"That freaks a lot of people out," he said.
Selling something that a customer will end up canceling or just refinancing adds "friction," Kramer said. This ultimately wastes time to the point it eats into profitability, he said.
Forcing products results in cancellations, which leads to more 90-day to six-month chargebacks. It also means the dealership is taking calls, filling out forms and bogging down the accounting department. Instead of wowing new customers, "you're fixing problems that you didn't need to create," Kramer said.
It also gives a "false sense of your PVR" — gross income per vehicle retailed — and a dealership must ultimately sell more products to make up for the chargebacks.
"It's like a variation of a Ponzi scheme," Kramer said.
Pitching fewer products can actually boost sales within the F&I office, according to Kramer.
"We also find that by offering fewer overall products, customers purchase more of the fewer products that we do offer," he wrote in an email.
Adopting a policy of not selling unwanted products required two changes.
One was a culture shift. If the dealership culture doesn't encourage such sales, F&I staff won't push unnecessary products, he said.
The other involved realigning one aspect of the pay plan. The company left the traditional JM&A performance grid in place, but it added a weighted component based around the new-vehicle F&I team beating a Southeast Toyota Finance new-vehicle sales volume objective, according to Kramer.
"We had a few people that left over that," Kramer said of the pay plan change.
He called it an "extremely painful decision" because the dealership lost some of the nation's top performers.
But it was necessary for the company culture, Kramer said.
"We're better off having made it," he said.
Aligning the group as a team meant the staffers "started winning together," he wrote.
The dealership is more profitable and has fewer chargebacks, Kramer said. It's gone from intermittently beating the Southeast Toyota goal to doing so every month.
The sales staff also is happier because when customers wanted to cancel coverage, they would contact their salesperson if they couldn't reach the F&I department, Kramer said. This cut into time the salesperson could have spent selling vehicles, he said.
