The Online F&I Dilemma
The Online F&I Dilemma

Much has been made of the move toward a fully online car-buying process, leaving dealers, agents, product providers and administrators to wonder whether the F&I office could be next. To learn whether online sales of F&I products is a realistic prospect, P&A magazine polled a number of experts in the field and quickly learned there is no one prevailing opinion.

Some believe the F&I process should move online, offering consumers the option to do everything but sign the final paperwork and take delivery of their vehicle from the comfort of their own home. Others believe that, while offering information about F&I products upfront gives multiple benefits to car buyers, the sale should still come only after a consultation with a trained F&I manager.

“There is a lot more direct-to consumer availability. No one has figured out at this point how to tap the customer buying the vehicle,” says Tony Wanderon, CEO of Westerville, Ohio-based National Auto Care Corp. (NAC). “Online financing and product sales are coming. It’s a matter of who’s going to be the first to do it. Will it be a third party? A credit union or bank? Can the customer pay for it all with one transaction? How do you get the disclosures out there, with [differing] state requirements? There’s a lot of things in the back that create challenges.”

“Digital technology is changing everything about how the automotive retail industry operates — from car sales to the connections dealers make with customers, even to how they interact with customers in the showroom,” says Raj Sundaram, co-president of Lake Success, N.Y.-based Dealertrack. “Consumers want to be empowered and dealers are leveraging technology to enable digital retailing.”

There is no denying that consumers are spending more time online before purchasing big-ticket items, including vehicles, and they are interested in getting information on more than just the make, model, trim level and options. Our experts agree that many have the desire to learn more about financing terms and protection products as well.

Rob Berger, executive vice president for Wise F&I in St. Louis, is one advocate of the “more is more” approach to online F&I.

“Absolutely, an F&I provider should provide consumer-facing product information in support of their products sold by automotive dealers,” Berger says. “For two reasons: No. 1, customer service for existing contract holders — so as to ease the claim or cancellation process by providing simple yet informative tips and guidelines — and No. 2, product-benefit value enhancement. F&I products offer great value to consumers. But many times, that value is lost or misunderstand by the consumer. Anything that we, as F&I product providers, can do to elevate the value proposition of F&I products at the consumer level has to be a good thing. Being online — where all the consumers are — is the logical place for this information.”

“The job of an administrator is to provide service to the dealership and their customers,” agrees Jon Anderson, senior vice president of sales and marketing for Warrenville, Ill.-based American Guardian Warranty Services Inc. (AGWS). “The online part of the administrator’s business provides an excellent way to assist the customer in locating service or information on their product. In most cases, the service starts with the dealership that they purchased the plan from. But in some instances, the online presence of the administrator can help the customers. Some examples of those are roadside assistance, policy and coverage information, starting a claim while traveling, or perform policy transactions such as payments and cancelations.”

“Selling F&I products online is probably where dealers will be at some point in the future,” notes Travis Wools, marketing director for Protective Asset Protection in St. Louis. “How far out into the future depends on the advancement of purchasing vehicles online. At this point, most in the automotive industry are aware of the impact Millennials are going to have on the car-buying process into the future, and this appears to be taking more of the purchase process to the online channel. With this shift, it only stands to reason that eventually some portion of the F&I process has to take place online — how much or when remains to be seen.”

At IAS, also based in St. Louis, Director of Training Joe St. John worries that an information overload could do more harm than good for consumers.

“An administrator’s scope is so broad that a consumer directed online presence might not make a ton of sense,” St. John says. “The administrator’s online focus should be primarily directed toward supporting agents and, in turn, their dealers. There are so many variations and customizations in the product world that an online, end user-focused presence for an administrator could create confusion and cause headaches. The potential for adding value is eclipsed by the potential for misunderstandings and negative outcomes. Administrator websites should clearly display the company’s contact information in the event consumers turn to the Web for customer support information or questions on a product warranty.”

