Top 4 Mistakes Dealers Make When Choosing an F&I Partner

Elevation Insights subscribers,

In the ever-evolving automotive landscape, selecting the right Finance and Insurance (F&I) partner is pivotal for a dealership's success. However, we often see common missteps that can impact long-term profitability and operational efficiency. In this edition of Elevation Insights, we highlight the Top 4 Mistakes Dealers Make When Choosing an F&I Partner and offer guidance on how to avoid them.

1. Overemphasis on the Administrator’s Name Recognition

It's easy to get swept up by a well-known administrator’s reputation. While brand recognition can be comforting, it should not be the sole factor in your decision. A reputable name doesn't always guarantee the best terms or support for your dealership.

Challenges with Large Administrators:

• Corporate Bloat: As companies grow larger, marketplace consolidation can lead to inefficiencies and slower decision-making.
• Diminished Customer Service: Service quality often declines as the focus shifts towards managing a larger customer base.
• Limited Flexibility: Larger companies may struggle to customize solutions quickly due to rigid processes.

Advantages of Nimble Partners:

• Customization: Smaller, agile partners can tailor their services to better meet your specific needs.
• Speed: They can move quickly on deals and adapt to changing circumstances with greater ease.

What to Consider Instead: Evaluate the administrator’s performance metrics, customer service, and the specific needs of your dealership. Focus on the value they bring rather than just their name.

2. Narrow Focus on Admin Fees

Admin fees are an obvious cost factor, but many dealers overlook additional expenses such as ceding fees, loss adjustment costs, and trust account charges. These can significantly impact your bottom line.

Hidden Costs to Watch Out For:

• Ceding Fees: Charges for transferring risk to the reinsurer.
• Loss Adjustment Expense: Costs associated with processing and managing claims.
• Trust Account Fees: Fees from banks that hold your funds in trust accounts.

Our Advice: Perform a thorough cost analysis considering all potential fees, not just the headline admin fee. This will give you a clearer picture of the total financial commitment involved.

3. Inadequate Wealth Management Strategies

Many dealerships don’t leverage the full potential of their earned premiums and B accounts due to suboptimal wealth management. Choosing a wealth manager who lacks transparency and a proactive strategy can result in missed growth opportunities.

Key Factors in Choosing a Wealth Manager:

• Transparency: Ensure clear communication about fees and performance.
• Strategy: Look for a wealth manager who can adopt an aggressive approach tailored to your dealership’s goals.

Tip: Regularly review your wealth manager’s performance and align their strategy with your dealership's evolving financial objectives.

4. Lack of Comprehensive Dealer Goals and Planning

Some F&I partners promise support but fail to deliver on detailed dealer audits, strategy sessions, and execution planning. This can leave you without a tailored approach to meet your specific dealership goals.

Steps for Effective Planning:

• Dealer Audit: Conduct thorough evaluations of current practices and outcomes.
• Strategy Sessions: Hold detailed meetings with F&I managers to understand unique challenges and opportunities.
• Execution Plans: Develop and implement customized plans to achieve your dealership's goals.

Remember: Effective F&I partners will take the time to understand your dealership's needs and work closely with you to develop a practical plan for success.

Final Thoughts:

Selecting the right F&I partner requires more than just considering the surface-level factors. By addressing these common mistakes, you can make more informed decisions that align with your dealership’s long-term goals.

If you have any questions or need further insights, don’t hesitate to reach out. We’re here to help you navigate these complex choices and drive your dealership towards greater success.

Best Regards,

Chad Staples President, Elevation Insights 602.677.6323, [email protected]

Feel free to reach out for further clarification or assistance in implementing these strategies. We are committed to your success and look forward to helping you make the best F&I choices for your dealership.

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