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Do Your F&I Practices Make You Vulnerable to Profit Leaks

The Merriam-Webster Dictionary defines “vulnerable” as “open to attack or damage.” Synonyms for the word include exposed and liable. All would apply if you’re not implementing best practices in F&I.


Becky Chernek is the president & CEO of Chernek Consulting

The Merriam-Webster Dictionary defines “vulnerable” as “open to attack or damage.” Synonyms for the word include exposed and liable. All would apply if you’re not implementing best practices in F&I.

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Over the past several years, the Federal Trade Commission has cracked down on deceptive practices. It started with “Operation Ruse Control” three years ago. Recently, the FTC sued Tate’s Auto Group in Arizona, accusing the company of falsifying customers’ monthly income and down payments on finance applications and contracts.

While Tate’s has vowed to fight the lawsuit, dealers have simply settled with the FTC and taken the financial hit and moved on. It’s questionable whether or not those dealers truly learned from their mistake and made the necessary changes.


Will you disclose all the terms of the sale to the customer either on the front or backend? Will your F&I manager use unethical practices to obtain lender approval such as power-booking or inflating customer income? Do you have excessive CIT issues and funding problems that cause a significant reduction in F&I profits? Are your chargebacks in line?

Some dealers intentionally push the line. Others trap themselves by not ensuring they have adequate training, hiring and compliance processes in place that reduce liability.

Best practices should include a hiring process that brings top-notch people into your dealership and the proper training to do their jobs. Establishing a strong code of ethics is another best practice to institute.


Bad hiring decisions, not properly vetting candidates or hiring the competitor’s problem wreaks havoc on a dealer process and creates a host of other problems. These individuals are notorious for pointing out all the problems and suggesting bad practices used at the previous dealership.

Not focusing on an adequate hiring process leads to a rouge F&I manager who may shotgun deals to the bank or is prone to spot deliveries hoping the customer gets bank approval only to recontract later on. As you know, recontracts diminish profits.

Or, you hire a star performer who hasn’t been properly vetted, can do no wrong, only to find out he/she will power book a deal by adding equipment to the vehicle to increase its value. They inflate the customer’s income or overstate employment status.


Start with credit reviews that validate information to ensure the customer can budget for the vehicle prior to submitting the deal to a lender. This alone will reduce careless errors and the likelihood the lender will “stip” the deal, or interviews the customer, which often leads to reduced profits.

Menu selling, whether it’s a paper or digital menu, is one of the best practices that can help to increase profits while reducing liability. If presented properly, the customer understands all of the products offered and the terms of the sale. The process is upfront and transparent.


Many dealers have switched from the paper menu to a digital menu to give customers the feeling of being in control of the buying process; it’s faster and interactive.

Assuring best practices are in place takes training and lots of it. If a dealer is switching to digital menus by simply putting an iPad in the F&I person’s hands and saying, “Have at it,” it won’t generate more profits. Instead, it may open you up to other problems and reduced profits.

Poorly trained F&I managers can still tinker with the digital menu and put the dealer at risk. Final disclosures are supposed to be easier with the digital menu. But if the F&I manager hasn’t been trained properly, the disclosures may get missed or not used at all.


Some are utilizing a paper menu but then become complacent, lowering performance. Be careful and refresh the menu often. Get the clutter off the menu. Use color ink. Endless products or products that are no longer offered need to be taken off the menu. Your menu — digital or paper — is your real estate; use it wisely.

To ensure you aren’t vulnerable to bad practices, dealers should consider a carefully crafted hiring and training practice. Hire to train and retain based on an established set of expectations.

A big part of the hiring process is creating a welcoming culture that encourages ethical behavior and a consistent roadmap that assures success. Failing to institute best practices or flying by the seat of your pants opens you to risk and profit leaks.


Let’s face it, no one likes having an angry customer or attorney knocking at their door. Build a culture that rewards for good behavior. 

Click here to view more solutions from Rebecca Chernek and Chernek Consulting, LLC. Becky Chernek

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