The success of today’s leading auto dealers relies on their ability to adapt quickly and effectively to changing market dynamics. Successful dealers regularly review and refresh the relevance of the F&I products they offer to customers. By regularly reviewing their product portfolio and making adjustments, dealers can meet the diverse and ever-changing needs of today’s customers.
Coming out of the pandemic, the automotive industry witnessed a significant surge in demand for new or late model pre-owned vehicles. Demand was driven by several factors, including increased personal savings during lockdowns and a strong desire among consumers to replace their older vehicles with newer models equipped with the latest technology.
However, the economic landscape has shifted again due to higher interest rates, inflation, and a tightening labor market, leading to a notable increase in demand for used vehicles. This change in consumer preference necessitates a corresponding adjustment in the focus of the F&I products offered by dealers.
Evolving Consumer Preferences
The increased used vehicle demand has prompted an increase in prices of used units. According to Cox Automotive, used values increased 2.8 percent in July compared with the previous month.
F&I products for new vehicles often focus on protection plans that cover advanced technology features in modern cars. These include electronic systems, infotainment units, and various sensors that require specialized coverage.
However, used vehicle buyers tend to have needs such as engine and mechanical protection, as well as roadside assistance and emergency services. As a result, dealers should continuously evaluate and refresh their F&I portfolios to ensure they are aligned with current customer preferences.
Let’s explore these differences in greater detail.
Tailored Products
New vehicles, equipped with state-of-the-art technology, require specific types of protection plans that cover repairs and replacements for advanced systems. Products such as vehicle service contracts, maintenance plans, ancillary and GAP protection are popular among buyers of new cars, as they provide an added layer of security for their investments. Conversely, used vehicles, which have higher mileage and less warranty coverage from the manufacturer, necessitate F&I products that focus on mechanical breakdown coverage and other services that address potential wear and tear issues.
The type of powertrain in a vehicle also influences a vehicle buyer’s F&I needs. For instance, electric vehicles (EVs) and hybrids have different maintenance and repair requirements compared to traditional gasoline-powered cars. F&I products tailored to powertrain specific needs can include battery coverage for EVs, hybrid system coverage, and specialized maintenance plans. As the market share of BEVs and hybrids continues to grow, dealers must ensure that their F&I offerings are inclusive of these emerging segments.
Customer-based demographics also play a crucial role in determining the types of F&I products that will be in demand. For example, younger consumers might prioritize tech-focused coverage and flexible payment options, while older customers may value comprehensive mechanical breakdown protection and roadside assistance packages. By understanding the unique needs and preferences of their target audience, dealers can create a more tailored and effective F&I product portfolio.
The Benefits of Regularly Refreshing F&I Portfolios
By offering F&I products that align with the specific needs of their customers, dealers can enhance the overall buying experience and increase customer satisfaction. A satisfied customer is more likely to return for future purchases and recommend the dealership to others, thereby increasing customer loyalty and fostering long-term relationships.
F&I products are a significant and vital source of revenue for auto dealers. By regularly updating their product offerings to match current market demands, dealers can capitalize on new opportunities and maximize their profit margins. This proactive approach allows dealers to stay ahead of the competition and maintain a healthy bottom line.
A dealership that consistently offers relevant and high-quality F&I products is more likely to be viewed as a trusted and reliable partner by consumers. This positive reputation can lead to increased dealership loyalty and attract new customers who are seeking a dealership that prioritizes their needs and preferences.
The automotive industry is subject to rapid changes in technology, consumer preferences, and economic conditions. By adopting a dynamic approach to F&I portfolio management, dealers can quickly respond to these changes and maintain their competitive edge. The ability to adapt remains crucial in an industry where staying relevant and responsive to customer needs is paramount.
F&I Refresh Strategies
Dealers should constantly monitor market trends, consumer preferences, and technological advancements to identify new opportunities and potential gaps in their F&I offerings. This can be achieved through surveys, focus groups, and analysis of sales data to gain insights into the evolving needs of their customers. Much of this data can be obtained from a top tier product provider
It’s wise therefore for dealers to establish strong partnerships with F&I product providers that can enable dealers to access a wider range of products and services and of course market research. These collaborations can facilitate the customization of F&I products to better suit the specific needs of the dealership’s customer base.
Leading dealers also know that their sales and F&I staff need to be well-versed in the latest F&I products and benefits. Ongoing training and development programs can equip staff with the knowledge and skills needed to effectively communicate the value of all F&I products to customers. Strong F&I providers can partner with dealers to provide comprehensive training for dealership personnel and ensure that the customer is shown the products that best fit their needs
Use of Data
Lastly, dealers must utilize technology and data analytics to help track the performance of their F&I products and make informed decisions about which products to retain, modify, or replace. A data-driven approach can lead to more effective portfolio management and improved customer satisfaction.
In a continuously changing environment, the ability to adapt to consumer demands is essential for success. For auto dealers, this means regularly reviewing and refreshing their F&I product portfolio to ensure they are meeting the diverse needs of their customers. By adopting a proactive and customer-centric approach to F&I portfolio management, dealers can enhance customer satisfaction, improve profit margins, and maintain a competitive edge in the marketplace.