Go Back   DealershipForum.com > Dealer Talk > Automotive Discussions

Notices

Automotive Discussions Car People talking about the Car Business – This is the place where it happens

Reply
 
Thread Tools Display Modes
Old 02-24-2008, 09:24 AM   #1
Bubba Louie
New Member
 
Join Date: Feb 2008
Posts: 8
Default Is F&I Professionalism Dying?

As a Finance Director of a large corporate, domestic line store, it seems that the direction in the industry currently is moving away from professionalism "in the box". I am amazed that recently the trend has become to having sales managers uploading deals to banks, attempting to dictate back end profits as well as the front end, and generally convoluting the entire process. It seems to me that we should maintain strict separation of these areas for all of the obvious reasons. Payment packing comes to mind as well as wire fraud, etc. Is the almighty $$$'s causing many in the industry to lose sight of right & wrong? In my humble opinion this direction I am seeing in our area is some serious litigation waiting to happen. F&I in this market for the most part has become a second tier position. The current mentality seems to be that any closer can do it. Just put a monkey in the box, show them how to do the paperwork, and turn them loose! Easy Deal! The Director is just a glorified producer that has more experience and handles all of the heat from the producers, while taking turns as well and getting all of the problem deals bought. I would like to know if this attitude and direction is happening everywhere in the industry, or is it localized for our little area?
Bubba Louie is offline   Reply With Quote
Old 02-24-2008, 12:09 PM   #2
XDCX
Administrator
 
Join Date: Nov 2007
Posts: 14,861
Default

Bubba Louie - Great post and welcome to the Forum.

I agree with your assessment of the current trends with F&I Professionalism - in fact, I think that it's happening throughout the dealership.

I tend to follow the stocks of some of the publicly held Dealer Groups and they all report that gross margins on new and used cars continue to decline. In an effort to address this decline, dealership payroll becomes an issue and the F&I Department is often a target.

The Lithia Group had a conference call last week where they told the analysts that they eventually intend to eliminate the Used Car Manager position at all of their dealerships and replace the manager with an associate that earns 50% less. Their goal is to have 100% of the trade assessments performed by a centralized "car center" that will manage the group's used car inventory.

In fact, I think that Lithia has eliminated the Finance Manager position in their new L2 Used Car Super Stores in an effort to address "delivery cost." (I'm not 100% sure that L2 runs without a Finance Manager - hopefully SHACOS can provide clarification.)

Thanks again for your post - hopefully some other members can provide some insight on what's happening in their markets.
XDCX is offline   Reply With Quote
Old 02-24-2008, 12:43 PM   #3
Bubba Louie
New Member
 
Join Date: Feb 2008
Posts: 8
Default

Sadly, I would tend to agree with what we are seeing. The truth of the matter is that F&I in '07 produced 47% of dealership profits and the corporations are working toward reducing the payroll % for the department to make more money. Next step, someone in India doing your e-contracting with customers for $2.50/day by video phone....just drop your customers off and it's done. Oh crap, I just gave some of these bean counters an idea!!!
Bubba Louie is offline   Reply With Quote
Old 02-24-2008, 07:39 PM   #4
SHACOS
Super Moderator
 
Join Date: Jan 2008
Posts: 838
Default

I agree with you Bubba. See Lithia's L2 model of finance and you'll see what I think the future of Finance is for large publicly owned auto dealers. L2 is centralizing all finance operations in Medford. Sales people are responsible for upsells on products.
SHACOS is offline   Reply With Quote
Old 02-25-2008, 07:54 AM   #5
XDCX
Administrator
 
Join Date: Nov 2007
Posts: 14,861
Default

Quote:
Originally Posted by Bubba Louie View Post
Sadly, I would tend to agree with what we are seeing. The truth of the matter is that F&I in '07 produced 47% of dealership profits and the corporations are working toward reducing the payroll % for the department to make more money. Next step, someone in India doing your e-contracting with customers for $2.50/day by video phone....just drop your customers off and it's done. Oh crap, I just gave some of these bean counters an idea!!!
Hey, don't be giving those bean counters any more ideas...

It will be interesting to see what the future holds. We already know that the dealer count will drop significantly in the next few years - the question that remains is what will happen within each dealership?

