Adrian Foster has helped build a business on the fortunes a business manager can bring to a dealership. 

As operations director at profit generation consultancy Remit Showroom, Foster leads the F&I team which not only recruits and trains business managers for dealerships but outsources the entire process. 

His clients include two Volvo dealerships in the north of England which took up the outsource option and within just a few months saw their F&I profit increase by more than 200%.

Foster said: “The dealer recognised a significant opportunity to increase income from F&I, but needed support to recruit, train, integrate and manage business managers. 

"A good business manager is essential for a healthy turnover and profit. 

"I cannot see how a dealership can survive in this climate without a clear focus on F&I.”

Remit Showroom sent in one of its best operators to Mercedes-Benz Epsom who has been responsible for 25% additional F&I business income while maintaining its high CSI score and reducing the average finance term – an oft-neglected but key KPI for repeat business.

Mercedes-Benz Epsom general manager Martin Buhagiar said: “The business manager has been an outstanding addition to our team. 

He has increased F&I income, helped us sell more cars and has been a major contributor to 2012 being our best year ever.”

Foster’s approach to business managers, however, is far removed from being simply a focused F&I profit centre – in fact, he argues, if it was, Remit would simply fail as a business proposition.

Canary in the coal mine
He explained: “It is just as much about delivering a first-class service to customers. 

If a business rams F&I down its customers’ throats, showroom traffic and customer satisfaction scores will soon deteriorate.”

F&I often serves as the “canary in the coal mine” and poor F&I income is usually an indicator that there are other less visible issues in the sales process affecting a dealer’s profitability. 

However, Foster also thinks dealerships face additional challenges in both attracting and retaining good business managers as well as maximising their potential.

Said Foster: “Dealerships need to be wary that their business manager does not become an overpaid administrator. 

Dealers need to tackle the issue of how to transform the business manager’s role into a key element of their customer proposition if their business is to gain as much as possible from the appointment.”

His position is backed up by Paul Harrison, head of motor finance at the Finance and Leasing Association, who said: “In the current climate, F&I income is vitally important to all car retailers’ profitability. 

This is highlighted in the FLA’s latest motor finance statistics which show that more than 70% of all private new car sales were funded through finance sold in showrooms. 

This figure continues to grow.

“While some dealer groups choose not to employ a traditional business manager, the team or individual responsible for finance sales should be fully integrated into the customer sales process.”

More specialists being employed

A dealership could boost finance sales by hundreds of thousands of pounds a year by investing in a trained professional to promote finance to customers.

Analysis by Sewells Research & Insight, sister company to AM, of more than 1,000 dealers in the UK, suggests that employing a trained F&I professional could boost finance sales by £800,000 per year on average.

Typically, finance penetration leaps from 54% to 68% when a dealership employs an F&I manager.

However, years of recessionary pressure have seen this position a victim of headcount culls.

On average, 62% of dealers in the research indicated they employed an F&I specialist, compared to 68% two years ago.

Each year, manufacturer finance houses fund more than £7.5 billion-worth of new car finance. However, dealers still hand more than £1.2bn in new car funding to secondary finance houses, suggesting significant room for growth.

For more information, email sewells@bauermedia.co.uk.

Transparency is critical

Arguably, the perception of retailers as reputable sources of finance and insurance products such as GAP as well as the desire to professionalise the business manager’s role to a much higher level is bound up with transparency and honesty which has seen the Office of Fair Trading issue guidelines on commission disclosure.

Paul Harrison, head of motor finance at the Finance and Leasing Association, believes if consumers are to trust dealers to provide their finance and insurance products, they have to be totally open.

He said: “In late 2011, the Office of Fair Trading published new
guidance for credit brokers and intermediaries.

The guidance covers numerous issues, including the disclosure of commission to customers and the amount of commission should a customer request the specific figure.

The OFT has made it clear that a dealer’s ongoing ‘fitness’ to hold a consumer credit licence will be reviewed based on compliance with the guidance.”

The FLA’s ‘supplementary briefing’ to help its finance company members work with their dealer partners to understand the implications of the OFT guidance is available at: www.fla.org.uk/motor.

The NFDA has produced a self-assessment guidance to assist its dealer members.

In December, the Financial Services Authority announced it will be
investigating the add-on insurance sector, which includes a range of retail products from holidays to electrical goods as well as cars, in the run-up to the transition to the Financial Conduct Authority.

The ‘shining light’ project, due to be completed by the autumn, will look at “whether there are common features of the add-on markets that weaken competition and drive poor consumer outcomes”. 

Main concerns include whether the consumer is focused on the primary sale and not on the cost and value of the add-on insurance, and whether the terms of the add-on insurance sometimes mean that the products are of limited use.