Rising used-car prices shouldn't hurt F&I

Jamie LaReau covers auto dealers for Automotive NewsJamie LaReau covers auto dealers for Automotive News
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The cost of used cars will keep rising this year. But that doesn't mean customers won't have the funds to buy those pricey F&I products on the back end.

The National Automobile Dealers Association expects the used-car supply to remain tight, keeping prices up. In some vehicle segments, such as minivans and near-luxury vehicles, prices could increase by 3 percent or more from last year, said Jonathan Banks, NADA's executive automotive analyst.

So, if people are paying more than ever for a used vehicle, would they still have the funds or financing to buy F&I products?

According to Banks, data show that last year dealers sold many F&I products, even to those paying for high-priced used vehicles.

"I think dealers have figured out how to explain to consumers the reasons for buying those products," Banks said. "I don't see rising used-vehicle prices hurting those F&I sales in 2012 either."

Banks speculated that perhaps as dealers focus more on customer service, used-car buyers feel the same as new-car buyers in the way the dealership treats them. Indeed, many dealers say their used-car buyers are given the same treatment and offered the same amenities that new-car buyers get.

Services that were once reserved for new-car buyers, such as special vehicle service clinics, now also are extended to used-car buyers at some dealerships.

It stands to reason if a customer wants a service contract or roadside assistance or some other F&I product, dealers will find ways to get it financed, offer an acceptable price and make it happen.

F&I is a big profit generator no matter where it comes from. As Banks said, "Buying used isn't a dirty word anymore."

You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on Twitter

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