Credit concerns, affordability and threats of a trade war didn't slow new-vehicle sales and F&I profitability in 2019 as many predicted. Yet experts such as Cheryl Miller, senior vice president and general manager for Dealertrack F&I and Titling Solutions, said a streak of negative automotive finance trends such as longer loan terms, higher levels of severe auto loan delinquencies and higher-than-normal interest rates helped shape 2019, presenting dealers and lenders some headwinds heading into a new year.
In addition to these headwinds, 2019 saw wider interest in education, with consumers researching finance options and F&I products online and increased attention on F&I training academies.
Here are some of the year's highlights:
Customer-facing F&I product content: Companies such as Cox subsidiary F&I Express partnered with a competitor, dealership management software provider DealerSocket, to push more F&I product information online for customers and F&I managers. Finance and insurance software provider RouteOne is piloting digital menus that F&I managers can send to customers before and after car deals.
Emerging/updated training academies: Zurich North America, Safe-Guard Products International, Allstate Dealer Services and Protective Asset Protection added or expanded the digital components of their programs, offering training that managers can participate in without leaving the dealership. Other program changes include an emphasis on selling service contracts and catering product presentations to individual customers.
F&I products for electric vehicles: F&I product companies Axiom, Protective Asset Protection and EFG Cos. launched F&I products specifically for EVs. At the beginning of 2019, the landscape for these products was relatively sparse.
Lengthening loan terms: Loans for new cars and light trucks continued to grow in 2019, with 84-month loans setting records. In the third quarter, 84-month loans represented 7.1 percent of the 3.6 million cars financed in the U.S., J.D. Power data shows, up from 4.2 percent in the third quarter of 2015.
Severe delinquency rates rose: Severely delinquent auto loans, or loans on which payments are 60 days or more behind, rose 9 percent through November 2019, according to credit bureau Experian. Subprime accounts that were delinquent rose 9 percent in the first 11 months of the year.
"That's a trend people are watching," Miller said. "Anytime delinquencies go up, there could be a tightening of lending in the marketplace."