Building stronger F&I revenue streams: Strategies for today’s dealerships

A variety of economic factors are prompting consumers to keep their vehicles longer, which is driving down new-vehicle sales – and crimping dealership revenue. But dealerships can make up for that lost revenue by putting more emphasis on selling finance and insurance (F&I) products, such as extended warranties and theft-prevention technology, that offer customers financial protection as well as peace of mind. Debbie Zettel, Senior Vice President of Sales Operations at Peoples Choice Warranty, provides some strategies that can help dealers generate solid F&I revenue streams.

Q: With vehicle inventories low and prices and interest rates high, customers are keeping vehicles longer. What new F&I products, services and revenue streams can dealerships tap in times of fewer new-vehicle sales?
 

Debbie Zettel: In the current market, dealerships can leverage extended warranties to meet customer needs and generate revenue. As customers keep their vehicles longer, the likelihood of mechanical issues rises, making extended warranties – also known as service contracts – a crucial offering. These warranties extend beyond the standard manufacturer’s warranty and cover various repairs and services. They also provide customers with peace of mind and added value.

Extended warranties also play a vital role in customer retention. With coverage for repairs and services, customers are more likely to return to dealerships, which fosters long-term relationships and potentially leads to future vehicle sales. Moreover, these warranties often include additional perks like roadside assistance, trip interruption and rental-car coverage, which enhance the overall ownership experience and differentiate dealerships from competitors.

Partnering with reputable third-party extended warranty providers, like Peoples Choice Warranty, ensures that dealerships can offer exceptional service, significantly enhancing customer satisfaction and loyalty while driving revenue growth.

Q: The transition to electric vehicles also changes the way vehicles are sold and serviced. How must dealerships adapt to address these changes and maintain or even increase F&I revenue?
 

Zettel: Electric vehicles (EVs) are revolutionizing the automotive industry, shifting the focus from traditional cars to technology-driven innovations. For dealerships to remain relevant and successful, they must adapt to these changes. A critical aspect of this adaptation is an educated salesforce that knows the differences between EVs and internal-combustion engine (ICE) vehicles in terms of operation, maintenance and benefits.

As EV adoption grows, sales teams need to understand the unique concerns of EV buyers. These include things such as battery life, charging infrastructure and environmental impact. Educating customers about how EVs can enhance their lifestyle, reduce their carbon footprint and offer long-term cost savings is essential. Doing so not only helps achieve sales targets, but also builds customer trust and satisfaction.

EVs typically require less frequent maintenance than ICE vehicles, due to their simpler mechanics and no need for oil changes. This shift necessitates a rethinking of dealership revenue models. Offering additional services – such as software updates, battery health checks and comprehensive extended warranty programs specifically tailored for EVs and hybrids – is an effective strategy. These specialized services help offset the reduced income from traditional maintenance required by ICE vehicles and help ensure that dealerships can maintain a strong revenue stream while supporting the growing EV market.

Q: The pandemic greatly accelerated the transition from in-person to digital retailing. What opportunities does this create for dealerships in terms of new F&I products and new revenue streams?
 

Zettel: For many dealerships, aftermarket products represent more than 50 percent of their gross profit and integrating those products into the customer journey can lead to improved penetration. A well-thought-out, custom digital marketing campaign is the first step in a solid sales process and marketing plan.

From marketing messaging to website content to showroom floors, showcasing the value of aftermarket products can lead prospects to value the product as much as the vehicle. Imagine a marketing campaign that asks customers if they’d like a 200,000-kilometer warranty on their next vehicle, which could lead to prospects that are motivated by such a product.

Q: The significant increase in auto thefts throughout Canada has generated great concern for consumers. What can F&I departments offer in the way of products and services to help address their concerns?
 

Zettel: The surge in auto thefts across Canada has become a major concern for consumers. Recent data indicates that a vehicle is stolen every five minutes. According to the Insurance Bureau of Canada, auto theft claims costs averaged $556 million annually between 2018 and 2021.

To address these concerns, F&I departments can offer a range of products and services designed to provide financial protection and peace of mind for their customers. One of the most effective solutions is guaranteed asset protection (GAP) insurance. When a vehicle is deemed a total loss, the primary automotive insurance company pays the current market value of the vehicle. The customer may have a balance owed after such a settlement. This is where GAP insurance comes in; it helps to reduce, or in most cases eliminate, the balance owed on a loan or lease.

Dealerships also can provide advanced anti-theft systems such as GPS tracking, immobilizers and alarm systems. Vehicle-etching services also are effective. By etching the vehicle identification number on windows and other parts, it becomes more difficult for thieves to resell the vehicle or its parts.

Q: The transition to digital transactions also suggests that retailers will have to become more digitally savvy. What sorts of partnerships are most valuable to retailers as they make this digital transformation?
 

Zettel: As complicated as the internet and digital presence are, the reality is that the road to a sale hasn’t changed much. It used to involve traffic to your store, ups and b-backs, then connecting with a representative.

With an online store, the process is similar: It’s about traffic to a site, first-time or returning visitors and connecting to the staff, which results in sales. The difference is that now users don’t have to depend on a manager and a desk log.

If dealers can track everything on their website, they know exactly how many people visited, who connected and where they came from, then improve their results through targeted marketing.

Dealerships should not undertake this digital transformation alone. Forming strategic partnerships is essential. One notable example is the partnership between Peoples Choice Warranty and Zymbyo, an Ottawa-based company that provides high-quality digital marketing campaigns for dealerships. This collaboration focuses on leveraging a transparent and results-oriented approach to help dealerships grow their sales and maintain accountability.

ABOUT THE PANELIST

Debbie Zettel
Senior Vice President of Sales Operations
Peoples Choice Warranty
With more than 35 years of experience in the insurance industry as a chartered private risk and insurance advisor, Zettel has earned a reputation for exceptional leadership. She has managed high-performing sales teams, driving remarkable growth in the automotive extended warranty sector in Canada. To learn more about Peoples Choice Warranty, visit www.pcwwarranty.com or email [email protected].