The sticking point, says Kelly Price, is where to draw the line between providing the education consumers demand without undercutting F&I producers. “There is a difference between promoting, educating and selling,” says the president of National Automotive Experts (NAE) in Strongsville, Ohio. “Today’s buyers have become quite vocal about their desire to have more information. There have been numerous surveys conducted and published that tell us customers want more information and they want it earlier in the process. Today’s car buyers are quite different from the buyers of yesterday. It is a fine line and potentially a slippery slope to sell online, but we run the risk of alienating customers and losing business by not providing information in a convenient manner for today’s buyer.”

And Brian Reed has some data to back up that idea that better-educated consumers who are able to access more complete information online will actually be more open to buying products when they do sit down in the F&I office. The Southlake, Texas-based president and CEO of Intersection Technologies Inc. and F&I Express says, “We’re big believers that everything is going online from an F&I perspective. I don’t know if that means shopping for everything online. But we believe in pushing information online as part of the car-buying process, yes, and that’s what customers want.

“We did an internal survey of sold customers. Sixty-three percent said if they had this information before going to the dealership, they’d be more likely to buy. The better educated the customers are about options specific to that car and that dealership, the more likely they are to buy, and the process will go quicker in the F&I office. Those are two big wins from the dealer’s perspective. Then there’s the benefit of transparency. When they walk into the F&I office, there’s no big secret. They know what’s going on, which leads to more products sold in a quicker process.”

The Dealer Option

While the debate over information provided by administrators continues, a consensus regarding information about F&I products on dealership websites appears to have been reached.

“Typically, the more the better,” Wools says. “We see an increasing number of dealers putting information about F&I products on their websites, and this is a good thing. Consumers are better informed than ever before, and the F&I department benefits from having compelling content on their website that provides customers with a clear understanding of the benefits of what is provided in the F&I office. Also, having the ability to present information about F&I products in different formats, such as video, and allowing for access from mobile devices, gives the consumer the options that they have come to expect. Often, when a consumer is not provided content about a product in an easily accessible, interactive format, they are going to be more resistant to purchasing it when presented the option face-to-face.”

“The purpose of online F&I product information is to pique a customer’s curiosity and interest,” notes St. John. “By providing them with valuable information about their potential ownership situation, a dealer can increase transparency and build a foundation of reciprocity and trust. Giving them expert insight and factual data on a loss-prevention programs can challenge negative preconceived notions.”

“Dealers should offer F&I products online as part the same process they use to offer their vehicles,” Berger adds. “There is work yet to be done in this area so as to make this a reality. We believe that software providers, such as MakeMyDeal, will develop compelling ways that a dealer can incorporate their F&I products — the same exact products that dealers currently offer via the F&I desk — into their customers’ online experience. As a consumer shops for a vehicle online via a dealer’s website, they will also see recommendations for appropriate F&I products to accompany the purchase of their vehicle. By the time the consumer hits the showroom, they will have a good idea of not only the vehicle they intend to purchase, but also the financing terms and F&I products that will be included in the transaction.”

But again, cautions Anderson, dealers shouldn’t mistake an online presence as a substitute for a trained F&I professional. “The dealership’s website is a great place to include information on the plans or products offered, but it is not a suitable substitute for the consultation within the dealership on coverage and terms appropriate for the consumer and their vehicle. Details on how a customer can get service under their contract or the coverage it provides is helpful, and the dealer’s website offers another alternative to locating quick answers and providing service.”

“Dealers see the value of leveraging technology to raise awareness of F&I products and educate consumers on the options available to protect their investment with warranty, insurance and aftermarket products,” says Sundaram. “For example, we are actually seeing mobile digital tools giving dealers a tremendous edge in selling F&I products within the showroom. Dealers who are using our eMenu for iPad tool for presenting F&I options to in-store shoppers has resulted in more than 51% more profits per deal and 45% more products sold per deal. In the coming years, it will be critical to integrate the online/digital to in-store workflow with tools like this to drive continued growth.”

