The No. 1 Reason Why Dealerships Fail to Maximize F&I Profits - AutoSuccessOnline

The No. 1 Reason Why Dealerships Fail to Maximize F&I Profits

After spending an hour negotiating with your sales staff and 45 minutes getting their trade-in valued, it’s no wonder buyers are tired and defensive. But, what’s next?

A whopping 99.6 percent of consumers are dissatisfied with the current car-buying process. It’s long, complex and painstaking, and they often fear dealerships are taking advantage of them. Plus, there’s a lot of waiting involved — today’s consumers hate waiting. We live in a world where instant gratification is the norm, where consumers can buy a product online and have it delivered in less than an hour. And yet, the average buyer spends more than three hours at the dealership purchasing a car.

After spending an hour negotiating with your sales staff and 45 minutes getting their trade-in valued, it’s no wonder buyers are tired and defensive. But, what’s next? The dreaded F&I process. Another hour as your F&I staff diligently describes all the available upgrades and service packages that may — or may not — interest the buyer. Throughout the entire process, the buyer may at times feel pressured, frustrated or confused.

Why Dealerships Fail During the F&I Process

It is during the F&I process that many dealerships fail to put the buyer at ease and create a trusted environment. This lack of trust is the No. 1 reason dealers aren’t maximizing F&I profit. Buyers want a stress-free, non-judgmental atmosphere to review the options at their own pace. But most F&I processes are far from this ideal. A car buyer in the U.K. described the process this way:

“They tried to sell me so many other financial products — I’m an accountant, but even I got confused. I would have felt better sitting at home and reading all the details because it was a lot to take in.”

When buyers feel confused, pressured or defensive, they are less likely to purchase F&I upgrades. They are more likely to add F&I upgrades if they are able to review the options at their own pace in a comfortable environment.

Even if your F&I manager does an incredible job explaining GAP insurance, the customer is still fearful that they are being taken advantage of, despite the fact that it all seems to make sense; in other words, customers are not likely to buy, simply because of lack of trust. This is why studies show a customer who is exposed to F&I products before entering the F&I office is more likely to purchase F&I product.

Customers want to feel like they’re in control of the buying process. They want the entire process to be faster, but they also want time to ask questions and don’t want to feel rushed. At first, this may seem contradictory. How can you make the process at the dealership faster while simultaneously giving buyers more time to review F&I options and paperwork?

How Your Dealership Can Build Trust and Maximize F&I Profit

Luckily, there’s an easy answer to this question. It comes from outside the automotive industry. In real estate, companies are making it possible to complete more of the home-buying process online. This satisfies customers’ desire for an easier, more streamlined process. From applying for a mortgage, to reviewing and signing documents online, customers can now complete much of the home-buying process online.

Dealerships can learn from this example by offering online checkout. Customers already spend hours researching vehicles online. Online checkout allows buyers to walk through the buying process online, including choosing accessories, estimating their trade-in value and reviewing F&I upgrades. All this is done in the comfort of their own home, at their own pace.

In this comfortable, pressure-free environment, buyers feel more in control of the process, making them more likely to add F&I upgrades than they would otherwise decline at the dealership. In fact, many dealerships find that online orders earn $500 to $700 more F&I profit per vehicle, compared to their previous averages. A large reason for this is the customers’ ability to reference third parties online that help them understand whether GAP Insurance, extended service contracts, or prepaid maintenance make sense for their purchase. These third-party resources may be giving the same exact explanations your F&I team will give, but it is delivered without pressure and will be viewed as more trustworthy from the customer perspective.

Online checkout saves hours at the dealership, for buyers and staff, alike. CRM and financing software is pre-filled, reducing time spent on data entry. Dealerships can run credit checks ahead of time. They can also see if the buyer may have missed an upgrade that may be relevant to them and recommend additional upgrades when the customer picks up their car.

Customer satisfaction is at its highest within the first 90 minutes at the dealership. With online checkout, buyers are able pick up their car in less than 90 minutes, when satisfaction is the highest, making them more likely to become loyal customers and to refer others. So, it makes sense that dealers are reporting that they achieve higher CSI when the customer utilizes online checkout.

The Bottom Line

Maximize F&I profits by offering online checkout and letting buyers upsell themselves. Deliver a streamlined, modern car-buying experience, increasing customer satisfaction and loyalty. All in all, online checkout is better for the bottom line.

You May Also Like

On-Demand: The New Speed of Auto Retail

Dealership inventories may be down, but smart fleet planning can ensure customers are getting the right combination of selection and utility. Rentals delivered by dealerships can give people a more economical way to get to work, to haul materials for those DIY projects or to just enjoy a new driving experience.

By Matt Carpenter, CEO, Dealerware

There are more franchise dealerships in the U.S. than Starbucks or McDonald’s locations. About two-thirds of America’s drivers live within 10 miles of their preferred dealership. Franchise dealerships have put America on wheels and kept America on wheels for over a century.

Why Your Next New Sale Could Come from the Service Garage

Gain a competitive edge by leveraging the data and resources of the service lane.

Unlock New Customers Using Cloud-Based Digitized Auto Lending

Today’s consumers don’t necessarily compare different lenders or dealers anymore; they compare experiences.

Retain Staff with Career Development Training

If you are serious about recruiting top talent and improving employee retention, create a career development program.

Does Embedded Auto Insurance Impact Customer Spend at the Dealership?

Insurance marketplaces incorporated within the car-buying experience present buyers with competitive pricing.

Other Posts

How Call Management Can Alleviate the Labor Shortage

When dealerships are understaffed, efforts must go toward prioritizing the customer experience. Call management is critical to this strategy, so knowing what to track allows for quick fixes and a better customer experience.

An Unlimited Source for Pre-Owned Inventory: The Service Drive

Why are used vehicles in higher demand than other pre-owned vehicles in the market?

An Unlimited Source for Pre-Owned Inventory: The Service Drive
Don’t Let Stubborn Economic Beliefs Drive Your Advertising Strategy This Time

The advertising industry is smarter and more competitive these days. Dealers need a trusted advisor to navigate and succeed in this complex environment.

The Benefits of Google’s GA4 Update

Learn about what’s changing with Google’s incoming GA4 update, and also about the benefits that the update provides for dealerships.

google analytics