The automotive finance and insurance (F&I) industry has officially entered a new, more challenging phase, where rapid post-pandemic growth has given way to a market defined by consumer affordability pressures and a strategic pivot toward a “deliberate omnichannel” customer experience. According to the State of the
F&I Industry in 2025 report released by Protective Asset Protection, dealers are grappling with a significant shift in consumer perception.
The comprehensive study, now in its sixth year, reveals a market that, while still resilient, is showing clear signs of maturation and moderation. While 62% of dealers still reported an increase in F&I product sales, the explosive growth seen in previous years has tapered off dramatically. The segment of dealers experiencing high growth (over 10%) plummeted from 31% last year to just 11% in the current report, signaling a clear cooling trend.
“Our 2025 report underscores a new phase for the automotive industry where market headwinds are beginning to take their toll,” said Rick Kurtz, Senior Vice President and Chief Distribution Officer for Protective Asset Protection. “Dealers are no longer just overcoming price objections; they are tasked with a fundamental re-education of consumers to demonstrate the vital value of F&I protection in a high-cost environment.”
The Affordability Crisis and the “Value Perception” Hurdle
The most significant headwind identified in the report is the rising total cost of vehicle ownership. This affordability crisis has created a new challenge for F&I managers: a “perceived lack of value” for their products. The report found that dealers cited this perception issue more than twice as often as they did in the previous year’s study. This shift is not driven by dissatisfaction with the products themselves, but by consumers scrutinizing every line item in a vehicle purchase that already strains their budgets.
Despite these pressures, consumers continue to prioritize protection for what matters most. The report indicates strong demand for products that cover major mechanical components, advanced technology features, and protection against total loss, such as GAP coverage. This suggests that while consumers are more cost-sensitive, they understand the risk of catastrophic repair bills or negative equity on their significant investment.
From Digital Race to Omnichannel Reality
The industry’s approach to technology has also evolved. The frantic race toward fully online, end-to-end digital retailing has been replaced by a more practical and effective omnichannel model. The report finds that the majority of dealers (over 63%) now offer robust online research options for F&I products but still require an in-person transaction to finalize the deal. This hybrid approach allows consumers to educate themselves at their own pace while preserving the value of the F&I manager’s consultation in the dealership.
This shift toward early-stage consumer education is one of the three critical pillars for dealer success identified in the report. By providing transparent information online, dealers can build trust and pre-emptively address value concerns before the customer even enters the F&I office. The other two pillars are product innovation tailored for affordability, especially for used vehicles, and the strategic adoption of technology.
Untapped Tech and the Rise of Wealth-Building
While dealers have embraced digital retailing tools, the adoption of Artificial Intelligence (AI) remains in its infancy. The report notes that only 8% of dealers are currently active users of AI. However, this nascent adoption rate represents a massive, untapped opportunity. AI holds the potential to personalize product offerings at scale, analyze customer data to present the most relevant protections, and ultimately help counter the value-perception hurdles by demonstrating a clear, data-driven need for specific products.
In contrast to AI’s slow start, dealer participation in wealth-building programs has become a mainstream strategy. The report reveals that 58% of dealers now participate in programs like reinsurance. This marks a significant shift from a conceptual opportunity to a practical standard for diversifying income streams and ensuring long-term financial stability in a market with thinning front-end margins.
Specialty Markets Undergo Normalization
The report also provides a detailed analysis of the marine, powersports, and RV sectors, all of which are navigating a period of post-pandemic normalization. The marine market saw an 11.19% year-over-year decline in registrations, while the powersports sector is experiencing a significant market correction with new unit sales declining by over 13%. However, the used powersports market remains a bright spot, showing a 2.04% increase in sales. The RV industry, meanwhile, is showing signs of stabilization.
Across all these specialty segments, F&I products are becoming increasingly crucial for offsetting lower margins and protecting consumers. As repair costs rise and the risk of negative equity looms, products like GAP and extended service contracts are essential for both dealer profitability and customer peace of mind.
Related Stories: