Most experts agree we’re not in a recession right now but could enter one soon.
The good news is that dealers might not feel the impact until the middle of 2023. In a period of economic uncertainty , it ’s important to prepare your F&I department for a potential downturn.
Which steps are worth taking and which ones should you avoid? Here, I’ll walk you through three F&I dos and don’ts that can recession-proof your dealership.
DO FOCUS ON LONG-TERM CUSTOMER RELATIONSHIPS
When finances get tight, potential customers tend to think twice before buying a new or used vehicle, and they might start exploring cheaper options for auto servicing and upgrades. Translation: a double hit to your revenue generation.
To keep the customers you have, it’s important to build long-term connections. This way, your customers will remember why they chose your dealership over the competition. Here are three strategies that have helped our clients again and again:
- Follow up multiple times after each sale. Many dealerships already follow up two weeks or earlier after each sale. Make sure to check in at the six-month and one-year marks, too. Ask customers about their overall vehicle experience, see if they need any upgrades, and encourage them to come in for servicing.
- Be genuine on every call. Instead of relying on call scripts, get to know your customers as people so you can personalize every interaction.
- Document each interaction. Keep a record of every follow-up so you know when to reach out next.
When you create authentic touch-points with your customers, you can build long-term relationships that keep your dealership top of mind.
DON’T FORGET PRICE TRANSPARENCY
In 2021, nearly half of customers said their auto purchases cost more than expected. The impact: an 11-point dip in price satisfaction on a 100-point scale.
Auto price hikes are common right now, especially on the front end, with dealer-added markups and more preloaded items. In a downturn, dealers must be even more transparent with customers regarding the asking price throughout the entire selling process.
If a customer gets in over his or her head with payments, the chances of lender scrutiny toward the dealer is much higher; the first area of investigation will be the deal jacket. Don’t forget: The customer will remember where they bought their vehicle, and they probably won’t come back.
To keep things aboveboard, here’s what I recommend:
- Don’t pack payments. In the auto industry, it’s all too common to give inflated quotes or conceal back-end products. Payment packing isn’t just misleading – it’s also illegal. What’s more, the practice can weaken your customers’ trust and push them away from your dealership.
- Don’t go for the whale deal. If you’re scoring big on a sale, you might’ve pulled a little wool over your customer’s eyes, even if you’re not strictly packing payments. But in an economic crunch, it’s important to do what’s best for customers, even if that means a little less profit.
- Give customers the right financing for their needs. Try to quote the shortest term at the best price. If customers want longer-term financing and, in turn, lower monthly payments, consider suggesting a more affordable vehicle so they’re not making payments for years on end.
Remember, vehicles have a long-term impact on customers’ financial well-being. Do right by your customers, and it’ll stick with them. There’s a good chance they’ll even spread the word.
DO INVEST IN F&I COMPLIANCE
During a slowdown, it’s easy to focus on boosting revenue and put F&I compliance on the back burner, but that’s a risky approach. When your revenue is unstable, the last thing you want is to slip up on regulatory best practices and get slapped with a hefty fine.
That’s why dealers should use this period to invest in tools that can keep them compliant. Not sure where to start? Try these options:
- Consider an F&I audit. An F&I consultant can help you identify risk exposures (like sales practices that open you to liability) and point you toward tools to correct them.
- Invest in digital training tools. With learning-management software and a mobile training program, you can improve regulatory compliance throughout your dealership.
- Consolidate vendor services. Many dealers use multiple platforms to facilitate HR or EHS training. Instead, look for an all-in-one digital solution that can consolidate services at a fraction of the cost.
When you invest in F&I compliance, you can reduce your liabilities and boost your financial security.
THE RIGHT PREPARATION CAN HELP YOU BOUNCE BACK FAST
During the Great Recession, new car sales fell by nearly 40%. The dealers that survived looked for responsible ways to close deals and deepen customer relationships. As a result, the industry bounce-back was historic.
There’s a good chance this slowdown will have a lighter impact, but the takeaway is the same: Beef up your F&I practices now, and it’ll be easier to come out strong on the other side.
Aaron Hartshorn is a district manager, F&I and compliance, at KPA, an environment, health, and safety (EHS) and workforce compliance software and services provider for midsize businesses.
Originally posted on F&I and Showroom