Five Elements of True Income Development
Five Elements of True Income Development

This March, I was asked to speak on behalf of Safe-Guard Products for the very first Agent Summit, which took place at the Las Vegas Hilton. I was very excited about the speaking engagement and the opportunity to represent Safe-Guard, a third party administrator that markets and administers ancillary F&I products through the agent channel.

Being responsible for more than 300 agents nationwide, the first question that comes to my mind is: what do our top producers do differently than our average producers? I have come up with five things that our top agents do that help drive the bottom line for their agencies: pricing of products, pay plans, menu selling, reporting, and training. In considering how our producers incorporate these into their daily activities, I have also explored:

  • What is different in the F&I office today?
  • What drives higher profits for dealerships?
  • What motivates F&I managers?
Ancillary Products Have Changed the F&I Office

It’s important to address where we’ve been before we can talk about where we’re going. The evolution of F&I began in the early 1960s with an average PVR of $300 a car and the sale of credit insurance. Then, in the 1980s, we were bringing in an average of $500 a car, and we were selling service contracts and rate in addition to credit insurance. However, there was a lack of control then along with very limited regulation and disclosure. In the current landscape, we now hold $1,000 a car as the benchmark; we are offering multiple products; we are selling off a menu; and we use a process that is very consumer friendly and includes full disclosure.

For years, the old adage was “service contract, service contract, service contract.” That’s a great concept. It’s always the first product in and the last product out. But even the best service contract salespeople in the country are running at 50-55 percent – 60 percent if you are in the top one percent. However, there is a remainder of 40 percent of your customers who didn’t buy service contracts but who would possibly buy another product. These additional products, the ancillary products, are what have changed the marketplace. We are offering more and more products that a large amount of customers see value in. The ancillary products, like GAP, Tire & Wheel Protection, Theft, Key Replacement and others, are behind the increase in today’s bottom line.

We haven’t really changed how we do things in the F&I office, but what we have done is to use the menu as a basis to sell the products. The reason the menu has been adopted in the F&I office is because of the increasing amount of products available to the customer to choose from.

F&I Department Drives Higher Profits for the Dealership

The increase of ancillary products on the market and the additional profits associated with their sales have resulted in an increase in importance of the F&I department during the past 4 to 5 years. This has not been seen at this scale in this industry before. In the chart below, it is clear that the expense associated with the profit available is so much less than that on the general sales floor. This obviously creates a larger net profit for the dealer, making the agent’s job more important and putting more pressure on F&I mangers to sell ancillary products. Agents are tasked with driving the bottom line for their dealerships.

The Five Elements

Successful agents are driving the bottom lines for their dealerships using a consistent formula – pricing, menu, pay plans, reporting and training.


The first thing agents are doing is teaching the F&I managers that they work with how to properly price and create value in products. If they know how to build value in the products that they are selling, then price isn’t the defining characteristic. Many times, F&I managers get so entrenched in selling the products that they forget to tell customers what the benefits are – what a product does and how it helps them. Pricing is important because it is a key component of value, which simply can be defined as perceived benefits minus cost (price). You have to sell the value! The F&I Manager is like a mother bird feeding a baby bird. Instead of chopping the price, F&I managers must feed tidbits of information to the consumer, and through that information build more value. When we start chopping the price, nobody wins.


A lot of dealers out there will tell you that they use a menu and do menu audits, but it has been found that the number of dealers and F&I managers actually using the menu effectively is a lot less than what most think. They are paying the subscription fees and printing the reports when they have to, but we have found that many do not use it as the sales tool that it is meant to be.

The menu is a great tool to put a customer in the driver’s seat. It is a guide that can help customers better understand their options. Menu selling is the crucial step between the interview and objections handling. The top agents are teaching F&I mangers about benefits selling in addition to properly pricing products. The menu also gives customers a clearer picture of the price and benefits with consistent use in every store.


The F&I business manager’s position is a pay-driven business. Everyone works his or her pay plan – it’s just a part of life. What we have found is when a store is stagnant, and we can’t get the numbers to move, it is usually tied to someone’s pay. On many occasions, the current pay structure has made the F&I manager very comfortable in his or her position – perhaps this person has been there a long time and is making a nice salary. Getting this person to increase his or her numbers is difficult because he or she is very comfortable financially speaking.

The top agents and dealerships today are using product index-based pay plans – essentially the more products sold, the more money an F&I manager makes. In turn, when a dealership’s product index goes up, its per vehicle retail index also increases. Pay plans draw revenue to the bottom line for the dealership. At first, the reaction may be, “what – we are going to have to pay that guy 15 percent, are you crazy?” But the reality is that while the F&I manager is going to make 15 percent, the dealership will be making 85 percent.

Top agents have found that the old stagnant pay plans based on reserve and/or a pool just don’t work in this day and age. It is important to pay people based on personal performance with different tiers in their pay. This way, the better he or she performs, and the closer this person comes to being a top one percent F&I manager, the pay scale reflects that he or she is getting paid like a top F&I manager. It also helps to identify lower-producing people because they are not growing inside their pay plans. Then, additional training can help them grow the business and their income.


When F&I was first evolved in the late 1960s and early 1970s, F&I managers had to handwrite everything down from the deal. When fax machines came around, they faxed agents and administrators once a week or month. Agents rolled up to the dealer on the 15th of the following month to talk about numbers and the previous month’s business. Now, it’s all about real time. When an agent shows up at a dealership, it is just as important to talk about what’s in the hopper as it is to talk about the most recent business.

We find that top-producing agents have very good reporting tools because you can’t expect what you can’t inspect. Being able to track the numbers in real time – not 15 days after the end of the month – is crucial to what we do in F&I. We need to exchange the information as it’s happening. That is what will enable agents to help each store to advance income development.

Many Safe-Guard agents use reporting information as a road map. For example, the reporting shows that Tommy Jones down at ABC Dealership is not doing so well. He didn’t have a good day yesterday. So, the agent will spend a good portion of the day helping him and getting him back on track before it’s 30 or 45 days later when he’s completely derailed.


A lot of companies are going to online training. Online training is a great resource for maintenance training, but online training should not become a shoulder for F&I managers to always lean on. Nothing is better than one-on-one training where the trainer or agent walks into the store and works directly with the F&I manager. This training goes so much further and creates faster financial results for the F&I manager.

Implementing the Five-Element Formula

In conclusion, if you teach benefits selling correctly, the F&I managers you work with will be able to hold strong on the price because they will convey the value of the products to every customer.

Pay plans drive revenue, and we have to pay the F&I managers for selling products based on the product index. With rate getting smaller and smaller, it’s important to reward F&I managers with product index-based pay plans.

Most dealerships say that they are using menus, but it’s important that menus are fully employed 100 percent of the time. Menus work, and it’s important to remove the element of picking and choosing for whom and when the menu is used.

In today’s fast-paced environment, all of the players should be able to pull real-time data to help our partners drive more sales. Our saying at Safe-Guard is a report that’s one number off is totally useless. Reports help agents show their dealers and F&I managers where they have been and where they are. Most importantly, understanding reporting helps agents assist dealers in reaching the next level or maintaining their top status.

As someone who preaches training practically more than anyone else in the industry, I must emphasize that one-on-one training cannot be replaced by online training. While online training is great for maintenance, in the type of business that we’re in, nothing works better than face-to-face communication with F&I managers.

Focus on these five important areas that top-producing agents have already mastered. You will become exponentially more successful as an agent, and the F&I managers and dealerships you work with will soar to the top of the industry.