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Dealers See Bottom-Line Benefits Through F&I Product Portfolio Review

The world has witnessed drastic changes in just a few short months. The economic fallout from the COVID-19 pandemic has impacted nearly 50 million workers since the end of February, according to Mark Zandi, chief economist at Moody's Analytics in a recent CNBC Report.

While Moody’s also believes “the COVID-19 recession is over,” automotive dealers of every size should be taking this time to review every aspect of their business to ensure maximum readiness for when the economy truly turns positive again.


Everything from reviewing F&I training protocols to refining inventory strategies are top-of-mind for dealers today. What’s more, dealers should also be taking this time to review their complete lineup of F&I program offerings and portfolio of services to ensure they have the right makeup of value-added products for customers.


It all starts with identifying vehicle trends


The right F&I portfolio begins with understanding what people are buying. Sure, incentives are hot for new cars currently, but supply levels and aggressive offers mean the sale of used cars and trucks will dominate car lots for some time. In fact, According to PureCars data reported in TorqueNews, during the last week of May used vehicles represented 10 of the top 14 vehicles nationwide.


Many dealers realize the opportunity to cater F&I products around used vehicles. As noted in the 2020 F&I Trends Report, a survey of approximately 500 dealership executives across the U.S. revealed that 41.7% said more sales of used vehicles represents the greatest opportunity to sell F&I products, followed by more truck sales (36.6%), longer loan terms (28.9%), and more EV/plugin sales (23.7%).


Structuring the right F&I program


This means F&I products such as vehicle service contracts and ancillary protection products will be beneficial products to offer customers to ensure their cars are protected from damage and expensive repairs. And to boost dealer profits, it would be wise for dealers to review the type of participation program they operate within. Not all participation programs are designed the same, and programs such as Dealer-Owned Warranty Companies (DOWC) are designed where dealers can brand their own F&I products, boosting profits further.


Even though there is great profit potential, a DOWC often means the dealer must own and operate the program as well, including certain administrative duties. Fortunately, when dealers partner with the right provider, most of these administrative duties and support are handled by the provider, leaving the dealer to only worry about selling their own branded F&I products to the customer — something they should already be used to. This is especially critical since a recent survey4 presented to 1,500 dealer professionals showed that 29% said their current F&I products are “too much of an administrative burden” and “don’t offer enough margin for the dealership.”


Many experts believe the worst may be behind us in terms of the quick and sudden damage that COVID-19 did to the economy. The numbers are far from returning to normal, but economists believe growth may be right around the corner again. To prepare, dealers should be taking many steps to come out of the pandemic recession, and a complete audit of their F&I product portfolio and participation program review is a necessary step in this readiness phase.


Tim Blochowiak is vice president of dealer sales at Protective Asset Protection, a full-service provider of F&I programs offering vehicle protection plans, GAP, ancillary products, training and other services through vehicle dealerships.