Adjusting to the changing F&I landscape

Like so many other areas in the auto industry in recent years, selling F&I products these days can be challenging, as numerous factors affect consumer perspectives and buying decisions. From electric vehicles and digital sales processes to inflation and longer lease and financing terms removing consumers from the F&I market for longer periods, it’s critical for dealers to adopt new approaches to maintain profitability and build customer loyalty. To help dealers navigate the turbulent market, Automotive News asked Gabe Garroni, senior vice president of insurance sales at Ally Financial, and Tony Wanderon, chief executive officer of APCO Holdings, for some insights and advice.

Q: What shifts are happening with the types of F&I products and services being offered in today’s marketplace? Are these long-term shifts?
 

Gabe Garroni: Although we don’t see any noteworthy or long-term shifts in the product suite itself, focus has significantly shifted to the consultative and training services we offer. Dealer needs can vary, but we’re coming across a common theme that centers on guidance, with compliance and safely navigating today’s more complicated marketplace. Additionally, service or customer retention and training in fixed operations has become a common request. We strongly believe these are long-term shifts in client needs and have made significant investments to provide ongoing support and expertise.

Tony Wanderon: While many of the changes we’ve seen play out already were in motion before the pandemic, they were accelerated by the pandemic – and many now are here to stay. First, and maybe most important, F&I products need to provide value to consumers. This means that the days of blindly offering the same options to each person are over. Suggesting the right mix of products, terms and coverages to provide optimal benefit for each consumer will drive higher customer satisfaction and, we believe, higher penetration for the dealer in the long term. That means well before customers sit down with an F&I manager, dealers must offer options for connected-car components and electric vehicles, consider what warranty coverage to include with a vehicle and find ways to educate consumers online and in showrooms about how they can help protect themselves from repair costs.

Q: What changes might be coming to the F&I products and services mix to align with EVs?
 

Wanderon: To align with the growing EV market, there will be changes to F&I offerings beyond the obvious starting point of having F&I products to cover EVs and their advanced components. EVs are more like computers on wheels, which means repairs can cost much more than those associated with internal-combustion-engine (ICE) vehicles. That means consumers face a lot of risk. These computer-like components expose vehicle owners to increased cybersecurity risks that they may not be aware of, so products built to provide identity-theft monitoring and to help protect consumers’ credit ratings when their vehicle is compromised will become more prevalent.

Garroni: As EVs have gained in popularity, the main product that needed adjustment was the extended-service contract. Most reputable providers have anticipated the growth of EVs and already made coverage enhancements to their service contracts to cover the additional components for EVs. The remaining product suite applies to EVs, just as it does to ICE or hybrid vehicles. However, the customer concerns and perceptions of risk may change as they enter the EV market. So it is important to identify any shifting attitudes and adjust your approach accordingly.

Q: What could the future of F&I look like with more of the buyer journey going virtual?
 

Garroni: With more transactions going the virtual route, dealerships may need to adjust their processes to align with virtual customers’ expectations. Customers want one transaction and don’t want to be handed off to multiple individuals during the process, so making it feel seamless and streamlined is important. The virtual customer also expects transparency. Therefore, providing information upfront is important so they can do research and feel more educated about the buying process. Finally, socializing your voluntary protection products early in the process makes customers feel more comfortable and more likely to purchase those products.

Wanderon: Delivering an efficient and engaging F&I experience will meet the evolving expectations of buyers in an increasingly digital world. Virtual product presentations became commonplace during COVID and have continued post-pandemic, but there’s more opportunity to present and educate consumers about the value of F&I products in a virtual experience. But dealers must continue to get better at transparent discussions about cost and more convenient documentation and delivery. As these discussions go virtual, regulatory and compliance measures will be needed to ensure that processes are being followed, along with adherence to legal and data privacy regulations.

Q: With longer lease and finance terms potentially taking customers out of the F&I market longer, what are some tips to help dealers maintain profitability?
 

Wanderon: Start by focusing on what products make sense for consumers. Making sure they walk away with the right mix of F&I products will increase the chances of creating a repeat customer, or the often-sought-after “customer for life.” Then, think about what products allow you as a dealer to create touch points with customers before the next vehicle transaction – things like prepaid maintenance should be top of mind. But beyond that, partner with an F&I provider that can help augment your business development center (BDC) efforts with timely customer outreach. This adds to the overall value of a customer and keeps your dealership top of mind when it is time for another transaction.

Garroni: There are three processes that a dealership can institute to help with this market shift. First, conducting a thorough customer interview to understand a customer’s needs and driving habits is essential. This will allow the F&I manager to best meet a customer’s needs with products and terms that can increase product penetration and profits. Secondly, the dealership should institute a process that introduces the customer to the service department and sets the first maintenance appointment. The retention of the customer’s service business leads to increased fixed operations profits as well as a higher probability of future vehicle purchases. Finally, it is essential to have a robust BDC to reach out to customers for trade-in opportunities or additional product sales opportunities.

