F&I sales up at 60% of car dealerships, Protective Asset Protection finds

Sixty percent of dealerships have generated higher finance-and-insurance product sales this year, according to the 2022 Protective Asset Protection F&I Trends Report.

Twelve percent of retailers saw F&I sales volume rise more than 10 percent from 2021, according to the F&I product provider. Another 48 percent increased sales by 5-10 percent, which Protective's Distribution and Training Senior Vice President Rick Kurtz called "very healthy."

F&I sales were unchanged at 22 percent of dealerships, and the remainder were down 5 percent or more year-over-year, Protective said in the report.

With fewer vehicles being sold in 2022 than 2021, the increase in F&I product sales is material and meaningful, Kurtz said.

Multiple factors contributed to the increase.

The decrease in vehicle volume has actually helped dealership F&I departments sell products, he said.

"There's more time to interact with the consumer," Kurtz said, creating what he called "less pressured" conversations that permit more time to help customers understand which products best suit their needs.

Tight vehicle supplies have also helped drive F&I sales by prompting dealerships to introduce higher-mileage older models into inventory — "things that previously maybe would have never been retailed," Kurtz said. Customers recognize they're buying a vehicle that is out of the manufacturer's warranty while needing to cover vehicle technology, he said.

Increasing vehicle technology and complexity have driven demand for F&I products; customers aren't sure how to address problems with such technology.

"In my neighborhood, I don't see too many people out working on their cars in the driveway on a Saturday anymore," Kurtz said. "It's very, very sophisticated."

Rising vehicle prices, increasing interest rates and overall inflation have also created an "increasingly stressed" situation for consumers, according to Kurtz, often making them less confident in their ability to cover a total loss or mechanical repair.

Protective Asset Protection looked specifically at the effect of higher prices on Guaranteed Asset Protection. The F&I product covers the difference between a vehicle's value reimbursed by a traditional auto insurer and the balance on an auto loan in the event of a total loss.

Kurtz said the need for GAP has increased as prices rise and customers become exposed to longer loan terms and higher interest rates. Consumers see it as a hedge against an "upside-down situation," he said.

But higher prices yielded mixed GAP results across the industry, according to Protective. Thirty percent of dealership decision-makers polled said their customers were asking for more GAP policies because of higher vehicle prices. A similar-sized group — 27 percent of dealership personnel — said higher prices led to reduced GAP demand. Another 36 percent reported no change in GAP.

"It's probably a little bit of a tough debate for the consumer," said Travis Wools, vice president of marketing and communication at Protective.

Some customers see their risk and conclude they need GAP, Wools said. Others might say, "'I probably could use this product, but I just can't afford to take on anything more into the payment,'" he said.

Customers could buy GAP at 68 percent of dealerships, according to other data from the Protective study.