Guest commentary: Modern retail a boon for F&I revenue — if it's done right

Technology has allowed consumers to create a truly omnichannel car shopping experience based on their own daily lives. Modern retail delivers this ability to browse, research and then purchase online or in-store and it will only continue to gain in popularity.

However, some dealers worry online platforms will cannibalize F&I revenue. They argue it's easier for customers to click away or miss the value of products when they're presented only on a screen. Without face-to-face discussions, customers don't get good information about extended warranties or GAP insurance, for example.

Yet, CDK Global data shows introducing F&I products earlier in the process with proper product education increases F&I sales by 15 percent. The convenience of digital platforms creates an opportunity for dealerships to sell more products if they can convey the value.

A renewed focus on F&I makes sense as lots fill with vehicles again. Inventory shortages over the past few years led to record-making profits. This slightly diminished the way some viewed F&I as a gross profit booster. With inventory rebounding and discounts back in play, dealers are once again looking to F&I sales to deliver additional gross profit.

In almost every analysis, F&I pages are the least visited on a dealership's website because these pages lack content or are buried behind multiple clicks. A well-informed experience requires easily accessible product information.

A dedicated F&I page prominently linked to the homepage and a robust digital F&I menu on the dealers' site are solid ways to engage customers. Another option is to insert a slide into a vehicle's photo carousel with a list of recommended or popular products for that vehicle. Allowing customers to self-select videos on product features and benefits also can help deliver a well-informed experience.

Even with the growing popularity among car buyers for a modern retail experience, many hesitate to buy a car entirely online. These car shoppers are more comfortable buying from a reputable dealer where they can see the vehicle, take a test drive and speak with someone who can answer questions face-to-face. Yet, in CDK Global's 2023 Friction Point Study, 65 percent of shoppers said they spent 15 to 45 minutes waiting to just get into the F&I office.

When consumers can educate themselves either while waiting at the dealer or online before coming into the store, the F&I manager will be set up for success because the shopper will be prepared to talk about products. In turn, the F&I manager won't have to start from scratch and can prepare a presentation based on the customer's online activity and details gleaned during the sales process.

Upfront self-education also shortens the in-store process, which is a major pain point for consumers. Customers want to be at the dealership for two hours or less. Complete product education online means consumers can do heavy lifting research at home and spend less time in the F&I office.

Transparency earns trust

Dealerships still face an uphill battle earning customer trust. While 78 percent of dealers believe the car-buying process is transparent, only 19 percent of buyers agree, according to a 2022 Capital One survey.

Online and in-store F&I product transparency can help earn trust and more sales.

According to a report from APCO Holdings, some franchise auto groups see upward of 65 percent attachment rates on vehicle service contracts after the F&I office was transparent with the buyer about the cost and coverage.

Modern retail for F&I not a fad

It may be tempting to think of modern retail as a phase, but there are no signs of a slowdown.

The benefits of a convenient, transparent and shorter car buying process are too valuable as CDK data shows any transaction taking over two hours leads to a significant drop in a dealership's Net Promoter Score. To continue driving F&I growth, complete online product education that speaks to the value and benefits, introduced early and often in the process, sets the F&I office up for success.