Automobile

Calif. car dealership pay plan breaks down sales, F&I silos

The approach is paying off.

In 2019, before the new pay plan was created, Niello’s F&I departments sold an average of 1.3 products per vehicle. In 2021, the first full year under the new plan, that rose 69 percent, to 2.2 products sold. In 2021, average gross income per vehicle retailed from F&I, without reserve, jumped 68 percent compared with 2019, Gingrich said.

Gingrich pointed out another benefit to the change: Selling more F&I products generates more fixed operations revenue because customers have to go to the dealerships’ service departments to get items covered by service contracts repaired.

“So it’s also a customer retention tool,” he said.

While hard to quantify, Gingrich said he firmly believes the gains in product sales and gross income per vehicle retailed stem from sales reps “planting those F&I seeds” during vehicle walkarounds and test drives.

“As they go over a car, they talk about upgraded paint technology or a nicer wheel package as well as protection programs for them,” he said. “In addition, it’s more efficient for the F&I managers because now they have to cover just five other products, for example, not eight, because three of them were essentially sold upfront.”

And when salespeople do great product presentations, price objections decrease because customers get excited about protecting their expensive vehicles, Gingrich added.

The approach also has turned out to be a career-building tool because it reveals which salespeople excel at selling products. That helps management determine whom to promote when finance manager positions open up, he said.

“In the end, you have to be sure salespeople get a piece of the F&I action and measure F&I managers’ performance in terms of [gross income per vehicle retailed] without reserve, then build compensation plans around those metrics,” Gingrich said. “That’s what drives sales and turns salespeople into F&I advocates instead of F&I killers.”

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