It wasn’t all that long ago that the F&I office became a dependable and consistent profit center. Product offerings became more diverse, processes became more sophisticated and targets grew higher and higher. But it is silly to think that growth in this area will continue unbridled, and we tend to think that the opportunity will not be as robust 10 years down the road as it is now. Car dealers have always been good at finding money, so once F&I profits level off what will be the next frontier for your profitability? With ever-slimming margins on vehicle gross (a clear result of increasing price transparency coupled with hyper-competition and outrageous factory incentive programs), you will need to focus on supplementing your profits somewhere!
Accessories are a clear opportunity for dealerships to improve their bottom line. The average customer spends hundreds if not thousands of dollars on accessories somewhere other than your store; why not try to get a piece of that pie? There are many reasons to buy accessories at the dealership, but the most compelling is one that dealerships rarely promote. The customer can wrap their accessories purchase into their payment, a huge advantage for the majority of customers! If nothing else, you should be offering accessories (just give them a list and let them pick) and mentioning that, should they plan on buying elsewhere, they will be laying down a lot of dough all at once.
Of course, if you are really going to attack this opportunity, it helps to have accessories displays, interactive technology, and a consistent process. And don’t let yourself be tied to the factory catalogue – you can sell car chargers, sun shades, heavy-duty floor mats, iPod cords, travel coffee mugs and anything else that customers use with their car!
Another opportunity that can help supplement all of those healthy F&I profits is already in your store. Service and Parts have long been an afterthought for dealerships, which is clear because the overwhelming majority of dealerships have far more profitable Variable Operations than Fixed Operations. If analyzed as a separate business, there would be a lot of bankrupt Service operations out there. Obviously this should not be the case… A Service department has endless opportunities to retain customers and build allegiance with every customer that walks through the door, not to mention everyone that lives or works within a reasonable distance. And you will not profit off of anyone more than a happy customer.
There are many examples of independent service centers making a very good living in your market. It’s time to recognize that they may have good business model and to figure out how you can learn from them. The lube shops of the world stay alive on air filters and wiper blades; how many do you sell in a month? The tire shops make a killing on rotations, alignments and brakes; do you focus on tires enough to capitalize on this? How much are you outsourcing? Can you really not fix windshield chips or install bed liners in house?
What about a detail shop? This is a pretty easy business to get into and there are some pretty healthy margins involved. Sure there are headaches, as with any other new venture. But you’re going to have to find somewhere else to make up the money lost on the back end. Maybe not today or tomorrow, but we are thinking the F&I money bus is wearing down and you need to be ready….