What about the Guy in the Middle? - AutoSuccessOnline
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F & I Solutions

What about the Guy in the Middle?

A philosophical disconnect with what constitutes fair play typically occurs with the entities furthest from the transaction.

Shannon Robertson is the executive director fo AFIP

It couldn’t have happened at a worse time. Now, 14 months into a devastating pandemic, just as vehicle sales are on the rebound, a change in administrations brings potentially unprecedented regulatory scrutiny of the F&I process. Dropping out of college your junior year to sell cars is starting to look like a bad idea, especially now that you’re working “in the box.” Your daily activities will soon be at the epicenter of the government’s inquiries.

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The really scary part? The legislators and regulators not only don’t understand what we do — they share a gross misperception of our activities, as evidenced by publicized statements that give dealers a bad rap. 

Before we get too wrapped up in doomsday scenarios, let’s step back and look at the situation from a different perspective. Instead of viewing it from the dealer’s or regulator’s point of view, what does it look like to the individual in the middle of the transaction — the customer?  

The customer is the hinge on which the standard for a fair deal rests. The regulator wants to ensure that transactions are completed in accordance with consumer protection laws. The dealer, as the seller, wants to maximize profit from the sale while still being compliant. The test for the customer is whether the product or service performs — or has the potential to perform — at a level on par with its price. 


A philosophical disconnect with what constitutes fair play typically occurs with the entities furthest from the transaction. For the most part, legislators’ and regulators’ perspectives of vehicle sales, financing and the sale of owner protection products are skewed by regular exposure to the most damning worst-case scenarios. After all, how often does a customer who had a $7,500 engine replaced at 45,000 miles after paying a $250 deductible on a vehicle service contract (VSC) share his positive experience in letters to his congressmen?

Franchised dealers, on the other hand, face a gauntlet of challenges to remain solvent in a hyper-competitive environment marked by the rising costs of doing business and thinning profit margins. Dealers set the trend in this dynamic marketplace in their selection of voluntary protection products (VPPs), as well as in determining vehicle finance profit thresholds, VPP pricing and which marketing techniques and menu tools to use. Of course, VPP providers do their part by continuing to develop new product options for dealers.


Which brings us back to the guy in the middle — the customer. The first fair deal test must be administered by the dealer. Does each product or service offered have the potential — within a normal set of circumstances — to yield a significant benefit to the customer at its current price? In truth, does it have the potential to yield a benefit to the customer at any price? 

For each VPP, ask your product or service providers whether credible, real-world actuarial data exists that would justify the product being offered in the first place. If so, does it support the retail price? If the answer is yes, get a copy of the data and have it reviewed by a qualified source. Logic dictates that selling consumers products whose benefits cannot be verified won’t pass a regulator’s review.


Granted, some VPPs will have to go. Some of the more peripheral products might be grouped and sold as a package — others with a lower markup. The time to make these changes is now, when decisions are left entirely to the dealer principal — not the investigating regulator.  

The bottom line? If your VPP offerings are selected and priced such that the customer — the guy in the middle — has been treated fairly, you’ll meet the oversight standards of investigating regulators. Your customers — and your industry — will thank you for it.

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