The automotive industry is experiencing a noticeable shift in consumer behavior and market dynamics, particularly in regard to Finance and Insurance (F&I) products. Of course, auto dealers are facing both challenges and opportunities in selling today’s F&I products, largely influenced by the current affordability situation and evolving consumer preferences.
One of the most pressing issues facing the industry is the impact of vehicle affordability on F&I product sales. According to a recent survey in the annual F&I report, 28.2 percent of dealers reported that the current vehicle affordability climate has slightly increased customer interest in purchasing F&I products.
This trend suggests that while some consumers are becoming more cautious about additional expenses, they are recognizing the value of protection in an era of high vehicle costs.
How The Affordability Challenges Shapes F&I Product Options
The affordability challenge is multifaceted, stemming from high vehicle prices, elevated interest rates, and general financial insecurity among consumers. In fact, 28.5 percent of dealers identified lack of awareness about F&I products as a significant factor influencing customers’ decisions to decline these offerings. This highlights a critical opportunity for dealers to enhance their educational efforts and demonstrate the long-term value of F&I products in mitigating the financial risks associated with vehicle ownership and maintenance.
Interestingly, the survey reveals that Vehicle Service Contracts (VSCs) are among the most popular F&I products being sold today, with 19.8 percent of dealers reporting them as top sellers. This preference for VSCs aligns with the growing concern over the cost of vehicle repairs and service. As vehicles continue to become more technologically advanced and complex, the cost of repairs has increased accordingly, making VSCs an attractive option for consumers looking to protect their investment and manage future expenses.
The complexity of modern vehicles is not just affecting repair costs; it’s also influencing the entire F&I landscape. The survey indicates that 12.9 percent of dealers see more technology in vehicles as both a challenge and an opportunity in selling F&I products. This duality reflects the need for F&I products that can keep pace with technological advancements while also addressing the increased repair costs associated with high-tech components.
EV Variable
In response to these challenges, dealers are adopting various strategies to adapt their F&I sales approach. The survey shows that 22.9 percent of dealers are focusing on increasing customer education on F&I benefits, while 22.4 percent are providing flexible payment plans.
These approaches demonstrate a shift towards transparency and customer-centric solutions, which are crucial in an environment where consumers are more cautious about their spending.
The rise of electric vehicles (EVs) and hybrid plug-in sales is another factor shaping the F&I landscape. With 17.3 percent of dealers seeing this as a challenge and an opportunity, it’s clear that the industry needs to develop F&I products tailored to these new technologies. This may include specialized service contracts for EV batteries or coverage for unique EV components, addressing the specific needs and concerns of EV owners.
The Need For Online Options
The survey also highlights a significant trend towards online F&I offerings. While only 5.5 percent of dealers currently see this as their biggest opportunity, the data suggests a growing importance of digital channels in F&I sales. With 25.6 percent of dealers allowing customers to shop for vehicles completely online, there’s a clear need to integrate F&I products seamlessly into the digital car-buying journey.
However, the transition to online F&I sales is not without its challenges. Only 10.1 percent of dealers reported that almost all of their customers purchased F&I product offerings online in the last 12 months. This indicates that while there’s potential in digital F&I sales, there’s still work to be done in making these offerings attractive and accessible in an online format.
The affordability crisis is also pushing dealers to innovate in their F&I product offerings. The survey shows that 19.3 percent of dealers are offering more affordable F&I product options. This trend towards more accessible products could help bridge the gap between consumer financial constraints and the need for vehicle protection.
Offering Additional Resources
Looking deeper into 2025, dealers are recognizing the need for additional support to adapt to these challenges. The survey indicates that 23.9 percent of dealers feel that more flexible financing options are necessary. This aligns with the overall theme of affordability and suggests that creative financing solutions for F&I products could be a key differentiator in the market.
Today’s auto dealership industry is trying to find more clarity when it comes to F&I product sales. The affordability crisis, coupled with technological advancements and changing consumer behaviors, is reshaping the landscape. Successful dealers will be those who can effectively educate consumers on the value of F&I products, particularly in light of increasing repair and maintenance costs. They will need to offer flexible, affordable options that cater to a wide range of consumer needs and preferences.
Moreover, the integration of F&I products into online sales platforms will likely become increasingly important. As more consumers turn to digital channels for vehicle purchases, dealers must find ways to present F&I options effectively in this space. This may involve leveraging interactive tools, video presentations, or AI-driven recommendation systems to help consumers understand and select appropriate F&I products.
The key to success in this evolving market will be adaptability. Dealers who can balance traditional in-person consultations with innovative digital approaches, while offering a diverse range of F&I products tailored to both conventional and electric vehicles, will be best positioned to thrive. By focusing on customer education, affordability, and technological integration, dealers can turn the current challenges into opportunities for growth and customer satisfaction in the F&I sector.
