Eliminating F&I Departments?
by George Angus
The automobile business is changing. Dealers are facing changes in customer expectations, factory demands, sales
resistance from customers, difficulty in hiring qualified personnel, and the fastest evolvement of change in the history of
the business since World War II.
The challenge of the dealer to meet this change has opened the way for dealers to seek out and implement new and
radical methods and ideas to stay on the forefront of the industry and maintain growth and competitiveness.
A large part of our company’s' function is to measure the results of these new and innovative ideas and honestly report
to our dealer clients, in depth, on the effectiveness of these ideas and methods without a bias toward any product or
agenda. Every idea is worth testing, but an unbiased measurement of results is needed to determine whether the idea or
method will accomplish the desired result.
We have received numerous requests for information and inquiries regarding salespeople taking over the responsibilities
of the F&I department. The reason this idea has been raised is to address the area of a customer centered, user
oriented process that addresses the culture based changes in society and the expressed wishes of our customer base. A
new way of thinking based on an evolving culture has brought about much positive change in the industry. Some of these
new ideas, however, have not been researched and examined under the harsh light of performance based evaluation.
Some ideas seem to fit the logic of the new culture, but, when put in practice, fail to produce the expected and desired
Eliminating the F&I department is one such idea.
We have studied this idea carefully and thoroughly and can report on the results of our work.
Customers have expressed a dislike for the process of dealing with more than one person during the buying process.
The logical solution to this problem is to have one person handle the entire buying process. The salesperson would take
the customer through the entire sales process. This would include all the steps. The salesperson would demonstrate and
help the customer choose their purchase, set the trade value, do any or all negotiating of price, and then present the
aftermarket and F&I products and complete the financing and final paperwork.
The possible benefits to the dealer could be a happier customer, a faster process, and one less manager’s salary and
percentage of income to pay.
Our Package Option™ approach seemed, to many dealers, like the perfect method to use to allow the salespeople to
easily and quickly present the F&I products. We agreed to adapt our method to fit the one person process, train a select
group of salespeople in its proper use, and then measure the results.
To conduct a fair and accurate study, we had to first choose top performing salespeople to conduct the test. We then
had to provide extensive training for these salespeople in the areas of F&I product knowledge, interest rates, full
disclosure, legal issues, and proper presentation of products and options. We then would measure their results against
the results of an effective F&I department operating in the same environment.
We measured the results using the following criteria:
1. Income per retail unit delivered.
2. Penetration levels of products.
3. Balance of income from different products.
4. Customer satisfaction with the process.
5. Chargeback percentage.
6. Administrative Effectiveness. (Returned contracts, paperwork, etc.)
As we began to measure preliminary results, we were initially impressed with the income that properly trained
salespeople were able to produce using the Menu Option method. We were surprised to find income levels that would fall
in the acceptable range for many dealers. ($300-$500 per retail unit delivered. This income was around 60% of what the
full time F&I managers were able to produce in the identical environment. However, this level of income tended to drop off
dramatically after only a matter of weeks. Retraining and follow up had some positive effect on this lowering of
performance but a consistent income level was never maintained. Interestingly, changes in pay plan seemed to have little
or no effect on this phenomenon. One dealerships salesperson production went from $480 per unit to $187 per unit in 12
weeks. The F&I departments, however, showed an actual increase in income over the same period.
2. Penetration Levels
The same type of change occurred in the area of penetrations. Initially, salesperson penetration levels, while tilted
toward service contract sales, were in a reasonably acceptable range. However, this quickly changed. Penetration levels
tended to drop off quickly and penetration levels of credit life and disability virtually disappeared. Again, additional
training tended to have a temporary positive effect but changes in pay plans had little or no effect.
3. Balance of Income.
Initially, the balance of income tended to lean towards service contracts. This quickly changed, however, as penetrations
dropped and shifted quickly to a dangerously high percentage of finance reserve income. This ultimately led to a
problem with chargebacks.
4. Customer Satisfaction.
This was interesting and surprising in many ways. Customer satisfaction with the sales process was almost identical with
or without an F&I department. We discovered that when customers express dislike for dealing with more than one person,
they may be referring to the salesperson-sales manager, back and forth process more than the F&I process.
5. Chargeback Percentage.
Salespeople had a lower overall percentage of chargebacks due to the sale of fewer products. However, as a
percentage of product sold, cancellations of products sold by salespeople was nearly double that of the F&I
departments. The biggest reason for these cancellations seemed to be disclosure related. (See #7, disclosure.)
6. Administrative Effectiveness
This was the area that caused the most frustration for the dealers. Immediate and serious problems developed when the
salespeople did the final paperwork. The amount of detail required to properly complete the paperwork involved in a
vehicle purchase seemed to overwhelm the sales staff and caused much frustration and created problems with lenders,
office staff, and management. More than one dealer resorted to hiring a staff person to complete the paperwork for the
salespeople. This, however, just added another salary for the dealer and operated much like an F&I department, minus
This was a serious problem. Even well trained, honest, salespeople seemed to have a problem accomplishing a proper,
full disclosure. In today’s environment, this is unacceptable. Dealers are faced with a myriad of laws and responsibilities
and many of these requirements were not accomplished using salespeople to complete the final disclosures. The biggest
issue seemed to be time related. After spending the time it takes to sell the car, customers wanted to complete their
paperwork quickly. The salesperson, wanting to accommodate the customer’s wishes, would move through the final
documents too quickly to do a complete, clear, disclosure. This kind of exposure is unacceptable and dangerous for the
The F&I department has a very difficult and important function in today’s automobile dealership that cannot be replaced
by the sales staff. While some success can be achieved by the salespeople, the disadvantages far outweigh the
advantages. Those dealers who have tried both methods find that they need the income, protection, and professional
handling of their customers a quality F&I department provides. A good F&I department produces high income from a
small investment and provides services and protection the dealer needs.
We need to understand the culture of today’s consumer, but, we also need to study and examine new ideas carefully and
make sure we create the results we desire.
Dealers need to concentrate on hiring the best F&I managers available, give them a process that accomplishes the
results we want, and support their efforts.
George Angus is with Team One Research and Training, a research and training company that specializes in scientific,
research based program development and training programs for the automobile industry. George has trained thousands
of F&I professionals and develops programs and techniques with the top performing F&I departments in the country.
Team One can be reached at 1-800-928-1923 or on the web at www.teamonegroup.com
George Angus has had over 100 articles published in news and trade publications. This
article is a recent example of George's reporting of information derived from researching,
training, and working with the leading F&I managers in the US and Canada.