This article was featured in the December 2021 print issue of F&I Showroom.
Today more than ever, it’s critically important to train dealership staff to give consumers the right information in a compliant manner. When we work with dealerships, we tend to see sales and F&I staff make the same mistakes.
The best way to ensure that your staff maintains compliance is through proper training. In addition, take the time to sit in occasionally and listen to sales and F&I presentations. The most common mistakes we see and where staff need the most training are as follows.
Using the Term Warranty Incorrectly
Sometimes salespeople will use the word warranty when referring to a vehicle service contract (VSC). This is a definite no-no. If the word warranty is in the product, the dealership is not legally allowed to sell the product to the consumer. Warranties must be free of charge. It violates the Magnuson Moss Warranty Act to interchange the words “Warranty” and “Service Contract.” You could be subject to state and federal enforcement action, potentially unfair and deceptive practice claims, and potentially be held liable to cover repair costs. Scare you? It shouldn’t. It should help you ensure that you and your employees are using the correct verbiage and terminology when properly describing products to the customer. It’s no different than telling a customer the car is red when it’s yellow or that it’s a premium trim model when it’s a mid-range trim model. The difference is knowledge. Knowing what you don’t know, but will be held liable for, is critical.
Today, it is becoming common for independent dealerships to offer warranties with vehicles that have a certified pre-owned (CPO) status. Warranties are a great value add that gives your dealership a competitive advantage and provides customers with peace of mind and higher levels of customer satisfaction.
However, sometimes staff will use the word warranty when referring to a VSC because it’s a commonly used word that the average consumer understands. Using the wrong word in this situation can lead to big misunderstandings, especially if the consumer walks away believing that something on their vehicle is covered that isn’t. Ultimately, this results in higher levels of customer dissatisfaction and bad reviews for both the dealership and their F&I product vendor, as well as the potential federal violations I mentioned above.
During F&I presentations, it’s important to clarify the difference between a warranty and a VSC so the consumer does not think they are getting a warranty when they purchase a VSC, or vice versa, when the customer believes that the warranty that came with their vehicle offers the same benefits as a VSC.
Using the Term “Bumper to Bumper”
When explaining the benefits of a limited warranty that comes with a vehicle, F&I managers sometimes use the term “bumper to bumper.” This is very misleading. Not even the manufacturer warranty when a vehicle is brand new provides bumper to bumper coverage, so saying that your limited warranty provides bumper to bumper coverage is just wrong.
To the average consumer, the term “bumper to bumper” implies that everything is covered. If you are selling a VSC that does cover literally everything, maybe the term can be used, but personally I recommend not using this term during an F&I presentation.
Instead, I would have F&I managers take the time to clearly explain what is covered with a limited warranty and what is not—the same with VSCs. Sometimes, I ask dealers when do they make their best decision—when they have more information or less information? Inevitably, the answer is “more information.” Your customers are the same as you. The more information you give them, the better decision they will make, and the more likely that decision will be to purchase a product that gives them a level of coverage they feel comfortable with.
Selling Products the Customer Doesn’t Need
Many F&I managers are still not doing a thorough needs analysis with every customer. These days it’s important to tailor F&I presentations to individual needs. For example, don’t sell a customer a five-year, 100,000-mile contract when they only plan to keep the vehicle for two years.
If your only goal is to sell products to make money, regardless of your customers’ needs, at some point your customer will realize they were taken advantage of. Not only will they resent you for selling them something they didn’t need, but they will also leave you a bad review and tell their family and friends to never purchase from you.
If you value your dealership’s reputation, hold your F&I managers accountable for conducting a needs analysis and tailoring presentations to individual needs.
Another common area where dealership staff makes mistakes is in quoting payments. It’s a pretty common practice to give some wiggle room in the initial quote, so the F&I manager doesn’t have to bump up the estimated payment ceiling when they factor in pricing for F&I products.
This practice is not only unethical but also illegal. Yet many dealership staff have no idea that what they’re doing is wrong. Let’s face it, laws and regulations change all the time and vary from state to state and even on the local level. It’s difficult to keep up. Ideally, your F&I partner is keeping you updated and on the straight and narrow with this information. Additionally, they should be offering guidance on the right and wrong ways to advertise vehicle and product information, especially when payments are included in your advertising.
When a car shopper arrives at the finance office, there should be no surprises. If you introduce F&I products early in the car-buying process, the consumer will be prepared for a higher payment because you’ve already explained the value to them.
The good news is that more technology is becoming available that allows your customers to calculate their own estimated payments right down to the penny, factoring in state and local taxes and fees.
When quoting payments, the math has to work for your customer. When you tell them the price of the vehicle, what the payment is, what the terms are, and what the interest rate is, your customer should be able to “do the math” to get to the same payment as you’re presenting.
If you’re unsure of how to maintain compliance while implementing transparency in your F&I department, ask your F&I partner for guidance and training. Your partner should be able to help train your staff and provide materials to help educate your customers.