Today, consumers are facing severe affordability challenges when it comes to purchasing and maintaining vehicles. As car prices continue to rise and economic uncertainties persist, dealers must adapt their strategies to meet the evolving needs of their customers. One key area in which they can make a significant impact is through the strategic offering of F&I products, not just at the point of sale but throughout the customer's ownership journey.

Current Vehicle Affordability

The automotive industry has experienced significant shifts in recent years, with vehicle prices reaching all-time highs. According to data, the average transaction price for a new vehicle surpassed $48,000 last fall, while used-vehicle prices reached nearly $26,000. These steep prices have led to notable changes in consumer behavior, with many opting to hold onto their vehicles for longer periods of time.

The average age of vehicles on U.S. roads reached a record high of 12 ½ years in 2023, up 40% compared to 2001 and 2.5% year-over-year. This trend reflects the improved durability of modern vehicles and the financial constraints faced by consumers when considering a new purchase.

Rising Cost of Ownership

While the initial purchase price of a vehicle is a significant factor in affordability, the total cost of ownership over time is equally important. As vehicles age, the cost of maintenance and repairs tends to increase. 

The consumer price index shows that costs for motor vehicle maintenance and repair have consistently risen this decade, with a particularly sharp increase since mid-2022. From the beginning of 2022 to June 2024, repair costs increased nearly 25%. The increase in maintenance costs, coupled with rising insurance premiums and fuel prices, has put additional strain on consumers' budgets. In fact, consumers ages 35 to 44 saw the biggest spending increase in the past 10 years, at 51%, a little more than those ages 45 to 54, at about 49%.

F&I Products in Addressing Affordability 

Given these challenges, F&I products have become more critical than ever in helping consumers manage the long-term costs of vehicle ownership. These products, which include vehicle service contracts, gap insurance, maintenance plans, and ancillary coverage, such as tire-and-wheel, can provide valuable financial safeguards for consumers while also creating additional revenue streams for dealers.

For dealers, offering the right F&I products can:

1. Protect customers: Help them prepare for planned and unplanned expenses.

2. Enhance customer loyalty: Dealers can strengthen their customer relationships by providing valuable services throughout the ownership cycle.

3. Generate recurring revenue: Many protection plans bring customers back to the dealership for service, creating ongoing income opportunities.

4. Differentiate from competitors: A comprehensive suite of F&I products can set a dealership apart in a crowded market.

5. Boost profitability: F&I products typically have higher profit margins than vehicle sales alone.

F&I Important During a Vehicle’s Lifecycle

While the traditional approach is to offer F&I products at the point of sale, there's significant value in extending these offerings throughout the customer's ownership journey. This allows several advantages:

1. Reduced initial pressure: Customers may be more receptive to considering additional products after they've had time to settle into their vehicle purchase.

2. Increased awareness of needs: As customers use their vehicles, they become more aware of potential risks and maintenance requirements, making them more open to protection products.

3. Addressing changing circumstances: A customer's financial situation or vehicle usage may change over time, creating new opportunities for F&I product sales.

F&I Success Throughout the Customer’s Journey

In addition to offering F&I products at the point of sale, there are various opportunities throughout a customer’s ownership cycle to ensure they’re informed about your F&I offerings. When customers bring their vehicles in for maintenance or repairs, it's an ideal time to discuss the benefits of protection plans. Dealers can utilize customer data to offer products that align with the customer's vehicle age, mileage and service history. 

Dealers can also create attractive packages that combine multiple F&I products at an affordable rate, and they can share informative articles, videos and infographics about the benefits of F&I products and the potential costs of vehicle ownership without protection. Ensuring that service staff have the proper training and knowledge to effectively communicate the value of F&I products during customer interactions is also key.

The Bottom Line

As the automotive industry continues to grapple with affordability challenges, F&I products represent a valuable tool for both consumers and dealers. By offering these products throughout the customer's ownership journey, dealers can help address long-term affordability concerns while building stronger, more profitable relationships with their customers.

The key to success lies in understanding the changing needs of consumers, developing comprehensive post-sale marketing strategies, and effectively communicating the long-term value of F&I products. By doing so, dealers can position themselves as trusted partners in their customers' automotive journeys, helping them navigate the complexities of vehicle ownership in an increasingly challenging economic landscape.

In an era when consumers are holding onto their vehicles longer than ever before, the importance of protecting and maintaining these investments cannot be overstated. By embracing a holistic approach to F&I, and partnering with the right F&I provider, dealers can play a crucial role in making vehicle ownership more affordable and sustainable for their customers while simultaneously securing their long-term success. 

Rick Kurtz is senior vice president and chief distribution officer for Protective Asset Protection.

EDITOR’S NOTE: This article was authored and edited according to F&I and Showroom editorial standards and style. Opinions expressed may not reflect that of the publication.