As originally appeared in Autosphere on July 26, 2022.
There’s no question we’re living in some very uncertain times.
For dealers, supply disruptions and uneven inventory levels, combined with higher inflation and rising interest rates present a host of challenges. Yet it is during difficult times like these that dealers who focus on long-term solutions stand to reap the biggest benefits.
Jake Stacey, Executive Vice-President of Sales and Training at LGM Financial Services, believes that customer retention is key to being successful in today’s operating environment. Stacey says that F&I is proving to be a critical element of that, with dealers no longer considering these products as part of the vehicle transaction but rather as integral to cultivating and growing long-term customer relationships.
Benefits for all parties
In today’s F&I space it is essential to have a suite of products that are designed to benefit the customer, the dealer, and also the OEM. From the customer perspective, Stacey says it’s important that “F&I products create a long-term relationship between customer and dealer—this is win-win-win for all parties. Customers get exceptional service at the dealer on the OEM brand and the dealership, which increases the likelihood of future business.”
Steve Holmes, Vice President at Myers Automotive Group, in Ottawa, Ont., notes that besides expectations, another key factor for today’s consumer when it comes to every aspect of the vehicle sales transaction (including F&I), is transparency and convenience. Having ready access to information is critical. “You have to have a forward-facing presence on your website,” Holmes explains noting that the biggest issue for many clients today isn’t necessarily the cost of the purchase but how easily and efficiently it can be done, whether online, in-store, or a combination of both depending on individual customer preferences.
At iA Dealer Services, Jill Kleovoulos, Director of Marketing, Ancillary Products, notes that F&I products also serve as a key tool in helping bring customers back to a dealer’s service and parts department in addition to being a revenue source for sales and a peace-of-mind solution for the customer.
Speaking of peace of mind, current economic uncertainty is also putting added pressure on consumers, not only on their wallets in terms of the rising cost of goods and services but also on employment, especially given the possibility of a recession on the horizon. On the F&I side, this has resulted in a growing number of customers opting for loan protection when purchasing a vehicle in view of potential employment disruption as well as disability and critical illness.
At Williamson Chrysler Dodge Jeep in Uxbridge, Ont., Financial Services Manager Joshlene Melo, notes that she’s seen a significant uptick in customers opting for loan protection and disability coverage on vehicle purchases. Additionally, extended warranties and pre-paid maintenance plans are also proving very popular. “Our extended warranty gold plan also includes service,” explains Melo. “The warranty package covers powertrain and non-powertrain related components as well as oil changes and tire rotations, so it’s essentially prepaid maintenance”. Melo notes that even if inflation pressures continue to cause parts and service costs to increase, the dealership’s customers remain insulated from this within the timeframe of their extended warranty gold plan.
And with customers keeping vehicles longer and inflationary pressures likely to persist for the foreseeable future, these kinds of F&I solutions can provide a win-win for the customer, the dealer, and the OEM.
Individual customer needs
Additionally, to really succeed in F&I today requires really understanding the needs of each individual customer. Jake Stacey notes that at LGM Financial Services, those dealers that are setting the standard are those with F&I managers that are effectively using the company’s customer assessment tool when engaging new or repeat clients. “‘In today’s environment, consumers expect personalization. They don’t want to spend time on product details that don’t pertain to them or solve a problem they don’t have. And when we look at the top performing LGM Financial Services Managers and dealers, they are all leveraging our customer needs assessment tool to deliver a highly tailored experience in alignment to a customer’s goals and budget,” explains Stacey. “The tool allows dealers to showcase which products best fit that customer’s needs. She says that this kind of approach has been proven to reduce overhead in terms of helping the FSMs become more efficient. “Our FSMs are spending their time on products that meet the customers’ needs and therefore have a higher propensity to be purchased.”
Besides loan protection, extended warranty, and pre-paid maintenance coverage, consumers and dealers are also looking more at cosmetic and appearance protection coverage on the vehicle. This becomes particularly apparent given the current inventory scarcity. As Jill Kleovoulos explains, these kinds of products also benefit both the customer and the dealer. “When a consumer purchases appearance protection or mechanical protection they are far more likely to return to that same dealership for repair.”
Kleovoulos explains that this becomes incredibly important over the longer term, “more so than the profit at the time of sale.” She notes that for dealers, customer acquisition costs are typically very high, so by dealers offering comprehensive appearance protection programs in addition to extended warranties, pre-paid maintenance, and loan protection, they have more opportunities to boost the number and frequency of touch points with their customers boosting both satisfaction and retention. “Repeat business from a returning customer is priceless,” says Kleovoulos.