Quote:
Originally Posted by SHACOS View Post
I agree with you Bubba. See Lithia's L2 model of finance and you'll see what I think the future of Finance is for large publicly owned auto dealers. L2 is centralizing all finance operations in Medford. Sales people are responsible for upsells on products.
SHACOS - you're the best - thanks for the input.

Lithia really seems to be sold on the centralized management concept. To the extent that L2 seems to be the "incubator" for new ideas, it appears that there are a number of changes ahead for the L1 Lithia branded dealerships.
XDCX is offline   Reply With Quote
Old 02-25-2008, 12:16 PM   #6
shutter
New Member
 
Join Date: Feb 2008
Posts: 1
Default

As a whole..Lithia is / has moved all of their ordering (new vehicles) to 1 centralized location along with used vehicle appraisals to Medford. With their new "Assured" pricing on ALL New & Used Vehicles, I feel that it will only be a short time before all Lithia Stores are moved to the "L2" way of selling cars. This includes New Car Franchises!! All U/C and N/C Manager positions are being or have been eliminated. My strong feeling is that it will only be a short time until the F&I Managers are gone It's SAD to see that the personalization of the car purchase (my opinion) is going away!!
shutter is offline   Reply With Quote
Old 02-25-2008, 01:02 PM   #7
XDCX
Administrator
 
Join Date: Nov 2007
Posts: 14,861
Default

Quote:
Originally Posted by shutter View Post
As a whole..Lithia is / has moved all of their ordering (new vehicles) to 1 centralized location along with used vehicle appraisals to Medford. With their new "Assured" pricing on ALL New & Used Vehicles, I feel that it will only be a short time before all Lithia Stores are moved to the "L2" way of selling cars. This includes New Car Franchises!! All U/C and N/C Manager positions are being or have been eliminated. My strong feeling is that it will only be a short time until the F&I Managers are gone It's SAD to see that the personalization of the car purchase (my opinion) is going away!!
Shutter - welcome to the Forum - great post.

I had a chance to listen to Lithia's Conference Call last week and I think that you're 100% correct. Management stated that they want to use their L2 Used Car Superstores as an "incubator" for processes that will be installed at all of their L1 Branded Lithia Dealerships. They believe that they can lower the "delivery cost" of the vehicle transaction by 50% with the use of centralized management.

The car business is changing so fast - it's incredible.

Thanks again for your post, I hope that you'll be a regular contributor.
XDCX is offline   Reply With Quote
Old 02-25-2008, 02:04 PM   #8
cbubba7
New Member
 
Join Date: Jan 2008
Posts: 3
Default F&I producers

F&I has made a huge transition in the past 20 years. They have gone from un-regulated cowboys to a solid profit center in the business. The way F&I is presented may need to be addressed somewhat. Rate spread will soon go away and be replaced by "flats" from the banks. The consumer groups will demand this and in places already have gone that way. Product will be sold by "menu" as to establish consistincy and protect the dealer from the "old cowboy" approach. The main issue with the dealer groups is that they seem to forget exactly vehicles are sold. Ford tried the dealer group approach in the early 90's in OK. They tried to cut costs, pay sales people hourly wages (cheap) remove real managers and replace them with a "cheap copy" and to their dismay THEY FAILED to the point they couldnt sell vehicles. The stores were sold back to the private sector and they ALL and profitable now.
You can cut costs---good businesses do this every day BUT in order to make car stores work well you have to have SALES PEOPLE work the stores and hiring SALES PEOPLE (including managers) costs good money-----good people demand good wages. They must remember this before it all fails
cbubba7 is offline   Reply With Quote
Old 02-25-2008, 04:44 PM   #9
XDCX
Administrator
 
Join Date: Nov 2007
Posts: 14,861
Default

Quote:
Originally Posted by cbubba7 View Post
F&I has made a huge transition in the past 20 years. They have gone from un-regulated cowboys to a solid profit center in the business. The way F&I is presented may need to be addressed somewhat. Rate spread will soon go away and be replaced by "flats" from the banks. The consumer groups will demand this and in places already have gone that way. Product will be sold by "menu" as to establish consistincy and protect the dealer from the "old cowboy" approach. The main issue with the dealer groups is that they seem to forget exactly vehicles are sold. Ford tried the dealer group approach in the early 90's in OK. They tried to cut costs, pay sales people hourly wages (cheap) remove real managers and replace them with a "cheap copy" and to their dismay THEY FAILED to the point they couldnt sell vehicles. The stores were sold back to the private sector and they ALL and profitable now.
You can cut costs---good businesses do this every day BUT in order to make car stores work well you have to have SALES PEOPLE work the stores and hiring SALES PEOPLE (including managers) costs good money-----good people demand good wages. They must remember this before it all fails
I remember when Ford and GM were buying Dealerships with the thought that they could do a better job running them - what a disaster.

