RV dealers are finding their margins shrinking and fierce competition from other dealerships. RVsurance Director of Training Andres Camacho said the easiest way for dealerships to grow their bottom line is to increase gross profit through F&I.
Camacho said the benchmark most dealerships aim for is 9% to 10% F&I profit per deal. He said dealerships looking to improve on that and reach 12% to 14% should follow his five steps. He said his steps have proven to work in mid-size dealers.
Camacho defines mid-size dealers as those selling between 180 and 200 RVs a month with an average sales price of $35,000.
Step one, Camacho said, is to make F&I a part of the sales process.
“Quite frankly, if we do not start a deal correctly,” he said, “we are not going to finish it correctly.”
Camacho said 72% of new RVs are financed. If a dealership is only financing 35% to 40%, the dealer is missing out on potential income. Such dealerships might be losing business entirely to competitors with a stronger F&I program.
Salespeople should be discussing the budget during the interview process, Camacho said. They should not ask about the budget first. Standard questions regarding tow vehicles and the number of people who need to sleep in the RV are first. Camacho said the questions build relationships and foster customer comfort.
“(Budget) needs to be one of the last questions, so salespeople can take them to a unit that fits their budget, and gives them the ability to say yes,” Camacho said. “Talking about budget has to be a function of a salesperson’s job. If it is not, it is going to cost your dealership a lot of money.”
Step two in the process, Camacho said, is that only management should be writing deals.
He said this gives the sales manager or owner an opportunity to see what the salesperson has accomplished with a customer.
“Salespeople sometimes take the path of least resistance,” Camacho said. “They hear a customer is a cash buyer, and the rest of the process goes out the window. They do not ask the follow-up questions: is that cash, cash or are you getting your money from another lender?”
He said salespeople commonly recommend the lowest down payment and the longest loan term. Doing so, he said, leaves the RV price as the only area left to negotiate. A higher down payment and shorter term provide more room for negotiation within the F&I process.
Step three, Camacho said, is the customer commitment and handoff to F&I. He said consumers should be introduced to the F&I department on the day of the sale. That enables the department to gather any information needed to approve consumers for financing.
“You need to get a partial down payment and a signed purchase agreement,” Camacho said, adding that handshake deals are a thing of the past. “This commits the customer, and it commits you to delivering the unit. Now, they feel like they have bought something.”
Camacho said that following through on the step significantly reduces the likelihood that consumers will comparison-shop at another dealer.
He said having the finance manager introduce early on any products the service department might need time to install is important. The service department will be set up for success and make a positive impression on the consumers when the RV is ready for delivery.
Camacho said having the F&I department set clear expectations for what will happen next in the process is important. If the consumer is already approved, say so. If the deal needs to be sent to other lenders, let the consumer know that, as well.
Step four is to structure the deal for opportunity, Camacho said, not just based on rate or reserve.
“Chase the total value of the deal,” he said. “You will be more successful. The lowest rate is not always the best deal.”
Lower rates and higher reserves might seem like the best options at first, but Camacho said dealers need to review more. A company offering a lower reserve might provide more space on the back end with F&I products.
He said that understanding which credit bureaus potential lenders use is important for matching deals accordingly.
“I know there is cost involved in pulling multiple bureaus,” Camacho said. “You need to have the ability to pull others to maximize programs and know where to send the deal.”
Camacho said dealers need to make it easy for the consumer to say “yes.” He said developing a professional, consistent F&I presentation is the best way to instill confidence in a customer.
