The Finance Office (“F&I”) is a major profit center for car dealers. Because new car pricing is readily available on the internet, dealers have begun to rely on “Back-End” profits that are generated by this department. This is especially true for purchases that are made through the Internet Manager or Fleet Manager. These departments flourish by generating these hidden profits in the finance office.Navigating the “F&I” department is challenging for the consumer because there are so many profit streams available to the finance manager. The first thing that a buyer should keep in mind is that the finance manager is a salesman. His primary function is to sell products to the customer after the salesman has negotiated the “Front-End” deal.
The Car Dealer's Monthly Payment Bump
There are many techniques that the “F&I” salesman will use. The most abrasive is the “payment bump.” This occurs after the customer has negotiated his payment with the salesman and has reached an agreement. Then, when he is signing the paperwork, he is told by the finance manager that his payment is actually higher. Often, this will be a $30 to $50 bump in the payment. Almost always, this will shock the customer and he will inform the “F&I” manager that he did not agree to pay that much.
Then the manager will explain that the payment is a “fully protected payment” that includes a variety of extra products. Of course, these products provide extra profit for the dealer. Most deals will include a “Leg” in the payment. This “leg” will allow the “F&I” manager to add many of these products without the customer noticing or with only a small increase in the payment. Although new “F&I” products and services are invented all the time, the following are the most common.
Keep in mind that many products have value to the customer, and the buyer should not reject them simply because the dealer would be making money.
There are seven potential profit centers available to the car dealer's fiance department:
1. Finance and Lease Rate Profit.
2. Extended Warranties.
3. Car Paint Sealants.
4. Gap Insurance.
5. Service / Maintenance Agreements.
6. Car Loan Insurance.
7. Car Accessories