Q: With affordability on everyone’s mind, what are some ways dealers might help customers prioritize the vast selection of F&I products available to them?
 

Garroni: When it comes to helping customers prioritize protection products, dealers can use several strategies. Begin by understanding the specific requirements and preferences of each customer. Thoroughly explain the benefits of each product and how it addresses potential risks. Offer tailored and personalized recommendations. And most important, offer educational resources and information about the full suite of voluntary protection products as early in the customer journey as possible. By employing these strategies, dealers can assist customers in navigating the selection of protection products, ensuring they prioritize the ones that offer the most significant benefits and align with their affordability concerns.

Wanderon: Return to the often-talked-about but rarely well-executed needs analysis. Learn about consumers’ driving habits, listen to how their lives may be changing, and look at what you know about them to give a presentation that includes the right mix of products for each customer. Also, don’t wait until late in the process to start talking about the value of F&I products. To do this well requires continual learning and development within the sales and F&I teams in a dealership.

Q: With consumers facing higher costs to lease and finance, how can dealers adjust their approach during the F&I stage of a sales process?
 

Wanderon: It’s key to introduce F&I products and educate customers about their value earlier into the sales process. Adding short videos to dealer websites about what F&I products are, which builds value early, can help develop awareness while customers conduct online research. Dealers should also consider creating a customer testimonial page on their websites.

Garroni: During the F&I stage of the sales process, dealers can make a few key adjustments to address the rising costs of leasing or financing vehicles. Dealers could provide a clear breakdown of all costs associated with the transaction. Transparency helps customers understand the financial implications upfront and make informed decisions. Dealers also can explore and offer a range of financing options to accommodate different budget constraints. Providing flexibility can ease the financial burden for consumers. It is also important to emphasize affordability during discussions with customers. By emphasizing long-term affordability, dealers can help customers make choices that align with their financial situations.

It also is important to focus on value-added products. Instead of focusing on upselling expensive add-ons, dealers should emphasize products that provide long-term benefits and peace of mind for customers. Finally, remember that customers expect expertise from auto dealers. This is an opportunity to provide counseling and guidance on managing finances. Doing so will help customers make responsible and informed decisions. Implementing these strategies will not only help customers navigate the rising costs of financing, but may also secure their financial well-being during ownership – and ultimately earn their repeat business.

Q: What are some of the ways dealers can demonstrate value with F&I products and services?
 

Garroni: First, provide quality products that have value and realize that the fundamentals still apply. The old tried-and-true evidence manual can provide real-life examples of how the purchase of voluntary protection products can provide peace of mind and save money in the long run. An evidence manual helps you tell a true story – and stories sell.

Wanderon: Finding ways to tap into the emotional and rational sides of a customer is most effective when working to build value in F&I products. A simple way to do this is to have sales and F&I personnel share stories of how F&I products have helped them personally. It’s even more powerful, though, to show consumer claims-paid details for other dealership customers. Devoting a web page to or printing out customer testimonials also can bring these stories to life. Having sales aids that explain how much common repairs could cost, how guaranteed asset protection (GAP) works and so forth also demonstrates the value of F&I products in a quantitative way.

Q: With consumers now adjusting their vehicle “wish list,” how does affordability affect the level of F&I products and services offered per vehicle sale?
 

Wanderon: Affordability challenges are touching all pieces of the vehicle purchase experience. As interest rates continue to increase and consumers roll more negative equity into purchases, there’s a squeeze on F&I. When factors like this are in play, training and development for dealership personnel is crucial, just to be sure that each deal is structured optimally and that dealers don’t squander opportunities to create customer value.

Garroni: Interestingly, at this point we don’t see any changes in product penetration, margins or the number of products sold per sale. It is a testament to the focus our clients have put into their customer journey and sales process and the value they build in the products throughout that process. The cost to service and repair a vehicle is up significantly from even a year ago, so the benefit of many F&I products is arguably higher than ever. That’s why a close review of your process, people and behaviors is critical. And it’s not something you do just once – it’s an ongoing process that creates opportunities to find small improvements again and again over time.

About the Panelists
 

Tony Wanderon

Chief Executive Officer, APCO Holdings (Home of the EasyCare, National Auto Care and GWC Warranty brands)

Wanderon has been a leader in automotive F&I since 1986, pioneering the development of several products. He also has served as president and chief executive officer of National Auto Care since 2013.

https://apcoholdings.com/

Gabe Garroni

Senior Vice President, Insurance Sales, Ally Financial

Garroni is responsible for sales, growth and strategic planning in the United States. Ally’s insurance operations include consumer products such as Ally Premier Protection, GAP and Every Day Protection Products for retail automotive dealers. He joined Ally in 2011 as an area sales manager.

https://www.ally.com/dealer/vehicle-protection-products/