive News - September 23, 2019 - Best Practices Supplement - A7
Automotive News - September 23, 2019 - Best Practices Supplement - A8
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Automotive News - September 23, 2019 - Best Practices Supplement - A10
Automotive News - September 23, 2019 - Best Practices Supplement - A11
Automotive News - September 23, 2019 - Best Practices Supplement - A12
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Automotive News - September 23, 2019 - Best Practices Supplement - A14
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Automotive News - September 23, 2019 - Best Practices Supplement - A20
Automotive News - September 23, 2019 - Best Practices Supplement - A21
Automotive News - September 23, 2019 - Best Practices Supplement - A22
Automotive News - September 23, 2019 - Best Practices Supplement - A23
Automotive News - September 23, 2019 - Best Practices Supplement - A24
Automotive News - September 23, 2019 - Best Practices Supplement - A25
Automotive News - September 23, 2019 - Best Practices Supplement - A26
Automotive News - September 23, 2019 - Best Practices Supplement - A27
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Automotive News - September 23, 2019 - Best Practices Supplement - A34
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Automotive News - September 23, 2019 - Best Practices Supplement - A36
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Automotive News - September 23, 2019 - Best Practices Supplement - A38
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Automotive News - September 23, 2019 - Best Practices Supplement - A42
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