The finance and insurance office is one of the most important departments of a dealership, both as a profit center for the store and as a resource for customers financing a vehicle acquisition and then protecting that investment during ownership.
As executive director of the Association of Finance and Insurance Professions, I’ve spotted these top trends:
First, the F&I function is an integral component of the vehicle-acquisition process. It will not be relegated to the past anytime soon. To survive, however, both the people and its processes must move in sync with the dramatic changes driven by the proliferation of virtual commerce and electronic consumerism.
The near-term F&I sales outlook is good, both in volume and in average income per sale. Post-recession consumer demand, coupled with an election-year economy, will generate brisk vehicle sales and solid F&I production numbers through the first quarter of next year.
In addition to vehicle information, the solicitation of aftermarket products, typically addressed during the F&I process, will be augmented by “canned” presentations available at in-store kiosks or online. General Motors is among those with programs being beta-tested or in place.
Advancements in dealership, lender and vendor software, bolstered by growing acceptance among consumers, will move the F&I processes closer to “paperless” transactions.
The trend toward financially prequalifying buyers will continue. The result will be a better ratio of shoppers-to-buyers for the sales staff and a dramatic improvement in the ratio of F&I “turns” to prospective lender “turndowns” for bad credit.
Regulatory challenges present the most ominous thunderclouds on the horizon. Inquiries into dealer practices by the Federal Trade Commission and the solicitation of car deal-related consumer complaints by the Consumer Financial Protection Bureau will continue into the foreseeable future.
By increasing the variables of an already-complex transaction, the regulatory changes will raise the potential for more errors, raise the cost of compliance and endanger certain profit margins and profit sources, such as dealer reserve in which a store, as compensation for facilitating a loan and doing the paperwork, affixes an additional percentage rate to the lender’s interest rate.
Consumer advocates and governmental agencies will maintain pressure to either severely limit or establish a fixed-dollar amount for dealer reserve, or eliminate it.
The electronic means for dealers to satisfy anti-identity-theft compliance requirements will keep growing.
Credit insurance will continue a slow decline, but will be augmented by debt-cancellation products such as involuntary-unemployment protection.
Faced with increased compliance scrutiny and improved cash flow, the number of franchised dealers seeking to AFIP-certify their F&I staffs and key managers will continue to grow.
David Robertson is executive director of the Association of Finance and Insurance Professions. He can be reached at [email protected].