There’s a saying in the auto sales industry that goes a little something like this:
“Every good F&I manager works a pay plan.”
Okay, maybe it’s not quite as catchy a saying as “the early bird gets the worm,” but you get the point. The special emphasis here, however, is on the word works.
All too frequently, F&I managers pick and choose the products they sell to buyers based on what will secure them the largest commission. Usually, whatever doesn’t, gets kicked to the curb. You can’t blame them; everybody has bills to pay and mouths to feed at home. The result is that more often than not, ancillary sales – like those found in gap insurance, paint and fabric protection, key replacement, or dent and ding fixes – are either glossed over or not even presented to customers because of their lack of value when it comes right down to an F&I manager’s earnings.
This kind of practice is unknowingly encouraged when poorly crafted pay plans are put into place – plans that only concentrate on specific areas of sales results, perhaps like finance reserve and service contract penetration. Even worse, some pay plans compensate the F&I manager with a percentage of the total department gross. This leaves virtually no incentive to sell buyers on ancillary products.
As a dealer, it pays to take a hard look at your month-end numbers. When you directly focus on average per-vehicle performance, you may begin to notice a trend indicating most of your dealership’s income is derived from reserve and service contracts. But what if you could tap into the additional revenue derived from the ancillary products there weren’t sold?
Simply because your dealership’s per-vehicle performance is over the benchmark of $1000, doesn’t mean that opportunities weren’t missed. This is an all too commonplace oversight that dealers frequently make, and it’s one that could end up costing you dearly in the long run. Capturing reserve and contract sales is no doubt vital. But losing sight of the opportunities inherent in ancillary product sales could be killing future business opportunities.
Is it possible to determine if your F&I managers are even attempting to sell buyers on ancillary product? You bet it is. It’s as simple as this: If you’re utilizing menu presentation, but ancillary sales aren’t being made, this could be seen as a clear indication that your F&I manager isn’t using it properly. What’s more than likely is that they’re using the menu as a declination tool instead of the way it was intended to be used: for product presentation. If a product is on a menu but it isn’t selling, it’s either because F&I is not presenting it or the product has no value.
So what’s the solution?
If you’re looking for someone to tell you what type of pay plan to institute in your dealership to ensure optimum ancillary sales, you’re not going to find it here. This is something that has to be determined individually, by closely examining the results obtained in the menu program you currently have in place. Doing this will point you in the right direction and will inform what changes you implement in your pay plans.
Put simply, the idea behind menu selling is to present 100% of the products available 100% of the time. When that is not done – and when F&I managers pick and choose products they sell to buyers based on maximum reward – you’ve got yourself a problem.
Ultimately, the most effective pay plans are those that compensate F&I managers on the sales of all products offered, not just reserve. An ideal balance to ensure the following of best practices among those in your F&I department is to institute a pay plan that compensates the F&I manager based on 40% of reserve and 60% on ancillary products sales.
Some dealers like to employ a grid pay plan, which takes into account the per-vehicle retail PVR and the total of products sold per delivery units contracted, and increases the total percentage of payout based on the higher of the two factors. Payout can then be based on department totals or per F&I manager. It’s also prudent to examine the relationships your F&I managers have with outside vendors. Some vendors will spiff the F&I manager for specific products sold which can also undermine your overall success with menu selling.
At the end of the day, everyone understands that incentivizing your F&I staff is critical to achieving objectives. But if doing so in a lopsided manner undermines the big picture, you’re in need of serious attention.
"Nothing ever comes to one, that is worth having, except as a result of hard work."
Booker T. Washington