The 80/20 rule applies to a lot of business factors at the typical dealership. I’m sure you can name 3 or 4 right off the top of your head.
One 80/20 rule that may not come to mind is in your F&I Department, where 80% of your deals reach maximum profit and 20% fall short.
We know this because we ran some audits on past lender decisions and found that 80% of F&I deals obtained maximum profit. For the remaining 20% of deals, the F&I manager used the wrong lender to maximize the dealership profit. That means the deal gets finalized with a lender that has a sub-optimal profit margin for the dealership.
For all the work that F&I managers do, it’s great to see they are nailing maximum profit 80% of the time.
However, how much does that cost you every month when they miss MAXIMUM profit on 20% of the deals?
We found that maximum profit misses ranged from a few dollars to over $1,500 in a deal audit.
Here are some stats from one 22 deal stretch.
- 15 deals were perfect – Maximum lender profit was achieved
- 7 deals were finalized below the Maximum profit available.
- 3 deals took an F&I loss when they would have been positive with the other lender decision
- The lowest amount of lost profit on a deal was $66.05
- The highest amount of lost profit on a deal was $1,504.09 (this deal closed at a $295 F&I loss when they should have used the lender decision that gave them $1,209 in profit)
- Total missed profit from the 22 deals $3,838.00.
- The Average missed revenue for the 7 deals was $548
- That’s a $174.45 average PVR that F&I managers missed for those 22 deals.
- The audit over several months showed the average ‘MISS’ was $274, so this example is well beyond the average. But even at $274, the misses on 20% of your deals really adds up.
80% success rate is fantastic, but how much do you think your dealership is missing by not capturing maximum profit on the other 20%. As you can see, it only takes a few misses to hurt your F&I profit maximization.
Audits are very telling, and this one is extreme, but we know dealers and F&I managers need real-time insights to capture all the profit opportunities.
That’s why ProfitIQ allows your F&I managers to easily see what lender decision will provide the dealership with the most profit in real-time. Even when a deal changes, ProfitIQ automatically recalculates profit from every lender to show which lender has the new maximum profit before the deal is closed and the profit opportunity is lost.
Having the tools to get 100% maximum profit is way better than accepting the 80/20 rule in your F&I dept.