How To Structure Deals As An F&I Manager (Free Training)

In today’s fast-paced automotive industry, structuring deals effectively is more important than ever. Dealerships are faced with the challenge of meeting customer expectations, managing profit margins, and navigating increasingly competitive markets. Without a proper structure, deals can fall through, resulting in missed opportunities, frustrated customers, and lost revenue.

This comprehensive guide will explore the critical components of deal structuring, including why it’s essential, how to implement best practices, and the role of Finance and Insurance (F&I) managers in maximizing both customer satisfaction and dealership profitability. Whether you're a sales consultant, a manager, or part of the F&I department, understanding how to structure deals properly can give you a competitive edge and help ensure long-term success.

Key Takeaways

1. F&I managers must actively engage in deal structuring from the start to ensure profitability and customer satisfaction.
2. Effective deal structures begin with the right questions during the initial customer interaction.
3. Presenting customers with multiple payment options—cash, finance, and lease—can significantly enhance the negotiation process.
4. Collaboration between sales and F&I teams creates more opportunities for upselling finance products.
5. Knowing lender niches and guidelines allows for better terms, more profit, and smoother deal closures.

What is Deal Structuring?

Deal structuring refers to the process of designing the terms and conditions of an automotive sale to suit both the customer’s financial situation and the dealership’s profitability goals. In this process, finance terms, lease terms, and cash payments are tailored to the customer’s needs and the dealership’s objectives. The goal is to maximize revenue while ensuring customer satisfaction through transparent and flexible payment options.

A successful deal structure balances several factors:

• Customer affordability and preferences: Tailoring payments and terms to what the customer can manage.
• Dealership profit margins: Ensuring the dealership makes a profit by controlling loan terms, down payments, and interest rates.
• Lender requirements: Working within lender guidelines and loan-to-value (LTV) ratios.
• Flexibility: Providing options to meet a variety of customer needs, whether they prefer to finance, lease, or pay in cash.

Why is Deal Structuring Important for Car Sales?

In today’s digital age, most customers arrive at the dealership well-informed, with 80% of their research completed before they even step foot on the showroom floor. This means they already have a solid understanding of the vehicle they want and the potential financing options available to them. Therefore, dealerships must be equally prepared to offer well-structured deals that cater to these informed customers while still ensuring profitability.

Here’s why deal structuring matters:

• Increased profitability: Structuring deals with optimal terms allows the dealership to maximize gross profits, especially when selling additional finance products.
• Customer satisfaction: Offering flexible options and understanding customer needs helps close deals faster and reduces the likelihood of customer dissatisfaction.
• Reduced fallout: Poorly structured deals—such as starting with unachievable low monthly payments—often lead to breakdowns in negotiation, resulting in the customer walking away.
• Lender relationships: Understanding lender requirements allows the dealership to structure deals that are more likely to be approved, speeding up the financing process.

How to Structure Deals Effectively

Step 1: Training Sales Staff

The first step in effective deal structuring is proper sales staff training. Too often, salespeople start the negotiation process by asking the wrong questions. For example, asking a customer how much they want to spend per month can set a low expectation that is difficult to meet, forcing the dealership into less profitable terms.

Instead, train your sales team to ask questions that allow for a better understanding of the customer’s needs:

• "What attracted you to this vehicle?"
• "What features are most important to you?"
• "What research have you done so far?"

These questions help gather information that can be used later to tailor a deal that suits the customer’s preferences and budget, without setting an unrealistic payment expectation.

Moreover, train the sales team to focus on the entire deal rather than just the monthly payment. By presenting options that include cash, finance, and lease scenarios, the sales team can maintain control of the deal structure and ensure it’s profitable from the start.

Step 2: Offering Payment Options

Every customer should be presented with at least three purchasing options:

1. Cash: A one-time payment that completes the sale.
2. Finance: Present multiple financing scenarios starting at 60 months, with different down payment amounts.
3. Lease: Show competitive lease options with varying down payments and mileage terms.

Offering these options early on allows the dealership to maintain control over the structure of the deal, avoiding the risk of starting negotiations with a lowball monthly payment. For example, starting a finance offer at 60 months with a $500 down payment provides room for negotiation later in the process, while still maintaining profitability.

Step 3: Avoiding Common Pitfalls

One of the most common mistakes in deal structuring is starting negotiations with an 84-month finance term or a zero-down payment option. While these terms may seem attractive to customers, they often lead to negative equity and reduce the dealership’s ability to sell additional finance products.

To avoid this, always start negotiations with reasonable terms:

• 60 months maximum for the first pencil, allowing room to extend the term later if necessary.
• Minimum $500 down payment, which provides flexibility for the F&I team to adjust as needed while still maintaining a profitable structure.