Making It Work

If everyone agrees that dealers should make more F&I information available to consumers, how can administrators help ease that process? Our experts offered a number of ideas, and providing better documentation was the common denominator.

“For starters, an F&I provider can provide well-thought-out content for each product category, including benefit highlights and risks — all in a variety of formats, including plain text, video, images, PDFs, etc.,” says Berger. “F&I providers can and should ensure that the content is compliant with all state and federal regulations and have a process in place to regularly review the F&I product-related content that their dealer partners host on their websites. One way to ensure the quality of the content is to dynamically serve the content through either a mutual integration partner such as F&I Express or a menu system, or via direct integration. We think this last integration piece is where the industry is headed.”

“We have been successfully working with dealers to incorporate digital retailing tools on their websites so shoppers can build a vehicle, look at interest rates and adjust terms to find a monthly payment that meets their budget,” Sundaram notes. “They can even apply directly for financing or obtain a trade-in value through the use of these tools. As a result, dealers have increased their lead-to-sales conversion rate by 30%, thanks to the use of these tools on their website.”

“What we are doing today with MakeMyDeal is giving them real-time product ratings when they get on that vehicle description page,” Reed says, explaining one way his company is looking to better support dealers beyond just providing better descriptions. “They translate it into how much per month for that car, whatever that coverage level is. Not only do we bring back the rates but the associated content as well. It’s presented online when they search for that specific car. It’s specific to new or used, mileage differences, bringing it back, etc. … And when they do go the dealership, those customers are more likely to buy.”

But not all buying situations are created equal, and that doesn’t change when it comes to an online F&I presence.

“Certified pre-owned programs are going to be a challenge for someone to sell. There are inspection processes that go with that. You really do have electronic approval on most loans today,” Wanderon explains. “Customers already have the ability to buy service contracts directly. The challenge is that, when you’re buying a service contract from a provider, you have to pay upfront. GAP is an easy complement to the loan. For a product like dent and ding, there are differences in what can be provided on a new rather than a used vehicle. It’s because of adverse selection. I think the world is going toward an immediate gratification and simpler transaction process. I don’t know if it really is simpler to do it online, but they think so.”

“It will be tough to eliminate or remove the human interaction when selling F&I products during the car-buying experience,” agrees Price. “However, providing information online about available products is becoming more common place. Dealers and administrators need to be careful and confident when promoting F&I products online. State regulations, product underwriting considerations and limitations as well as administrator willingness, all need to be considered. All of these factors will ultimately determine the success or lack thereof with particular product success.”

One option to consider is using the online platform to sell F&I products to consumers after they’ve left the dealership. “As complex as F&I solutions are, selling them via a Web page or kiosk hasn’t shown to produce superior results. That being said, remarketing to consumers online who didn’t purchase products at time of sale, could open an untapped revenue stream for dealers,” St. John says. “By utilizing a seamless ecommerce platform combined with custom payment plans, agents and dealers could provide follow-up opportunities for their current customers to reassess their protection needs.”

It is hard to deny the impact the Internet has had on our industry, touching and changing every facet from the knowledge the consumer has access to before they walk through the door, all the way through to how they interact with the service department long after the vehicle has been purchased. F&I is one of the last areas inside the automotive dealership to truly feel the squeeze, but that is rapidly changing. As more consumers become more comfortable with making large purchases via online platforms, they will continue to demand access to greater tools when it comes to choosing and buying their vehicles.

The challenge with F&I is the complex web of regulations and requirements that go along with most of the products sold, and the individual factors that every single customer will bring along with them that could impact the products they qualify for and the amount they can reasonably finance. All of this seems to be at odds with the idea of an automated online process that removes the F&I manager from the equation — even if that is what consumers believe they want. Dealers and providers face a challenging dilemma, finding the right balance between providing the information and tools consumers demand and the experience and expertise and F&I manager knows is necessary to truly get the best deal for everyone involved. As technology and the public’s comfort level with it continues to evolve, administrators and dealers will have to work together to find the best way forward.