By Arnold Tijerina, Director of Business Development, Dealer World

In this day of shrinking front-end margins on vehicles, you have dealers increasingly battling it out at auction for used car acquisitions and customers demanding a more streamlined buying process. Some dealerships are evaluating whether or not to eliminate one of the key positions that’s been in the dealership sales departments – namely the finance manager. This topic has picked up steam lately as dealers explore better ways to decrease transaction times to acquiesce to consumer demand for a better buying experience. The business office – powered by the finance managers – has been a staple in dealerships accounting for much-needed sales revenue, but is the end near? Here are some scenarios and the pros and cons of each one.

Continue with Business as Usual

Finance managers are responsible for badly needed revenue in each sale. A great finance manager can produce an average of $1,500-$2,000 of back-end revenue through finance reserve and back-end products. This position requires an individual that not only has sales ability but also the interpersonal relationship skills necessary to develop and nurture relationships with buyers. The ability to negotiate with a buyer and package a deal heavy with “A” paper in return for them taking on a few of your more difficult packages is priceless.

A skillful finance manager can look at a deal structure and know exactly which lenders will consider taking the loan and which won’t, as well as provide a much-needed second set of eyes for the sales managers when decisions of spot deliveries occur. They can bring additional sales through special finance situations and get those deals to stick. Not only do finance managers tend to stay around longer, but many are also knowledgeable enough to assume the responsibilities of a desk manager – when and if the occasion arises – which often isn’t the case in reverse. Finance is a delicate process as these individuals will typically have in-depth knowledge of compliance and red flag laws.

Crossing the “t”s and dotting the “I”s is incredibly important to not only safeguard a dealership from audits but also ensure that all of the necessary documents (stips) are secured and in place. No dealership wants to see a long heat sheet, and consumer advocate groups are increasingly cracking down on dealerships for calling customers who were spot delivered back in for rewrites with accusations of bait and switch – or yo-yo – financing. These individuals are essential cogs in the machine that is your dealership. This position has long been seen as a steppingstone or transition for salespeople to further their careers in the dealership towards management positions. The skills and knowledge acquired during an individual’s tenure in the business office are invaluable and necessary to be a successful sales manager.

Opponents of maintaining the status quo simply point to that customer on a busy Saturday who has been waiting two hours for an available finance manager while their salesperson babysits them and is unproductive. This bump in the road in the buying process is significant enough to transform what could have been a smooth and pleasant buying experience into one of frustration. This single pain point in the process leads us to our next scenario.

Salespeople as Finance Managers

The technology exists today that would allow dealerships to offer a single point of contact buying experience to consumers. The salesperson is typically the person who has built the most rapport with the customer and is better situated to continue the sales process past an agreement on initial sales. There’s no reason why salespeople can’t be trained on F&I products and how to sell them. Given the right training and tools, salespeople can guide a customer through the road to the sale, present figures immediately through existing software via a tablet with variable payment options including multiple terms, down payments, and even leasing options.

Soft pull technology can assist in making those presentations more accurate and realistic. The customer can tweak options with the guidance of the salesperson to come to the financing terms that suit their budget and needs without the salesperson having to go back and forth with some mystery person sitting out of view behind one-way glass. Once initial terms are agreed upon, the salesperson can collect any needed information from the customer, present the customer with finance products via a menu on the same tablet, and even guide them through signing all the required documentation necessary to finalize the sale with the software as a guide.

This provides a seamless buying experience for the customer and eliminates situations where a customer is simply waiting. It eliminates transaction times and increases customer satisfaction. And another benefit of adopting this model is that dealerships can save hundreds of thousands of dollars per year in salaries, benefits, and other employment-related expenses. In this model, a new position is created with an individual managing the relationships with banks and being a single point of contact for buyers. In addition, this person can handle those deals that are special finance or difficult to get bought.

Opponents of this model argue that technology by itself isn’t enough to protect a dealership’s financial interests. Red flag and compliance training would be required, and with dealerships seeing a turnover in their sales departments at upwards of 70%, chances are dealers would find themselves continuously training new salespeople in a never-ending revolving door. Even if dealerships compensate salespeople for back-end product sales at the same commission rates, salespeople often don’t have the knowledge or the time to become experts.

Extended warranties and service contracts can have many variables. Even though many dealerships are eliminating some finance products that have been staples in dealerships for some time (like window etching and rust protection), there are still many profit centers from finance products that require specialized knowledge and training to best represent and sell them. Putting all your eggs in a single basket may create a better customer experience upfront, but reliance on technology and removing that second set of eyeballs is a risky proposition.

What’s the Solution?

I know that change is inevitable. If anything, the pandemic has shown that consumers are increasingly demanding a better buying experience and if dealerships won’t provide it then other companies will. You see that they have been popping up and increasingly being backed with large money even though the technology exists for dealerships to provide the same experience. Perhaps a hybrid model is the solution in which we see “A” paper customers being offered this experience while those with more precarious deal structures, or with challenged credit, working with a traditional finance manager.

Either way, dealerships must identify the pain points in their buying process – whether online or in the dealership – and adopt technologies that will create a more seamless buying experience for their customers. Failing to do this will put a dealership at a disadvantage in this hyper-competitive market as consumers increasingly vote with their wallets and choose the better experience over the pricing-centric model we’ve been using for decades. It’s been proven that consumers will pay more for a better experience, so rather than complaining about low front-end grosses while discounting cars to be competitive, use a better customer experience as a value proposition. Cater to these customers, and you will find yourself in front of the pack with happier customers, increased revenue, and an easier path to customer acquisition and retention.