This approach helps prevent customers from walking away due to an unachievable offer and keeps the deal structure solid from the beginning.

The Role of F&I Managers in Deal Structuring

F&I managers play a crucial role in the successful structuring of deals. Their expertise in finance, lending criteria, and product sales makes them invaluable assets in maximizing both profit and customer satisfaction.

Why F&I Managers Should Be Involved Early

F&I managers should not wait until a deal is submitted to them by the sales department. Instead, they should be involved from the start, assisting with the structure and ensuring it aligns with both the customer’s needs and the dealership’s goals. By collaborating early, F&I managers can:

• Identify opportunities for upselling products such as extended warranties or gap insurance.
• Negotiate better terms with lenders by leveraging their understanding of lender guidelines.
• Offer guidance on structuring finance or lease terms that ensure profitability.

When F&I managers are involved in the deal structuring from the beginning, they can make adjustments that benefit both the customer and the dealership, ensuring that deals are profitable and customer satisfaction is high.

Benefits of Proper Deal Structuring for Your Dealership

When deals are structured effectively, the benefits to the dealership are numerous:

• Maximized profits: Starting with well-structured terms ensures the dealership earns the most from both the sale and additional products.
• Faster deal closures: Proper structure reduces negotiation time and increases the likelihood of closing deals quickly.
• Increased customer loyalty: Satisfied customers are more likely to return for future purchases and refer friends or family.
• Enhanced lender relationships: Working within lender guidelines fosters stronger relationships, potentially leading to better rates and quicker approvals in the future.

Common Mistakes in Deal Structuring

Even experienced sales and F&I managers can make errors when structuring deals. Some of the most common mistakes include:

1. Starting with unrealistic payments: Avoid offering low monthly payments without considering the full financial picture.
2. Skipping critical customer interaction: Failing to ask the right questions early can lead to deals that don’t meet customer needs.
3. Neglecting lender guidelines: Ignoring specific lender requirements can lead to delayed approvals or even deal rejections.
4. Not involving F&I early: Waiting until the end of the process to involve F&I managers reduces the chances of maximizing profitability.

The Importance of Collaboration Between Sales and F&I Departments

One of the keys to effective deal structuring is collaboration between the sales and F&I teams. These two departments must work closely to ensure that deals are structured in a way that benefits both the dealership and the customer.

Why Collaboration Matters

When sales and F&I teams collaborate, they create a seamless process that ensures deals are structured properly from the start. This partnership allows for better communication, quicker deal closures, and more opportunities to upsell finance products.

Sales teams can also benefit from F&I’s expertise in lender guidelines, ensuring deals are submitted correctly and approved more quickly. In return, F&I managers can use the information gathered by sales consultants to tailor their product offerings and finance options to better suit the customer’s needs.

Best Practices for Restructuring Deals

In some cases, a deal may need to be restructured after the initial offer. This could happen due to changes in customer preferences, lender feedback, or the discovery of new information during the negotiation process.

Here are some best practices for restructuring deals:

• Stay flexible: Be open to adjusting terms as needed to accommodate customer needs or lender requirements.
• Involve the customer: Communicate any changes clearly and provide reasons for adjustments to maintain trust and transparency.
• Work closely with lenders: Understand each lender’s niches and guidelines to negotiate better terms when needed.

How to Use Customer Interaction to Structure Better Deals

Customer interaction is crucial for understanding their needs and structuring the best possible deal. Asking the right questions early on can provide valuable insights that help tailor financing and payment options to their specific situation.

Key Questions to Ask

• "What is your timeline for purchasing?"
• "Have you considered leasing as an option?"
• "How much research have you done on financing options?"

These questions allow sales consultants and F&I managers to understand the customer’s financial situation and preferences, enabling them to structure deals that are both profitable and satisfactory for the customer.

Additional Training

Structuring deals effectively is an art that requires collaboration, expertise, and flexibility. By training your sales staff to ask the right questions, involving F&I managers early, and presenting multiple payment options, dealerships can increase both profitability and customer satisfaction. The key is to maintain control of the structure from the start, avoid common pitfalls, and work closely with both customers and lenders.

When done correctly, proper deal structuring can lead to faster deal closures, better customer experiences, and long-term success for the dealership. By following these best practices, your dealership can stay competitive and maximize its potential in an ever-evolving market.

The art of deal structuring lies in understanding both the customer’s needs and the dealership’s financial goals. With the right approach, you can create win-win scenarios that benefit both parties, ensuring long-term growth and profitability for your dealership.

If you want to dive deeper into this topic, check out Product Prep Live. It’s packed with hours of videos, dialogue, and transcripts on everything F&I-related. Whether you’re just starting out or looking to sharpen your skills, Product Prep Live has you covered. Take a free test drive and see for yourself how it can help you excel in your F&I career.

Until next time, go get them!