Close relationship with finance and insurance department pays off across the car dealership

John Barr, left, is general manager of Findlay Toyota, where shared commissions result in increased volume and more chances to sell F&I products. Desk Manager Greg Hadges is at right.

If dealers want the service department to support finance and insurance efforts, they should treat service advisers as partners to both the F&I and sales teams. Otherwise, each of the departments likely will be on guard, worried that others’ success will negatively impact them.

“In our store, we make a strong attempt to make sure that doesn’t happen,” said John Barr, general manager of Findlay Toyota in Henderson, Nev.

The key for Findlay Toyota is to protect money on the pack — or the portion of the profit on the sale that the dealership allocates to itself before setting a salesperson’s commission. Say there’s a $2,000 profit on a vehicle. After a $500 pack, the salesperson will be paid $1,500 in commission, and at Findlay Toyota, that commission is funneled to sales and service.

That incentive motivates salespeople to work harder, resulting in increased volume for both sales and service. As a result, the opportunities to sell service contracts and other F&I products also grows.

Standardize the pack

Knowledge of the specific wants of his customers helps Barr standardize the pack on new cars so that extra sales commission is almost a given. One example on new cars is tint, a must for car buyers driving in the unforgiving Nevada sun. The cost of the tint is $120, but the dealership sells it to customers for $450. The dealership funnels the $330 profit into the sales commission.

The pack in service is similar. Every used car includes a $1,350 pack for reconditioning. Some cars need more work, but many need much less. That extra profit is used to pay commission to service.

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“In many car stores, sales and service don’t communicate. The used-car manager or new-car manager fights hard against any little expenses in their departments,” he said. “In our store, sales doesn’t have to create as much profit to earn incentives because the dollars are protected.”

Although F&I managers don’t get paid on the front end of those deals, the higher volume throughout sales and service boosts their sales. Findlay Toyota retailed more Toyota Auto Care — an F&I product sold by the service department — than any other dealership in its region, said Barr.

“That high volume is one of the best indications of how F&I benefits from higher front-end incentives,” he said.

“The key is to customize pay plans so everyone makes a fair living and no one feels overlooked.”

F&I and service are natural partners in boosting each other’s bottom lines, said Erik Radle, CEO of Miller Ad Agency, in Dallas, which helps dealerships develop marketing and advertising plans.

“The relationship between service and F&I should be dramatically more symbiotic than that between sales and F&I,” he said. “F&I and service aren’t trying to occupy the same space.”

$25 bonus

One of Radle’s Toyota dealership clients leads its market in service retention, driven by the close relationship between F&I and service.

The dealership is approaching an 84 percent service retention rate. The F&I managers offer a complimentary lifetime powertrain warranty to all new-vehicle buyers.

Customers also get their $100 deductible waived if they service the vehicle at the dealership.

Stephanie Cooper, a finance manager for Timbrook Automotive, a dealership group with locations in Cumberland, Md., and Keyser, W. Va., proves F&I can take steps to forge that bond without a dealershipwide initiative.

Service advisers at Timbrook’s stores receive a $25 bonus, the same paid to sales, for each customer they refer to F&I who purchases a service contract.

“When people come in for service because they’re having an issue that requires them to pay, our service advisers will tell them that the charge could have been avoided if they had a warranty,” said Cooper. “That works very well. We sell warranties to a lot of customers that didn’t originally come through my office.”

Service advisers also keep a watch on vehicle mileage and alert customers as factory warranties near expiration.

About 30 percent of referrals purchase a service contract. Customers respond well to a 0 percent finance program that requires no credit check and to discounts Cooper offers on service completed before the latest warranty purchase.

When customers don’t purchase service contracts, F&I refers them to sales.

More than 10 percent of those customers ultimately buy a car at the dealership, Cooper said.

“Service can be your best friend or your worst enemy,” said Cooper. “Working together helps everyone, and it also keeps customer satisfaction survey rates high.”

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