Today’s automotive industry continues to see noticeable changes in everything from consumer demand, behavior, and shopping patterns to the way operations are dealing with an ongoing shortage of inventory, parts, and labor. What’s more, the shopping process itself continues to evolve into more of a digitized experience. While the industry isn’t fully digitized the way we consume virtually everything else, we’re light years ahead of where we were back in 2015.

F&I product providers overall remain confident with their ability to manage through the increased parts and labor costs with specific product pricing increases. In fact, the price of replacement parts and the labor needed to install them rose last year and continues to list above 2021 levels, partly due to inflation. However, F&I providers continue to manage these increases along with their dealer partners.

F&I profits remain healthy

These costs are important to note because F&I sales continue to be an important profit center for the industry as a whole. Some of the largest auto retailers reported an increase of year-over-year F&I profits as high as 66% during Q4 of 2021. Also, depending on the type of participation program they’re involved in, their program can also dictate the level of profit dealers are realizing.

Aside from prices, the shopping experience itself is changing before our eyes, with the continued proliferation of digital retailing and a more digitized F&I process. Dealers have increasingly embraced digital-retail processes over the past few years, which benefits their finance departments by injecting more efficiency into the process – something consumers have long desired.

This is good news since consumers already are extremely accustomed to acquiring products digitally via popular e-commerce platforms. A plethora of training programs are now available to help dealers and their F&I departments get up to speed in how they offer F&I products and services in an online environment.

Continued focus on the customer experience

This is critically important since it provides car shoppers with education on F&I options earlier in the process, helping them make more informed decision from the comfort of their own home. It also leads to a customer experience that exceeds their expectations, which may even lead to greater long-term loyalty and engagement. Ultimately, a more digitized F&I process gives consumers transparency, convenience and speed — everything a dealer needs in order to sell a car and F&I benefits in a more expeditious manner.

Over the last year, more dealers are selling F&I products such as vehicle service contracts, appearance products, tire and wheel protection, prepaid maintenance and GAP coverage. In fact, the majority of dealers say their F&I sales are up between 5% and 10% compared to the previous year, according to a recent retailer survey of F&I trends2.

Key trends among specific F&I products

Most dealers today are selling F&I products such as tire and wheel (73%), exterior appearance products (72%), GAP coverage (68%), and vehicle service contracts (66%). Dealers say there are a handful of ways they can sell even more F&I products, including the ability to provide access to online financing (56%), offering F&I products that help with vehicle affordability (53%), and F&I products that are more geared toward the sale of used vehicles (48%).

In terms of selling more F&I products during online shopping, 54% of dealers say they still need better resources that offer pricing online, and 53% of dealers say they need resources that offer the ability for customers to select F&I product and coverage options online.

The majority of dealers say access to more F&I products designed specifically for used vehicles would be the most impactful overall to improving F&I product sales, as well as increased coverage for existing protection products like VSCs, and a more diverse set of F&I product options.

In terms of greatest opportunities for selling more F&I products today compared to a year ago, most dealers (55%) said more EV/plugin sales gives them the best chance. This correlates to the most frequent reasons cited by consumers for selecting F&I products – more technology features found in cars today and electrical components.

Each of these trends illustrate continue strong growth for F&I product potential and sales for today’s auto retailers of all sizes and focus of new/used.

Travis Wools is vice president of marketing and communications at Protective Asset Protection.