Dealers grapple with online F&I

Finding strategies to incorporate finance and insurance products online may be the most challenging aspect of creating a holistic digital retail experience.

Many dealers offer educational materials about F&I products on their websites, but not everyone is willing to go all the way. Concerns over lost profits and removing the F&I manager from the process have made some dealers hesitant to put too much online or allow customers to outright purchase those products independently.

David Pryor, president of F&I product provider Safe-Guard, said most digital retailing solutions don't have F&I products baked in, which means most digital retailing solutions are incomplete.

"We've been talking about digital retail in this industry for a long time," he said. "And everybody said, 'It's coming, it's coming, it's coming.' I mean, it's getting closer. It's still not fully here."

Finding where protection products fit into an online transaction is the biggest roadblock to the digital retail process, said Safe-Guard Marketing Director Kelly Noren.

Dealers that leave F&I products out of their digital retailing platforms have two choices, Noren said: Include educational material to prepare customers for an F&I pitch in-store or keep the products off their websites altogether.

The first route, if properly transitioned at the store, could increase F&I product sales. The second option could add more friction at the store than ever before, where consumers enter brick-and-mortar locations believing a deal is completed only to be confronted with a sales process that seems to negate the work accomplished online.

"It's almost worse than the friction that exists today in the finance office," Noren told Automotive News. "You're developing a process that should add convenience and transparency to the consumer. It should save time. But now, you're just slamming the door.

"Now, we've got challenges that we didn't have in the store."

Incorporating F&I products and processes is the last bastion for dealers before they can truly sell a car online, according to F&I experts, dealers, trainers and F&I product providers.

Nearly 3 in 4 customers prefer to get deal-specific information online, including F&I products, according to Cox Automotive's 2018 Future of Digital Retail study. About half of the 2,550 in-market shopper respondents said they wanted to structure the deal online themselves.

Customer demand that affects digital retailing varies by market, says Mo Zahabi, senior director of product consulting for Cox, which offers online retailing software. Part of what's influencing demand is simply the awareness that digital F&I product purchases are even possible.

"It's up to the dealer to really drive the concept of digital retailing," Zahabi said. "Not every dealer does a really good job advertising the fact that that's an option at the dealership."

F&I product information belongs inside the dealer's digital retailing process, he said, and should allow customers to go as far as they want to in the car-buying journey.

But what's really slowing the progress of digital F&I product presentations, consultants said, is profitability.

F&I profits account for a hefty portion of dealerships' gross profits. F&I makes up about 4 percent of revenue at the nation's top public retailers but accounts for roughly 30 percent of their gross profits. AutoNation Inc., the No.1 public retailer for F&I profit per vehicle, pegs $1,350 of its nearly $2,000 per-car F&I profits on product sales.

"There's going to be a natural resistance," Pryor said. "If you go to a dealer and you say, 'Hey, look, we've got this great solution, but the profitability is only half of what you had before' — that's really going to slow down the adoption."

Ritch Wheeler, vice president of training at American Financial & Automotive Services, said the industry needs to rectify its problem with placing F&I product information online, but he added that a fully online F&I product pitch-to-purchase scenario without input from the F&I manager would likely result in mistakes and lost profits.

"There's a certain percentage of customers that are going to get so deep into the process, they're going to speed right past the F&I offerings if we don't do something about it as an industry," he said.

To avoid being left behind, Wheeler said, F&I managers need to introduce products earlier in the process — even if that pitch occurs online.

"We have to figure out a way to still give them a tailored, personalized presentation on our protective products digitally," he said. "You can do it with screen-sharing technology. You can do it through Webex, Zoom — even FaceTime if you have to."

Educating customers on F&I products on dealer websites can be a challenge. Emailing back-and-forth between an F&I manager and customers would be a waste of time, Wheeler said, and closing the chatbox is the first thing customers will do on a dealership website.

So where does the F&I product information belong on a dealership website? Some dealers argue the information should go on the pages where customers spend the most time — the vehicle details pages.

SpinCar, which provides virtual walk-arounds for websites, launched an F&I product merchandising tool at last month's NADA Show. F&I product information, which includes text and video content, is embedded into a vehicle detail page.

The current version of the software does not include F&I product pricing or purchase abilities, though executives said the next iteration could introduce those elements at the dealers' discretion.

There are F&I software providers today that offer remote F&I product sales. Ruddy Brito, CEO of Mastria Auto Group in Raynham, Mass., allows customers to price and purchase F&I products remotely through the digital retailing process Mastria Fast Lane. Customers mostly opt to finish the deal in-store, and F&I managers still have an opportunity to sell to customers.

"That process went from three hours in the dealership and maybe 10, 15 minutes waiting for F&I ... to maybe an hour [and] 30 minutes," Brito said.

Companies such as Darwin Automotive, the software that powers Mastria's online solution, provide dealerships data on the customer journey. For instance, Brito said, if a customer lingered on a page featuring information about an F&I product but opted to not purchase it, the F&I manager in-store could use that as a talking point in the F&I office. The group, which carries eight brands among six stores, sells about 6,700 vehicles, new and used, per year.

Brito said he will "reevaluate and revamp" the way that he does business because customers are demanding change.

"I don't necessarily want to wait for the manufacturers to impose or force down a solution because I think we'll be way behind," he said.