4 Ways to Leverage Low Inventory Environment for Better F&I
Are there any silver linings in the near-empty dealership lots across the US? Headlines are rather bleak these days with most automotive analysts saying that low inventory could linger into next year. So while it may look like there is no way to uncover anything positive about this situation, that may not be the case…especially in F&I.
Dealerships across the country are reporting record PVR in F&I which on the surface may seem a bit counter-intuitive but when you look closer at how the entire process has changed to purchase a car and roll through F&I, it makes more sense than you think.
To many, it looks rather apocalyptic given how every dealerships USED to look before ‘COVID times’ in late ‘19 when bloated inventory levels often had cars spilling out into satellite lots around town waiting for their perfect buyer. Not the case now.
Digital retailing, once thought of by many dealerships as unnecessary and too much of a hassle, has now become the norm. Pandemic shutdowns forced dealers to put processes in place to allow buyers to test drive from their own home and do the deal without having to come to the lot. Notaries were available to execute paperwork in their driveways if needed.
As restrictions eased and lots opened back up for in-person traffic, a funny thing happened. Car shoppers, for the most part, wanted to continue shopping from home and handling as much of the process as possible from their laptops. And really, who can blame them? It’s how we buy most things these days, right?
High prices, lower inventory
In ‘21, as dealerships were struggling to find cars (both new and used), another interesting thing happened…prices for both jumped by leaps and bounds to record levels. New cars were becoming scarce and prices jumped to well above MSRP. As buyers were pushed into finding late model used vehicles, those prices jumped to 40% YOY pre unit. Madness.
But then PVR rose during this time due to higher amounts financed and more buyers willing to add protections that before the pandemic they may have not considered. But now every car is too expensive NOT to.
How can F&I benefit from low inventory?
While it seems like the automotive industry is stuck in the Upside Down, there are several ways that F&I departments can better see the silver lining in the current challenges with low inventory.
With fewer cars on the lot to sell and an increase in factory ordering, this gives your F&I staff a unique opportunity to reimagine the entire experience for your customers. It’s becoming more about making every deal better even if there are fewer of them.
Let’s look closer at 4 ways your department can leverage this environment to maintain high profits and penetration…
- Renew Focus on Training - With fewer deals than before the pandemic, this can lend itself to more time to train staff in new sales methods that fit today’s selling environment. If your administrator has an F&I ‘school’ as most do these days, have managers do refresher training to keep skills up to date and add new ones. Now is not the time to be complacent and sit back counting your commissions…use this time to be sure that everyone is sharp for whatever changes the market has in store.
- Rethink Customer Service - Car buyers seem to always have the same set of complaints about the F&I process and one of them that consistently comes up is the rush through paperwork and lack of post sale followup. When a car buyer is lucky enough to find the car or truck they want on your lot (or when it comes in via order), take this time to look at the value of taking the time to follow up on lost VSC sales with a simple call or email to recapture that lost revenue. Look at the process of responding to customers' questions about the products sold or find ways to make it easier to help with the claims process.
- Rework the Menu - Maintaining a high PVR starts with having the right products on the menu and with more time to spend with your customer, you can more easily dial into exactly the products they may need. The days of having to race through a stack of deals on a busy Saturday are different now and with a change in buyer priorities comes a change in the approach to menu selling. Try bundles, try preloading appearance-related ancillaries, trim the fat off the menu to give fewer but higher margin products.
- Reinvent the F&I Experience - Fewer cars on the lot means every deal is precious to your store. Offering a new and more enjoyable customer experience for those deals is critical to your store’s success, especially now as buyers are traveling far and wide to find any car they can get their hands on. You want your local buyers to stay local and offering an overall better and more enjoyable way to finance their car is a good start. Streamline their process, trim the menu, ask all the right questions ahead of time to help save time, and meet your customers where they are in both expectation and mindset. Their buying process has changed…your dealership must change, too.
The dealership environment had not really had to change much over the last few decades. It was the same 2-3 hour slog it always was to buy a car from start to finish. ‘I love to go buy a car!’ said no one ever. But now the landscape has changed and it may never go back to what it one was. Dealers may have less cars than usual for years to come. OEM’s are already toying with the idea of bypassing the dealership altogether with straight to factory ordering (a la Tesla, etc).
Use this challenging time to see how your dealership can roll with the changes and maintain high profits while giving customers what they have always wanted…a better F&I experience.
If part of your retooling of the F&I experience means looking at new products or changing administrators, let us know here at TruWarranty and we’ll be happy to help you revolutionize your entire process to meet the challenges of today head on.
In light of the latest moves from the FTC regarding F&I products and what is or is not looked at as a ‘beneficial’ product to sell, dealerships may have to polish their sales skills a bit to make sure customers see the value in every ancillary product you offer.
When times are good as they are now in the market, this is the best time for F&I directors to take the pulse of the department