The stagnation in new vehicle sales combined with rising interest rates is squeezing many auto dealers at the margins, leaving them to look for other ways to boost profitability. One of the ways dealers are hoping to shore up profits is in the service side of their business. Another is in offerings of auto ancillary components like finance and insurance (F&I) products to build a more sustainable path to profitability. Many of these services are appealing to customers — protection against price inflations and a one-time investment towards service and maintenance are two noteworthy services – so it’s in dealers’ best interest to expand them.
A new research report by Frost & Sullivan has found that by 2025, finance and insurance products will account for about 35 percent of gross dealership profit. The report also noted that for dealers to fully take advantage of F&I products, the sale of such products needs to begin earlier in the buying process.
“In traditional auto retailing, F&I products are introduced in the final stages of the purchase cycle resulting in pressurizing the customer to make a buying decision,” wrote the report’s authors. “The dealer-centric approach does not address the actual needs of customers. Consumers are demanding a hassle-free online purchase experience similar to non-automotive sectors. To remain relevant, it is imperative that OEMs and dealership develop a consumer lifecycle engagement plan and adopt an omnichannel, customer-centric sales strategy.”
The “customer centric” part means that today’s F&I manager must be savvy and willing to help customers, not just sell to customers and rack up a commission. This requires the F&I manager to build a new approach and work with customers from the very earliest moments of contact to determine their needs and wants. It should never be about “outsmarting” customers to get them to buy products and services out of confusion, mental exhaustion or a “resigned to our fate” attitude.
By eliminating pressure and unnecessary sales pitches, F&I managers can build new relationships by becoming customer advocates through what can be an aggravatingly complex procedure. With these new relationships expected to bring in more than one-third of dealership profits in the next few years, it’s a step that no one can afford to skip.