According to the experts, the chip shortage creating the inventory problem will continue throughout 2021 and possibly into early 2022.
Eventually, new vehicle supply will return to normal, and used vehicle prices will level off and fall back to the norms. I’m also positive that if you are reading this article, you are doing everything humanly possible to find and secure sales inventory from every potential source.
That being said, it may be a little refreshing to think about how you can increase profit on the vehicles you are selling. Five minutes of not thinking about inventory could be the perfect mental break and help you grow your F&I profit on the vehicles you are selling.
Customers that are buying, new and used, are looking to protect their purchases with protection products. Thus, GAP and service contract sales are rising.
It’s great that customers are buying these products, but we also know lenders treat upsells differently. Some cap the profit well below what a customer is willing to pay for the protection, while others let you max out the profit. Sometimes the LTV requirements get in the way of selling protection products profitably.
I know what you are thinking; any good F&I manager will find and secure a profitable deal.
Unfortunately, our audits show that 20% of deals get placed with a sub-optimal lender decision. 20% remains true; before, during, and after, the world changed with Covid and inventory supply issues.
More protection product sales mean more changes to each deal as your F&I team successfully sells them. Adding complexity to a deal shouldn’t make a difference, but it does.
When a change gets made, the various lender decisions are often not fully recalculated to see where or how they can capture any additional profit. Our audits show that dealers can capture between $40 and $120 in ADDITIONAL F&I PVR just by the F&I team placing the deal with the correct lender decision every time.
The beautiful part is that it is less work for the F&I managers because ProfitIQ automates the calculations and organizes the decisions based on profit maximization. When a product is sold and added to the deal, every lender decision gets updated with the new structure and evaluated for maximum profit. It’s like your F&I team is in a ten-story stair climb race, but they now get to start on floor 6 or 7instead of the ground floor. They are guaranteed to finish the race and win the extra profits for your dealership every time.
Inventory may be restrained for many months, so let’s make sure you start capturing the maximum available profit on the vehicles you do sell.
If you are interested in learning more about ProfitIQ and ready to start capturing the many $1,000’s most dealerships F&I teams are missing every month, please reach out to us at – sales@creditiq.com
