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.
