Some Things Never Change
In my 5+ decades in this business, some topics keep coming up over and over.
Recently there have been suggestions at conferences, dealer meetings and Twenty Group meetings, that the industry consider combining Special Finance and F& I. In addition, I have heard suggestions that we eliminate F&I and give that function back to the sales force.
The Auto industry has tried hybrids before. And not the kind of hybrids we are seeing today. Think about the El Camino and the Ranchero. There is a reason these vehicles are relegated to the museums and car shows. They really weren’t very good at anything. They were a two passenger vehicle so they didn’t make a good passenger vehicle and they had a limited payload. They made a poor truck.
In 2003, the topic came up and I wrote an article and I stand by my words today.
Here is what I wrote back then:
Combine F& I and Special Finance? How Many Ways Can I Say No?
On several occasions lately, I have heard suggestions that dealerships combine the offices of Special Finance and F&I into one person. One dealer had the audacity to tell me that his F&I Manager could handle Special Finance in his spare time. And even more recently, I was asked the question specifically: “Can one person do F&I and Special Finance?” Unless your dealership delivers less than 50 new and used vehicles a month the answer is clear ; No, no, no!
While I can imagine that there may be some advantages to the dealer in payroll and physical costs; however, the actual costs in lost productivity and profitability would far outweigh any savings to be had.
There are hardly any other subjects that you could raise that would elicit such a quick and unconditional answer from yours truly. And given the enormity of the question, it begs more than just a perfunctory answer. But before we begin with the answer, lets redefine and clarify the question. Should one person be responsible for the tasks of F&I and Special Finance? Keep in mind that I am not talking about having these two divisions under one management group. Nor am I talking about having the staff of these two profit centers cross-trained to the extent that they can fill-in in the case of an occasional absence. I am also not talking about the principal players in F&I and Special Finance working together and collaborating to maximize profitability on any given deal. As a matter of fact, I think it a great idea for F& I and Special Finance to compare notes on any prospect that doesn’t qualify for top-tier financing. The question that was posed to me was “Should the F& I Manager and the Special Finance Manager be the same person?”
Okay, now I suppose you want an explanation of my unconditional and, to some, irrational outburst. I anticipated that and am ready. First and foremost, these two jobs are totally different. I mean totally, completely and cast-in-concrete different. Would you put a brake technician in the paint shop? Not hardly! Your standard F&I Manager makes his/her living and contribution to dealership profitability by up selling the prospect on additional, or backend, products. You know the menu, Croak & Choke, Rust & Dust, etc. Now please understand that I am not making light of the importance of the F& I position. On the contrary, I am a firm supporter of that science, but it is it’s own arena. The credit approval, or Finance, part of the job is perfunctory in today’s market.
In Special Finance the Credit Approval is the job! Granted, a credit approval does not guarantee the delivery of a profitable deal. Still, an approval in hand makes the rest of the job a whole lot less stressful. Kind of like the old parable that says that:
“Money isn’t everything, but it sure makes everything else more tolerable!”
An F& I Manager deals in real time. When he/she arrives on the scene, whether in the showroom or his/her office, the deal is done. The job is to make the deal more profitable than it was when it landed on the F& I desk. The approval is a given and a non-factor! Whether the F&I Department is successful or not, that vehicle is going on down the road. He/she is actually standing in the way of a successful delivery. Can you imagine the new combination F&I/Special Finance Manager who, in the middle of putting together the paperwork and stipps to structure a Special Finance deals, gets interrupted at least twice by salespeople waiting to T.O. a new or used car buyer. You talk about stress!! Stress on the part of both the Sales staff and the Finance staff.
For the Special Finance Manager, the approval is the deal. Without an approval, you have nothing except perhaps another prospect for your thirty-day file. The concentration, the real job, is putting together an application package that a lender will accept. A Special Finance Manager needs to know and understand the lenders and their programs. No amount of software is going to have the experience and intuition necessary to ferret out those little tidbits of information that can make or break a deal. Special Finance is about CREDIT! One deal at a time; one prospect at a time; one individual at a time credit.
Can one person go from up selling Fabric Protection and CLAH to a 60 years old LeSabre buyer one minute to dealing with a 34 year old with multiple repos the next? Not likely! And certainly not if he/she is going to mine 100% of the profitability from both deals.
There is no common thread running through these two jobs except perhaps the word “finance” in both titles. There are different skills necessary. The two areas deal with different clientele in most cases. The ratio of homeruns to at-bats is vastly different. It takes a different mindset to be successful at each of these important positions.
Having said all that; let me reiterate on something that I said earlier! These two profit centers should report to the same management. The Special Finance Manager should be involved in every deal that doesn’t get a top-tier approval. Why? Because some of the Special Finance Lender programs will be a better deal for that lower tiered customer. And now listen to this very carefully: those same SF programs will be much more profitable for the dealership. Sure you may have to work out a type of hybrid pay program for this type of deal, but it will be well worth the effort. And while they are cooperating, the two departments may actually gain some understanding of what each other are up against on a daily basis.
Should they cooperate and collaborate on deals? Of course! Should they be the same person? Absolutely not! Not now; not ever!
You didn’t ask, but somebody did and that was my answer. Now all you F&I Managers who think that Special Finance is a walk in the park and all you Special Finance Managers who think that anybody can do F&I, can read this and go in the back room, sulk and bad-mouth me. But whatever you do, please keep these areas separate and continue to contribute the very large amounts of profit that you send to your dealerships bottom line individually.
Just my two cents worth.
About the author
Dick Hassberger, of Lake Orion, Michigan is a veteran of over 50 years in the Automotive Financing and Leasing industry, starting his career with the former Wayne Oakland Bank in September 1960. Dick is National Sales Director for VOISYS. He has held executive positions with Major Banks, Lending Institutions and Leasing companies and has accumulated a vast store of knowledge in the automotive financing industry, which he regularly shares with his client dealerships as well as readers of this blog. Dick was a regular author for World of Special Finance Magazine.