New-vehicle affordability promises to dog dealers and consumers into 2020. Automotive finance experts say creativity in the finance-and-insurance office is called for to keep customer payments manageable, but much of what determines a customer's ability to pay happens online ahead of time, and on the sales floor.
With higher-than-ever transaction prices, straining customer budgets isn't likely to pay off. Instead, helping select more affordable models at lower trim levels will give the F&I department a better chance to be profitable.
Stretching loan terms is often one of the methods F&I managers employ to make a vehicle more affordable — but that often just extends how long a customer is out of the market. Tony Dupaquier, director of The Academy, an F&I training center in Austin, Texas, suggests financing F&I products off the retail installment sales contracts, or talking to customers about bi-weekly payments, before resorting to longer loan terms.
The closer the monthly payment is to a customer's budget, the easier it is for F&I to sell protection products on the financing, says Dupaquier.
"What we find a lot of times is customers come in with a certain budget in mind, and they go into it with the sales team and the sales team sells them a different vehicle," Dupaquier said. For example, if the most a customer can do is $500 per month, "they'll do the $650 car, and that budget is already pushing the customer's limits — it's already difficult for F&I."
With online tools and research, customers can determine their budgets and find vehicles that reasonable fit within that fiscal boundary.
Starting with top dealership management, stores should help customers in the long run by tweaking sales practices and adopting a new mindset: Stretched budgets leave little room for extras such as F&I products.