The Walls of the “Box” Are Falling Down

Automotive News offers a potentially eye-opening article this week on customers using smartphones to shop F&I products—sometimes while they’re in a dealer’s F&I office.

The chief take-away for dealers: You should anticipate and plan for pricing transparency and margin compression in your F&I departments, if you haven’t already.

I say this based on our experience in new and used vehicles. As consumers do their homework, their expectations for vehicle prices are defined and formed by what they see online. They are “the market.” As retailers and competitors, dealers have no choice but to align their businesses to meet these buyer expectations. The end result, of course, is margin compression and a greater need for dealers to operate more efficiently. These are the reasons velocity management works for dealers who embrace its efficiency-focused, turn-and-earn principles.

As I read the Automotive News article, I asked why F&I product pricing and profits haven’t yet been fully subject to these market dynamics. The answer, I think, directly reflects what we see in our showrooms: The bulk of buyers focus on vehicle price. A lesser number drills into finance rates and terms. Even fewer customers will do F&I product homework.

But it looks to me like that small group of F&I-aware customers is getting bigger—and potentially faster than any of us might imagine. The walls of the “box” are now wired, and may be coming down.

This suggests “documentation as the new negotiation” will become necessary in another dealership department.