The finance and insurance department is a key profit area for dealerships. For example, F&I accounted for over 24% of publicly listed Asbury Automotive Group’s 2022 gross profit.
Fintech startup Sunbit aims to help dealerships earn even more by offering consumer financing for F&I products. After piloting the financing program with a small group of dealerships, Sunbit is rolling it out to its entire dealership customer base.
"People want F&I products because it gives them peace of mind,” says Tal Riesenfeld (pictured, below left), Sunbit co-founder and chief revenue officer. “We help them to buy those products and not break their monthly budgets. Both the dealerships and people win, which is our main motivation.”
Sunbit was founded in 2015 with a focus on financing for non-discretionary expenses. Some 6,700 auto dealerships already offer the company's service-lane financing products. The advantage to the dealer is that a consumer can have a repair done that he or she otherwise could not afford.
Similarly, Sunbit financing makes a dealer’s F&I products, including extended warranties, service contracts, gap insurance and key-replacement policies, affordable to consumers.
In early 2022, Sunbit began piloting the F&I financing product at more than 100 of its dealership customers. Spartanburg Toyota in South Carolina was among the pilot group.
The dealership’s customers have had access to Sunbit’s financing for about six months. The dealership has done four transactions worth $14,895, John David Ledbetter, Spartanburg Toyota’s finance director, tells Wards.
Sunbit’s F&I financing platform “is tremendously easy (to use),” he says. “As car people, we are all about solutions for the customer. One more solution to help us get a little more done is always the best thing.”
Sunbit sent someone to train dealership personnel on selling the F&I product, adds Ledbetter. After that, the local F&I director trains any on-boarded personnel.
Unlike Sunbit’s service-lane loans, which are interest-free for three months but carry an APR of up to 35.99% for longer-term loans, the F&I loans carry no interest rate regardless of the length. Only six-, 12- and 18-month loans are offered, however.
”The F&I product never has an APR on it, unlike our other product,” Riesenfeld tells Wards. “The F&I department only knows how to sell with zero APR.”
Sunbit charges a fee to the dealership for each loan made. Riesenfeld declines to disclose the amount but says it’s in the single-digit percent and depends on the amount of the loan, its terms and the borrower’s credit score. He says such loans are not new for dealerships, but Sunbit’s new offering stands out because of the speedy processing and high approval rate.
Sunbit says the application process takes 30 seconds, and 90% of loan applications are approved. The loan originator is Utah’s Transportation Alliance Bank, which determines loan qualifications and terms of credit.
Spartanburg Toyota’s Ledbetter confirms that approval is fast, and “I haven’t had anyone turned down,” he says.
The technology can be accessed in-store through a tablet app or remotely through a customer’s connected device and also is integrated into an online checkout process.
“The value proposition for the F&I manager is, they get the money and there is no chargeback or recourse; if the customer defaults, we can’t go back to them,” says Riesenfeld.
While that might seem risky for Sunbit, Riesenfeld asserts that customers who buy F&I products are “self-selecting” and aren’t buying a discretionary product, which makes them lower-risk.
“The chances of you paying back for something you need are higher than the chances of paying on something you just wanted, such as a Gucci bag you bought online,” says Riesenfeld.
The fact that the products are purchased through the dealership’s F&I office adds another layer of protection, he says.
“There is a connection between the customer and the dealership brand,” says Riesenfeld. “It is very different than if you buy something online.”