2025 has already proven to be a year marked by economic turbulence and uncertainty. The only constant has been change, and the potential for significant shifts looms large.
Auto dealers find themselves at the center of various challenges, including the impact of tariffs, geopolitical pressures, and falling consumer confidence levels. To thrive in this environment, dealers must adopt a strategic game plan that focuses on navigating uncertainty while remaining consultative and customer centric.
The Impact of Tariffs on the Auto Industry
One of the most pressing issues facing auto dealers in 2025 is the potential impact of tariffs on the industry. The administration’s on-again, off-again tariffs have created a climate of unpredictability, with the possibility of new vehicles being priced at thousands above current sticker prices.
These tariffs, particularly those on imported vehicles and parts from Canada and Mexico, threaten to disrupt supply chains and increase costs for both manufacturers and consumers. As a result, dealers must be prepared for near-term changes in vehicle pricing and availability.
To mitigate the impact of tariffs, dealers should focus on diversifying their F&I product inventory and offering a mix of options for both new and used vehicles. With the potential for new vehicle prices to skyrocket, more shoppers may turn to used vehicles as a more affordable option. Ensuring a robust selection of high-quality F&I options that cater to used cars and trucks can help dealers meet this demand and maintain sales volumes while keeping customer service levels in place.
Geopolitical Pressures and Their Effects
Geopolitical pressures are another significant factor contributing to the uncertainty in the auto industry. Beyond just the trade wars, geopolitical tensions and shifting regulatory landscapes are all influencing the sector’s trajectory.
In response to these pressures, dealers should prioritize flexibility and adaptability in their operations, with an eye toward being more consultative with customers, rather than up-selling. F&I training programs are important for auto dealers aiming to position F&I products in a consultative manner because they equip dealership staff with the skills and knowledge needed to understand customer needs and preferences. Allowing them to offer personalized financial solutions and protection plans.
By adopting a consultative approach, dealers can build trust and rapport with customers, enhancing their overall experience and satisfaction. While also demonstrating the ability to prioritize flexibility and agility given the current economic climate. Effective F&I training ensures that staff can confidently present additions such as vehicle service contracts, GAP and ancillary products in a way that highlights their value and benefits, rather than focusing solely on sales.
The Right Mix of F&I Products
When it comes to new vehicles, certain F&I products can be particularly beneficial. Vehicle service contracts are essential, offering extended coverage beyond the manufacturer’s warranty and protecting customers from unexpected repair costs. GAP is another important product, covering the difference between the vehicle’s value and the remaining loan balance in the event of a total loss. Additionally, paint protection and interior protection plans help maintain the vehicle’s appearance and resale value. Offering these products in a consultative manner ensures that customers understand their benefits and feel confident in their purchase decisions.
For used vehicle buyers, service contract programs and ancillary products such as windshield protection and tire and wheel coverage provide significant value. Maintenance programs and limited warranties can also be beneficial for these buyers. Dealers should work closely with their F&I program administrator to ensure that their offerings are well-suited to the needs of pre-owned or even high-mileage buyers. Additionally, certified limited warranty programs can provide peace of mind and increase customer satisfaction.
Helping to maintain affordability is key. According to a recent report from Protective Asset Protection, in 2023, 35% of dealers reported that affordability concerns impacted customer interest in F&I products. By 2024, 60% of dealers reported offering more affordable F&I options, as high vehicle prices and interest rates continue to shape purchasing behavior.
Dealer Financial Health and Wealth Building
Maintaining financial health is also important for auto dealers navigating the uncertainties of 2025. One effective strategy is to implement wealth-building programs that enhance profitability and provide long-term financial stability. Dealer-owned warranty companies, for example, allow dealers to tailor their own F&I offerings retaining underwriting and investment income through their branded programs. This can boost profit potential and also enables dealers to consult with trusted financial advisers to maximize returns.
Integrating wealth-building programs into their business strategies allows dealers to diversify revenue streams and mitigate the impact of market fluctuations. This proactive strategy fosters stronger relationships with consumers, enhances brand loyalty, and increases the likelihood of repeat business and positive referrals.
Auto dealers must adopt a strategic game plan that focuses on navigating these challenges while remaining consultative and customer centric. When dealers diversify their inventory, prioritize flexibility, offer comprehensive F&I training, and implement wealth-building programs, they can overcome the challenges in today’s business climate.
The key to success lies in adaptability, resilience, and a commitment to meeting the evolving needs of consumers.
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