In today’s competitive Australian automotive market, dealerships are fighting harder than ever for profitability. While much of the focus is placed on new car sale margins, service retention, and used vehicle sales, there’s one critical area that is often overlooked: the finance and insurance (F&I) department.
For many dealerships, finance should be a powerhouse of profit. Instead, mismanagement, poor processes, and a lack of strategy are silently eroding margins — costing some Australian dealerships millions each year. Here’s why.
1. Using an external broker
Many dealerships are choosing to use external brokers. Although they think this is efficient, it actually creates a disconnect between the client
and their business. By having finance inhouse you have another person having a conversation with the client and who can generally build more report than a salesman. Salesman thinks if a client doesn’t ask them for finance that they don’t need it when in fact they just don’t trust a salesman or is trying to control the sale.
*82% of cars sold in 2024 were financed.
2. Lack of Staff Training and Turnover
The F&I department requires specialist skills — yet many dealerships treat it as though its an easy service to provide. Salesman believe they are the centre of the clients world when in fact clients lack trust in sales staff and will trust a finance specialist more. Staff turnover remains high in many dealerships and the quality of sales staff is poor and often are thrown into the deep end without proper training on sales techniques such as report building, booking clients in for test drives or even just time management skills.
Poorly trained salespeople miss upselling opportunities, fail to structure deals competitively, and introduce clients to finance effectively. A low finance penetration rate (percentage of cars sold with finance arranged by the dealership) could be costing you hundreds of thousands of dollars annually.
3. Inefficient Processes and Technology
Australians expect a fast, seamless buying experience. Yet, in many dealerships, the finance application process is slow, paper-heavy, and disjointed, especially when they use an external broker. If customers are left waiting too long or have to repeat their information multiple times, they’re likely to get frustrated — and walk.
Progressive dealerships are using digital F&I platforms, bringing finance in-house, and integrated CRM systems to streamline the buying process. Those who haven’t adapted are leaking both customers and revenue.
4. Underselling Finance
Many dealerships and certainly sales staff are underselling finance or valuing its importance in the sales process. Dealerships who focus more on weekly payments seem to be the more successful than those that focus just on a price. In today’s economic environment consumers are budget conscious and can relate more to a weekly value over a total spend hence why the importance on representing a weekly price.
The Hidden Cost of Mediocrity
It’s important to understand that the financial hit isn’t just in lost commissions. Poor F&I performance can lead to:
- Reduced customer engagement (they are focused on finance first and either go away or the dealership sends them away to secure)
- Increased sales cycle times
- Higher advertising and marketing costs to replace lost sales
- Reduced conversions
Over the course of a year, even modest improvements in finance penetration and product upselling could mean an additional $200,000 to $1 million to the bottom line for a medium-sized Australian dealership.
What Should Dealerships Do?
- Focus on Finance: Work with partners who will help you build your finance department and their business.
- Invest in Regular Training: Focus on product knowledge, and soft sales skills a non-negotiable, ongoing focus.
- Audit and Upgrade Processes: Regularly review your finance workflow for bottlenecks and inefficiencies especially with your sales staff.
- Leverage Technology: Adopt digital finance platforms to speed up approvals and improve customer experiences.
- Strengthen Lender Partnerships: Build strong, collaborative relationships with multiple finance providers.
- Incentivise Customer Outcomes: Align sales bonuses to customer satisfaction, finance income per sale as well as profit.
Final Thoughts
In an era of razor-thin margins and intense competition, dealerships can no longer afford to let the finance department operate on autopilot. In Australia’s evolving regulatory and consumer landscape, a professional, compliant, and customer-centric F&I department isn’t just a nice-to-have — it’s a major profit centre.
Ignoring it could be one of the most expensive mistakes your dealership makes.
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