Are F&I sales doomed as lease volume increases? Not according to some data....
Replies to This Discussion
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Permalink Reply by David Krier on
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One of the keys is the length of the Lease... On short term leases you can still sell F&I products, the focus on their options at the end. If the Customer thinks they may buy their vehicle at the end (many do) then it's the reasons for the product are the say as if they purchased. If the Customer thinks they may want to trade at some point out the increase in value by adding the product.
Most importantly, if it's a short term lease, keep the product out of the payment... A big jump in payment will probably result in the Customer not agreeing to the product. "We could build it into the payment, but most of our Customers prefer to keep their payment the same... So they typically write us a check or we can put it on a credit card where you can divide it up. That way your payment stays the same. Which way do you prefer?" In some cases you the product may have a no-interest option over a period of months.
One approach that's extremely effective on lower priced products was to say something like "We have a program where you can go 37 months and we can handle your maintenance for the life of the Lease! Would you like to do that" In reality I would just collect a check for the amount of the product that would be due in 15 days (similar to a pick-up payment but not actually a pick-up payment because it was paying for a product). We disclose this as we are going over the paperwork. This worked really well for Maintenance, Rental Care or Lease End Wear Care/Smart Care.
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Permalink Reply by Michael A. Tuno on
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Leasing for F&I results is alive and well! There are a number of great products in the market place to serve the lease customer. Tire and Wheel, pre-paid maintenance, key replacement, theft, ID Protection, windshield, lease wear and tear, Composite products to name a few. While the profit margins may not be extremely large on these products, they all still serve the ownership needs of the customer who leases.
Effective trade walks, even on lease turn ins are great ways to help understand within a dynamic menu presentation, which of these products will work best for the customer.
However, often the reasons that customer's lease may not necessarily be the best for their ownership habits. Some times the "lease" customer may be better suited for a retail finance sale , especially if they drive a great deal of miles or too few and continuously re-lease.
The market is heating up for leasing again--just do not lose sight of what is best for the customer!
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Permalink Reply by James A. Ziegler on
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This dumb-ass question has popped up about once every four or five years. Donna, do you never learn? Yes, in the short-term F&I will see a very slight drop in some areas..BUT...as always...leasing will continue show dismal returns for the lessor and retail finance will re-surge. it's a cycle that has been constant since the 80's.
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Permalink Reply by Scott Murray on
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To Jim Z- The 1960's called and they want their attitude and condescending attitude back!
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Permalink Reply by Bobby Compton on
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I'm actually surprised with the question at hand, are F&I sales doomed as lease volume increases?
I was very fortunate to have worked with a Toyota dealership who happened to be ranked #1 in the Nation for finance products sold and ranked #7 in the Nation for volume.
We thrived on leasing, and in many cases would convert retail purchase customers to leasing.There are payment buyers, cash buyers, credit buyers, and so forth. Depending on the customers budget and desire of vehicle, the option to lease should be looked at as a positive situation for both customer and dealer.
I look at leasing as a guaranteed future customer opportunity, as in many cases products are sold up front before they ever hit finance - and of course with full disclosure.
Car selling is still a state of mind and comes down to process. I find that it's best to be diverse in creativity and diverse in your offers to the customer. Customers like options, the lease word isn't a bad word and it can be done with great profits and plenty of products sold.
There's some outstanding input in this thread...
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Permalink Reply by Rick Williams on
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All of your responses are good and accurate each have a little different approach but the end game is the same, point is to take advantage of the opportunity and maximize the profit potential....after all that's what we do.
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Permalink Reply by Donna L. Harris on
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Jim,
The cycle you refer to began in the early 1990s. That's when short-term leasing gained broader acceptance as it was promoted by Half-A-Car. That's also when consumer leasing drew attention from the FTC and Federal Reserve and Reg M was updated. The service contract was the big seller for a long time and still is, though menu selling has helped dealers broaden product sales. I have watched the statistics over the years and product sales--especially service contracts--tend to fall when leasing increases.
James A. Ziegler said:This dumb-ass question has popped up about once every four or five years. Donna, do you never learn? Yes, in the short-term F&I will see a very slight drop in some areas..BUT...as always...leasing will continue show dismal returns for the lessor and retail finance will re-surge. it's a cycle that has been constant since the 80's.
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Permalink Reply by Brian J Walter on
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I am somewhat new to the car business and have been Managing for only a few years. But I will certainly take the challenge of making profit in F&I because of increased Leases due to the rising business volume. I believe that a Finance Manager is going to want to see 75-100 deals a month rather than 40-60. Even if the average drops we can still make even more money.
I think that David Krier has it right on. I think this is a great question and one that every Dealer should ask. At my store we are doing a much higher percentage of leases but our F&I is also producing more profit. I think that if you get the volume and the great attitude that there is plenty of profit available. Besides, the low lease payment makes Wear Care easy. I know I always want to just turn my lease car in. I'll pay an extra $20 to just say,"here's your car back!"
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Permalink Reply by Donna L. Harris on
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Brian, give me a call in the morning 540-668-7295. Donna Harris, Automotive News
Brian J Walter said:I am somewhat new to the car business and have been Managing for only a few years. But I will certainly take the challenge of making profit in F&I because of increased Leases due to the rising business volume. I believe that a Finance Manager is going to want to see 75-100 deals a month rather than 40-60. Even if the average drops we can still make even more money.
I think that David Krier has it right on. I think this is a great question and one that every Dealer should ask. At my store we are doing a much higher percentage of leases but our F&I is also producing more profit. I think that if you get the volume and the great attitude that there is plenty of profit available. Besides, the low lease payment makes Wear Care easy. I know I always want to just turn my lease car in. I'll pay an extra $20 to just say,"here's your car back!"
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Permalink Reply by Michael Baker on
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Donna: Simple- affordability in the short term unless stores, if they are in the know can execute perpetual tactful follow up to succeed in a retained customer from Variable ops to Fixed ops. Been there, done that. To the humble disgrace of dealers, they do not align the two of Variable and Fixed. Call me for tips or e...
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