Ally All Ears podcast: Tips for maintaining sales and F&I momentum in a higher-interest rate environment

Matt Siman, area growth leader at Ally Financial, discusses ways dealerships can increase F&I product penetration and maintain F&I margins even as the affordability squeeze gets tighter.

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Emma Hancock: Hi everyone, welcome back to the All Ears podcast. I’m Emma Hancock, host, and strategist at Automotive News. This podcast is sponsored by Ally Financial and produced by the Automotive News Content Studio. In each episode, we explore topics that are important to leaders in automotive retailing. Our guests include experts in their field from Ally, plus dealers from around the country, and we cover tips and explore insights that can help dealerships successfully navigate the transformational changes taking place in our industry. So, on that note, let’s jump into today’s conversation. Affordability is a hot topic right now for good reason, and we know it will have an effect on F&I. Today we’re going to be discussing how dealerships can increase F&I product penetration and maintain F&I margins even as the affordability squeeze gets tighter. These days, everything is connected and helping customers maintain the future value of their vehicles and make the ownership experience more convenient, just makes good business sense. In a recent Automotive News article by Gail Kachadourian, the concern this year with F&I is with customers feeling like they don’t have enough money left to spend on F&I products. So, the opportunity here is showing the long term benefits of building the future value and convenience of the vehicle they’re taking home. Our guest today is Matt Siman, area growth leader at Ally Financial. Welcome, Matt. Thanks for being here.

Matt Simon: Thank you, Emma. Appreciate being here.

Emma Hancock: Great to have you here. So, Matt, the average retail price of a vehicle has skyrocketed over the last few years. And with higher interest rates, overall vehicle affordability is becoming an even bigger pinch point. What are some of the ways dealers might demonstrate the long term benefits of adding F&I products and services to a vehicle sale?

Matt Siman: I would obviously say in these uncertain times it’s a good opportunity to remember obviously still compassionate with the customer, but also combining your industry knowledge so that you can help them manage their budget and the vehicle ownership. For an example of this customers might budget their monthly expenses but not include the repair into that factor. So, a good conversation to have is the benefits of a vehicle service contract. This way you can explain to them the upfront cost of it. They’re going to have a more stable, monthly outgoing. And if ever there was to be a major repair come up on there, typically that is covered then by the vehicle service contract. Another good thing to mention, obviously with pricing fluctuating in the way it is, maintenance, the vehicle we’ve got to maintain it while it’s on the road to keep it on the road. A maintenance package might be a good area to cover with the customer. That way they know ahead of time what their maintenance costs are going to be. They can get their oil changes, tire rotations and chassis lubes all handled through the duration of that. But as we look at the long term benefits on that, I would say peace of mind in the ownership, but also a vehicle that’s been well maintained and doesn’t have any major repairs needed on it is going to have a better resale value as well .

Emma Hancock: I like what you started with about compassion and starting from a place of what’s reasonable for the customer. I think that’s great. So, with customers pre-ordering vehicles three to 6 to 9 months out, a trend that probably won’t go away anytime soon. Are there times for dealers to discuss F&I products and services that might be beneficial?

Matt Simon: I think even as simple as having a good introduction to the F&I manager, or at least introducing them to the F&I office is a good start. That customer might end up three months, six months, like you said, but at least that way they’re a bit more familiar with the person or the office that they’ll be dealing with. But it also might open up an opportunity to have a conversation about how they’re going to pay for the vehicle. Maybe they’re looking to go through their credit union that the dealership might have a relationship with and perhaps highlight some of those benefits as well for convenience for financing through the dealership, but also what their plan might be for adding coverages. Again, it depends on how far out the order might be, but it’s worth having that conversation and introduction early on so at least that way there’s some rapport being built, and the customer has a better experience coming back in.

Emma Hancock: It’s really a different world now with preorders. So, start that rapport early, like you said, Matt. So, could dealers be looking at F&I opportunities differently when it comes to premium versus non-premium vehicles? Is there a difference in the process? Could there be benefits to different processes?

Matt Siman: I would say having a consistent process is really the key. That way, once everybody sticks to the consistent process, you’re going to create a better environment for the customer. Obviously, vehicles being premium versus non-premium might have different equipment packages on there. So that’s another conversation to have, such as technology. It could be the expense of repairs for that customer and just make sure that they’re aware of what options the vehicle has on there and what coverages are available to them. But otherwise, I would say keep it consistent and you should have a good customer experience through that.

Emma Hancock: Great advice. Now, in an effort to streamline the process for customers, could the F&I portfolio of products and services be divided into two key categories: resale and convenience? For example, customers who finance and buy might focus on resale and building future value versus customers who always lease and may be focused on convenience during the lease term.

Matt Siman: I would say it comes down to the customer’s driving habits. In this case, sure enough, they can bundle themselves into these categories that you mentioned without anybody trying to fit them into that box. I would say paying more attention to the customers’ driving habits would quickly distinguish what levels of coverage they might need. But I would also say never exclude any of those options based on whether they’re buying versus leasing until you’ve really looked into the driving habits. Now I’ll give you an example of that. If they were leasing a vehicle and we assumed that they might not need certain coverages because they’re just leasing it, well, if that customer was driving 18,000 miles, 20,000 miles per year, 36 months, 46 months, they could quickly end up being outside of the vehicle manufacturer’s limited warranty, which now leaves them exposed to risks and repairs on the vehicle. And the last thing a leasing customer wants to do is pay for something on return, or worst off, have something break during it that they have to pay out of pocket unexpectedly. And I think that would go as well for the ownership of the vehicle as well. Obviously, there are different conversations to be had based on how long they’re keeping it. But again, a well-maintained vehicle will hold a better value if they are to resell it in the future.

Emma Hancock: Well Matt, you’ve covered a lot of ground with us today. Everything from the long term benefits of F&I products and services, suitable times to discuss F&I products with customers, F&I, opportunities with premium and non-premium vehicles and streamlining F&I portfolios into key categories. Thank you so much for your great insights.

Matt Siman: I appreciate you Emma. Thank you for having me.

Emma Hancock: That is it for this episode of the All Ears podcast. I hope everyone found this helpful. I certainly did. On behalf of Ally Financial and the Automotive News Content Studio, thanks for listening and bye for now.

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