The F&I office is the lifeblood of the dealership. With the race to the bottom on price, dealers need to make up the profit on the back end. The pressure is on and the dealer expects a minimum PVR of 1500. F&I managers must bring their A game.
- They must be well trained and coached.
- They must know their lending institutions in and out.
- They must work on building relationships with clients and their staff.
- They must be ready to continuously evolve.
Everything is based around the VSC. It is the engine that pulls the train. How can we sell more service contracts and make more money, while increasing the customers buying experience? EVERYONE is searching for that answer and very few have found it. Good news, I am going to share a little of my secret sauce with you.
We MUST change the conversation and STOP using repair scare. For decades F&I managers have been using repair scare and payment manipulation to sell service contracts. We have been armed with several closing techniques to sell a payment buyer. We have focused so much on the payment buyer and not on the value buyer. Does the person who pays cash for a car have different needs than the customer financing?
Almost ALL customers are looking for a few things when they purchase a new vehicle. They want the greatest use and enjoyment, the least amount of aggravation with the lowest total cost. The service contract guarantees they will never pay for a repair or worry about having a car to drive. So why do customers decline the service contract about 50 percent of the time. I will tell you why, you didn’t change the conversation. You used old school tactics that were taught in the 80’s and 90’s. We must change the conversation. We must change it to a conversation of exit strategy. The reason I believe in the service contract and I truly believe that EVERYONE should have on is it gives us a defined exit strategy.
Customers get caught up in wanting the lowest rate, lowest payment, wanting more for their trade and they totally lose sight of what I call the exit strategy. By investing in the service contract, you have the option to keep the car longer, resulting in paying less depreciation, interest and sales tax. The service contract allows you to negotiate differently when you trade your vehicle in or sell it out right. It allows you to ask for more money and the customer has an option to cancel the policy and receive a pro-rated refund. The service contract protects the customer against a problematic car. Have you ever met that customer that says he/she will just trade the car in early if it is problematic? That is a costly mistake resulting in the customer being exposed to depreciation, interest and sales tax prematurely. The service contract is the only thing to really combat that. Having the service contract is the smartest decision one can make when purchasing a vehicle.
On paper we charge a premium for the service contract, it costs nothing and, in some cases, makes you money. With the long term polices available it makes zero sense to not purchase one. It allows the customer massive piece of mind and the opportunity to keep the vehicle longer. By doing that they save from depreciation and sales tax. When they decide to trade they can ask for more money because they have a VSC. Let’s shift our focus from repair scare over to exit strategy and watch the increase in pen and gross. Let’s change the conversation and enhance the buying experience for the customer.