Unraveling the Mystery of the Automobile Dealer’s F&I Office

by Don Elliott on May 24, 2011

According to a survey done by F&I and Showroom Magazine in 2007, it takes the average car shopper 123 minutes to buy a new or used car. 30 minutes of the car buying experience are spent in the Finance and Insurance (F&I) office. What should you expect when you transition from the used car salesperson to the F&I manager as part of the process?

The F&I office exists to sell products related to your car purchase. There is a benefit to each product sold in that office. The questions are, “Do you really need it?” and “At what price?” And, just like your car purchase, there is usually plenty of room to negotiate.

Financing – Most people need some type of financing when buying a vehicle. Car dealerships can often make more money by providing financing than they can when they sell you the car. Financing is the largest single item provided by your dealership’s F&I office.  In the 2007 F&I and Showroom magazine survey, 58% of new car buyers and 68% of used car buyers bought the dealer-provided vehicle financing, known as a Retail Installment Sales Contract (RISC). Note that RISC-type of financing is also available from your bank, credit union or online from a variety of resources. This is one case where it pays to shop, know your credit score and have a targeted interest rate before you buy.

Extended Service Contracts – In a more recent study by F&I and Showroom Magazine, an increasing number of new and used car buyers are choosing extended service contracts. The most popular terms were the 6 year/72,000-mile and the 5-year/100,000-mile contracts, accounting for 56.3% of the contracts written. Most contracts were for bumper to bumper coverage.

Gap Insurance – For the F&I manager, selling gap insurance can be an easy close. For only $8-12 per month on a 60 month contract, you can be assured that you are fully insured in case your new car is stolen or involved in a bad accident. Find out how much your insurance will cover and the size of the “gap” once you have chosen a car to buy.

Leasing – Depending on the make and model of the car you are buying and your driving habits, leasing might be an option to the RISC. About 20% of new car buyers choose to lease, with an even higher percentage of lessees for luxury car brands.

Theft Deterrent – VIN etching and LoJack-type devices are high-profit items for the dealership. If they are important to you, this is one area where a good negotiator can reap rewards. Most newer cars have an array of security devices already included in them.

Prepaid Maintenance – This item is growing in popularity at new car dealerships. Many dealers will offer prepaid maintenance at an attractive rate or even free so that they can have you return to the dealership on a regular basis.

Credit Life/A&H Insurance – It is usually less expensive to add the cost of your recent car purchase to an existing life insurance policy as compared to the cost of credit life insurance. Accident and Health coverage is more difficult to isolate with existing coverage. In either case, many people choose the security of knowing that the balance of their car loan would be paid should something unfortunate occur.

Other stuff – Depending on your patience, you might also be offered fabric and paint protection, upgrades for wheels and tires, pinstripes, floor mats, satellite radio, GPS, emergency road service, OnStar-type assistance and more.

Take a deep breath! Knowing up front what’s coming will make your trip into the F&I office less intimidating. As I have said before, do your homework before you get to the dealership. Buy only what you want or need and negotiate to assure that you get your best new or used car value.

Send us a comment if this information about Finance and Insurance (F&I) was helpful for you.

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