Concerning your other points - I agree 100%. The days are numbered for rate mark-up. The banks will fear more lawsuits alleging ethnic profiling and the consumer groups will press for full disclosure. Flat payments will be the solution - my guess is that it's not too far away.

Regarding the level of talent that's in the box, that brings us full circle to the beginning of this thread. It appears that the direction is toward a lower talent/lower cost employee in Finance.

I guess we'll have to wait and see if the results are different this time?
XDCX is offline   Reply With Quote
Old 02-25-2008, 05:46 PM   #10
okcarl
Lotus Factory Guy
 
Join Date: Jan 2008
Posts: 182
Default

Any decision to put a lower cost lower talent individual in the finance office is asking for trouble. I trained finance managers and I can tell you the talent is gone. Many of the F&I managers out there are nothing but glorified paper pushers. There was a post on here earlier about Bob Lewis VW filing for BK. While I was training there they wanted me to train a title clerk from the back office to do finance. She had no clue how to structure a deal or what front or backend advance was. They have no clue what to do if the customer has an issue and run back to the sales manager if the customer has an issue with the transaction vs. trying to solve the problem and move on themselves. I know in California where I just left, that a small clerical error in the paperwork could lead to thousands of dollars being paid out from a nuisence lawsuit, so what would the effect be of putting an unmotivated underpaid and untrained individual in that office.

Carl

Last edited by okcarl; 02-25-2008 at 05:53 PM.
okcarl is offline   Reply With Quote
Old 02-25-2008, 06:13 PM   #11
Bubba Louie
New Member
 
Join Date: Feb 2008
Posts: 8
Default

I keep reading about the Lithia model they are working on. These are the same brain surgeons who lost over $20 million $$'s on a Dodge dealership in Broken Arrow, OK. No wonder they need to cut costs.

Bottom line is bottom line. If they want to remain profitable, they need to be willing to pay professionals to do a professional job. If they just want to throw up #'s without profitability, then by all means, let's make it a clerical job. As someone stated in this thread earlier, Ford did a GREAT job right here in Tulsa with all of their dealerships. Now look at Ford as a whole....
Bubba Louie is offline   Reply With Quote
Old 02-26-2008, 07:13 AM   #12
XDCX
Administrator
 
Join Date: Nov 2007
Posts: 14,861
Default

Quote:
Originally Posted by okcarl View Post
Any decision to put a lower cost lower talent individual in the finance office is asking for trouble. I trained finance managers and I can tell you the talent is gone. Many of the F&I managers out there are nothing but glorified paper pushers. There was a post on here earlier about Bob Lewis VW filing for BK. While I was training there they wanted me to train a title clerk from the back office to do finance. She had no clue how to structure a deal or what front or backend advance was. They have no clue what to do if the customer has an issue and run back to the sales manager if the customer has an issue with the transaction vs. trying to solve the problem and move on themselves. I know in California where I just left, that a small clerical error in the paperwork could lead to thousands of dollars being paid out from a nuisence lawsuit, so what would the effect be of putting an unmotivated underpaid and untrained individual in that office.

Carl
Carl - great points. One nuisance lawsuit could cost a dealer thousands of dollars more than he would have paid by hiring the right person.
XDCX is offline   Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump

Similar Threads
Thread Thread Starter Forum Replies Last Post
Q&A - Bellavia Gentile & Associates, LLP suit against the Treasury XDCX DealerLaw.com 167 09-20-2018 10:28 AM
A Trillion Here & There crowe General Discussions 17 02-18-2017 06:50 PM
ADP or R&R vs AUTOMATE birch3x Finance 15 07-23-2011 10:43 AM
Anyone want a R&R F&I printer? MICDJDLR General Discussions 5 01-27-2010 04:17 PM
How many F&I Managers? MARV Automotive Discussions 8 12-29-2009 06:57 AM


All times are GMT -7. The time now is 02:29 AM.


Powered by vBulletin® Version 3.8.5
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
Copyright DealershipForum.com - 2008 - 2016