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New Decade Sees Shift in F&I

The automobile industry is among the largest in the nation, and one of the industries driving the economy forward. According to the American Automotive Policy Council, the automotive industry is the largest manufacturing sector in the United States; and the Automotive Aftermarket Network estimates the value of the aftermarket segment exceeded $400 billion in 2019. As we emerge from a decade of increased regulation and rising interest rates, the auto industry is roaring into a time of skyrocketing vehicle prices and a shift in F&I in not only product offerings and predominant vehicle type, but most importantly, in technology.

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From a product standpoint, longer payment terms have become commonplace to help fit higher vehicle prices into monthly budgets by creating lower payments spread out over 84 or even 96 months. F&I profits can benefit from this trending consumer mindset, as well, since many new-vehicle buyers are focused on keeping their monthly payment low, and a nominal monthly addition is more palatable than incurring the total price of a vehicle service contract as a single payment (e.g. $10 per month feels more affordable than $840). Longer loan terms can also increase the market for GAP protection. What’s more, leases are increasing in popularity to help drivers get into more expensive cars, but with manageable payments. Leased vehicles also need protection options, which can include lease care, lease wear & tear, and traditional VSCs for higher mileage customers.

In addition, as the cost of new vehicles continues to rise, auto buyers are increasingly seeking used cars. While that trend may receive a mixed reception with dealers, it is actually good news for F&I teams. More used vehicles mean fewer vehicles with OEM coverage driving off the lot, and more opportunities to provide VSCs and protection products, including not only VSCs but finance-related products, as well. 

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With these changes, the most significant shift in F&I is the increasing demand for transparency by consumers. Car buyers are more knowledgeable and want more information prior to purchase of an F&I product. 

For example, there has been an increase in robust digital F&I menu offerings to allow for the demand of self-directed purchases in F&I. The buyer, knowing their own needs, is driving toward the best coverage for their particular situation. If you are not working with an administrator that offers a digital menu that is fully integrated with a dealer’s dealership management system, you are already behind. The process should be simple, streamlined and transparent, while presenting options to the customers that best fit their needs. 

With today’s car buyers completing almost all of their research online before ever stepping foot into a dealership, the value of transparency and convenience that digital retail provides is apparent. Consumers want an alternative to the traditional F&I process, on their own time, without spending additional time in the dealership following a vehicle purchase. The new decade will see a new kind of digital F&I emerge, one that is consumer driven and easily accessible beyond the walls of the dealership.  

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In tandem with the shifts in the market affecting products and vehicle type, we must focus on who we are selling to and their demands. It is vital the focus remains on the customer, first and throughout the transaction. The F&I industry must make sure consumers have the information they need to make decisions that are right for them. If we do that, we will not only cultivate trust and loyalty, but dealerships will flourish in an increasingly digital world, and we will all thrive through the roaring ’20s.

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