In today’s automotive market, consumers are facing severe affordability challenges when it comes to purchasing and maintaining vehicles. As car prices continue to rise and economic uncertainties persist, dealers must adapt their strategies to meet the evolving needs of their customers.
One key area where dealers can make a significant impact is through the strategic offering of F&I products, not just at the point of sale, but throughout the customer’s ownership journey.
The automotive industry has experienced significant shifts in recent years, with vehicle prices reaching all-time highs. According to recent data, the average transaction price for a new vehicle in 2024 is approaching $50,000, while used vehicle prices are hovering around $30,000. These steep prices have led to notable changes in consumer behavior, with many opting to hold onto their vehicles for longer periods of time.
The average age of vehicles on U.S. roads reached a record high of 12.5 years in 2023, up 40 percent compared to 2001 and 2.5 percent year-over-year. This trend reflects the improved durability of modern vehicles, and the financial constraints faced by consumers when considering a new purchase.
The Rising Cost of Vehicle Ownership
While the initial purchase price of a vehicle is a significant factor in affordability, the total cost of ownership over time is equally important. As vehicles age, the cost of maintenance and repairs tends to increase.
According to recent studies, the average annual cost of vehicle maintenance and repairs has risen to over $1,000 per year for vehicles older than five years. The increase in maintenance costs, coupled with rising insurance premiums and fuel prices, has put additional strain on consumers’ budgets.
In fact, a recent survey found that nearly 45 percent of respondents reported difficulty affording vehicle maintenance and loan payments, with this figure rising to nearly 60 percent among Gen Z consumers.
The Role of F&I Products in Addressing Affordability Concerns
Given these challenges, F&I products have become more critical than ever in helping consumers manage the long-term costs of vehicle ownership. These products, which include vehicle service contracts, GAP insurance, maintenance plans, and ancillary coverage, such as tire and wheel, can provide valuable financial safeguards for consumers while also creating additional revenue streams for dealers.
For dealers, offering the right F&I products can:
- Protect Customers: Help them prepare for planned and unplanned expenses.
- Enhance Customer Loyalty: By providing valuable services throughout the ownership cycle, dealers can strengthen their customer relationships.
- Generate Recurring Revenue: Many protection plans bring customers back to the dealership for service, creating ongoing income opportunities.
- Differentiate from Competitors: A comprehensive suite of F&I products can set a dealership apart in a crowded market.
- Boost Profitability: F&I products typically have higher profit margins than vehicle sales alone.
The Importance of F&I During a Vehicle’s Lifecycle
While the traditional approach is to offer F&I products at the point of sale, there’s significant value in extending these offerings throughout the customer’s ownership journey.
- Reduced Initial Pressure: Customers may be more receptive to considering additional products after they’ve had time to settle into their vehicle purchase.
- Increased Awareness of Needs: As customers use their vehicles, they become more aware of potential risks and maintenance requirements, making them more open to protection products.
- Addressing Changing Circumstances: A customer’s financial situation or vehicle usage may change over time, creating new opportunities for F&I product sales.
Tips for F&I Success Throughout the Customer’s Journey
In addition to offering F&I products at the point of sales, there are various opportunities throughout a customer’s ownership cycle to ensure they’re informed about your F&I offerings. When customers bring their vehicles in for maintenance or repairs, it’s an ideal time to discuss the benefits of protection plans. Dealers can utilize customer data to offer products that align with the customer’s vehicle age, mileage, and service history.
Dealers can additionally create attractive packages that combine multiple F&I products at an affordable rate; share informative articles, videos, and infographics about the benefits of F&I products and the potential costs of vehicle ownership without protection. Ensuring that service staff have the proper training and knowledge to effectively communicate the value of F&I products during customer interactions is also key.
The Bottom Line
As the automotive industry continues to grapple with affordability challenges, F&I products represent a valuable tool for both consumers and dealers. By offering these products throughout the customer’s ownership journey, dealers can help address long-term affordability concerns while building stronger, more profitable relationships with their customers.
The key to success lies in understanding the changing needs of consumers, developing comprehensive post-sale marketing strategies, and effectively communicating the long-term value of F&I products. By doing so, dealers can position themselves as trusted partners in their customers’ automotive journeys, helping them navigate the complexities of vehicle ownership in an increasingly challenging economic landscape.
In an era where consumers are holding onto their vehicles longer than ever before, the importance of protecting and maintaining these investments cannot be overstated. By embracing a holistic approach to F&I, and partnering with the right F&I provider, dealers can play a crucial role in making vehicle ownership more affordable and sustainable for their customers, while simultaneously securing their long-term success.
