Despite the ongoing inventory and parts supply challenges of the automotive industry, F&I profit potential has grown in recent years, especially since the pandemic began.

According to F&I data from StoneEagleMetrics, the average F&I gross profit per financed vehicle increased 24% year over year to $2,499 in December 2021.  The firm’s insight said this growth was greatly influenced by products, which contributed about 60% of the profit in December 2019, 2020, and 2021.

Whether it’s the need to protect higher mileage vehicles now in demand by consumers, better F&I education of products online and earlier in the shopping process, or more time being spent by F&I departments, there are many reasons why F&I continues to grow.

Expanded Products and Resources

The expansion of F&I solutions, protection products, and participation programs have been a key part of this growth, and dealers have taken note. This expansion of opportunity and profit potential has room to continue this trend, but it will only happen through the acceleration of F&I programs. This is a main reason for our decision to acquire AUL as another key growth driver for our dealer and agent partners.

This move was not made with what many consider a traditional consolidation strategy. It’s about growth, acceleration of existing resources, and growing our pool of talent to help dealers in their efforts to expand their businesses. Many dealers that were operating five to 10 dealerships a few years ago are now operating 20 rooftops. They need more resources and human capital, as well as an expansion of programs and offerings, to continue their growth.

F&I programs today include extended service contracts, guaranteed asset protection, and ancillary products to protect consumers’ investments in automobiles, recreational vehicles, and watercraft and powersports vehicles. In addition, dealer participation programs, training and technology solutions are also vitally important to dealers’ success. To help dealers continue to succeed, having a complete and robust set of solutions, as well as a network of industry professionals with the expertise to help navigate the changing environment, is a must. During the past six years, we acquired the former U.S. Warranty Corp., Revolos, and just recently AUL businesses.  

Continued Focus on Used and Higher Mileage

The right focus on used and higher-mileage vehicles is also a key component for dealership growth, with F&I products that can be fully supported through a network of general agents. 

With fewer new cars and trucks to choose from resulting from ongoing inventory challenges, more consumers have been pursuing deals on used vehicles. The sale of used cars and trucks means more consumers are seeking vehicle protection plans to keep older-model and even gently-used vehicles in top shape after purchase – further driving up the need for expanded resources and profitability for F&I products. Ultimately, the lowered sales volumes since the pandemic began means dealers are relying even more on F&I products to boost profit levels.

The average used car in America sold for $28,365 in April — an increase of more than $1,100 from March levels according to KBB. ² The continued rise in prices for used vehicles means consumers are relying on quality protection plans and F&I products even more today.

F&I Opportunities for Dealers Throughout 2022

While experts believe used vehicle prices will begin to trickle down as new-vehicle inventory climbs into 2023, the opportunity for F&I product sales will remain healthy. With this used inventory still in high demand entering 2022, F&I product trends that are expected to be in focus in the coming year include preowned vehicle service contract programs, and GAP, ancillary, and certified programs. 

Dealers tend to gravitate toward certified programs, such as limited warranties, because they offer numerous options relative to eligibility, coverage, and deductible options. Additionally, many certified programs offer dealers investment opportunities in the form of dealer participation programs.  

Ancillary programs are in high demand because they protect key elements of the vehicle and can be added individually, or as part of a combination program to complement the coverage a vehicle service contract program provides.  

Despite continued challenges in the industry, a continued focus on F&I product acceleration and program offerings, combined with more expert resources available, will help fuel further growth throughout 2022 and beyond for dealers.

Rick Kurtz is Protective Asset Protection’s SVP and chief distribution officer.