The third quarter of this year ended with a bang for both new and used powersports dealers, with unit sales growth up 27.3 percent. The 3Q Powersports Business/BMO Capital Markets dealer survey showed 69 percent of dealers were above plan for the year. Of the survey respondents, 83 percent are single-store operators and the majority carry a wide variety of powersports products. Both new and pre-owned unit sales were strong, with 1 in 5 dealers reporting that F&I sales were very strong.
What happens when those strong sales aren’t so strong? According to the survey results, 84 percent of respondents were concerned about the US political climate and another 63 percent were most concerned about the pandemic. When asked specifically about the presidential election, write-in comments reflected that dealers believe a Democratic win would negatively affect business.
So let’s take a quick check on our current situation. The US continues to suffer from the coronavirus. In fact, the number of new cases recorded each day has ballooned from fewer than 40,000 in September to over 100,000 in early November. And scientists are cautioning against a larger winter surge, as people are forced inside due to cold weather. Clearly, COVID-19 is not going away anytime soon.
Now let’s unpack some of the data behind the strong sales data. The government stimulus package in the second and third quarter, coupled with work/school at home and decline in traditional vacations prompted buyers to turn to ATVs and other recreational vehicles. To help things along, low interest rates made powersports a financially attractive option to capture more of those stimulus dollars.
Where are we now? While the Federal Reserve has signaled their intent to keep interest rates low, the traditional winter down-turn for motorcycles will likely occur. Some categories of ATVs and recreational vehicles could remain strong. But it is unlikely that another stimulus package will be approved before inauguration day. Will your fourth quarter sales take a turn for the worst?
Leaving money on the table
Let’s revisit the survey data point regarding F&I revenue. One in five dealers said F&I sales were very strong. Really – only 1 in 5? Hurray for the one dealer – he is maximizing the revenue potential of each sale. The other four dealers could be leaving a lot of money on the table at the close of each sale. While not every buyer will purchase a protection product, we can certainly do better. And if the Q4 sales do hit a dip, the additional revenue could mean the difference between a black or red quarter.
The steps to maximizing F&I revenue are fairly simple and easy to incorporate into your sales process. For new units, attaching solid, value-add protection products can make that holiday ‘sale’ price a better deal for the consumer and the dealer. If you are trying to move inventory to make room for new 2021 bikes, value-add protection products optimized for each customer’s needs can make that buyer feel even more secure in their purchase.
For used bikes, vehicle service contracts attached to good, solid units can produce several percentage points of revenue, while also increasing the perceived value of your inventory. Cash-strapped buyers are also better candidates for financing when a protection product is attached.
If you’re struggling with F&I penetration, maybe it’s time to retrain your team on how to conduct the customer interview, use a consultative approach to the product presentation – pairing product benefits with individual needs, and how to overcome the most common objections.
With more than 40 years helping dealers achieve their F&I profitability goals, EFG Companies has the right training and F&I solutions for you. Whether you need an online rehash or in-depth in-person training at your dealership, we can turn your team into Top Performers. Contact us today to learn more about our training services.