What dealers said about margin, claims from F&I activities

CHESTERFIELD, Mo. - 

When Protective Asset Protection, conducted its latest survey addressing dealer concerns and opportunities with F&I product offerings, the provider of F&I programs, services, and dealer-owned warranty programs wasn’t surprised to see margin to be a primary concern.

An element that did catch the attention of Protective Asset Protection senior vice president of distribution Rick Kurtz revolved around claims.

Dealers of all sizes rely on their finance office for prosperity. Behind financing, Protective Asset Protection noted that additional F&I offerings represent the second-largest opportunity for margin growth for dealers at 57.6 percent.

The online survey was presented to approximately 1,573 dealership owners and professionals between March 5 and March 9. The results show that the majority of dealers are concerned with falling sales, as well as dealership consolidation and administrative challenges to their current roster of F&I products.

More than three quarters (78.8 percent) of dealers surveyed said their current F&I products don’t offer enough margin for the dealership, and nearly half (48.5 percent) said their current F&I offerings are too much of an administrative burden.

A significant number of dealers said they sell a vehicle service contract on 15 percent of all new-vehicle sales. While 36 percent said they sell a vehicle service contract on 25 percent of used vehicle sales. Dealers also said the top three barriers to selling vehicle service contracts include inadequate coverage (66.7 percent), price and customers not seeing the value each at 63.6 percent.

Ideally, 63.6 percent of dealers said they would like to have more control over claims adjudication for their F&I products, and another 57.6 percent said they would like to have control over branding their own F&I products. Training remains critical, as 54.5 percent said more training is needed to sell F&I products, and 51.5 percent said more education is needed to help sales staff when handing customers over to the F&I office.

“Margin opportunities will remain a central concern for dealers in the coming years, especially as sales pressures increase for both new and used vehicles,” Kurtz said. “Many of these dealers will rely on F&I offerings to make up this margin, but they’re saying they want their own F&I products they can offer to their customers to increase margins further, help with the overall branded experience, and improve customer satisfaction.”

To uncover useful data, Kurtz explained how he and the Protective Asset Protection team crafted questions for this survey in order to generate results that might benefit dealers of all sizes.

“When putting together the survey we really wanted to allow all types of dealers to weigh in. As we look at the near future, as well as the long term, there are plenty of varying needs based on the type and relative size of dealers’ operations,” Kurtz said in a message to SubPrime Auto Finance News.

“However, we learned there are a number of core items that remain relevant — primarily, concerns about the impact of future trends of auto sales and the need for dependable F&I program administration,” he continued.

Those structured, well-thought questions led Protective Asset Protection to what Kurtz described as quite noteworthy.

“We were a bit surprised by just how many respondents were interested in having more control over the claims process, as well as the number that recognized value in branding their F&I products,” Kurtz said. “Yet, I wouldn’t say these results were a total surprise. Agencies and dealers have been telling us how important the control of F&I programs is to their respective businesses.

“This type of input was an important factor of our acquisition of US Warranty Corp. nearly a year and a half ago. As the creators of the Dealer Owned Warranty Company program we saw great value in providing this to the marketplace to meet the needs that we see in these survey results,” he went on to say.

Kurtz emphasized the heavy burden and pressure that F&I departments encounter nowadays to carry greater profit load for dealerships.

“F&I departments have always played a critical role in dealerships — as part of the buying experience as well as the overall ownership experience. There’s no denying margin compression continues to be a challenge for dealers everywhere. F&I plays an important role in helping a dealer’s operation retain profitability at the time of sale. This pressure is not new, but with continuing decline of margin, it’s likely not unfair to say it’s increased,” Kurtz said.

“However, it’s important to consider the overall impact of F&I for the dealership’s customer experience,” he continued. “We know that customers who opt for protection plans tend to return to the selling dealer for service and they also tend to be more satisfied during the lifetime of their vehicle ownership. This ability to continuously provide a positive experience for the customer plays an important role in retaining that customer for their next purchase.”

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