Industry Voices | The Affordability Challenge for Dealers

In today's automotive market, 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 where dealers can make a significant impact is through the strategic offering of F&I products, not just at the point of sale, but also throughout the customer's ownership journey.

The Current State of Vehicle Affordability

The automotive industry has experienced significant shifts in recent years, with vehicle prices reaching all-time highs. According to recent data, the average transaction price for a new vehicle in 2024 is approaching $50,000, while used-vehicle prices are hovering around $30,000. 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 12.5 years in 2023, up 40% compared to 2001 and 2.5% year-over-year. This trend reflects both the improved durability of modern vehicles and the financial constraints faced by consumers when considering a new purchase.

The Rising Cost of Vehicle 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.

According to recent studies, the average annual cost of vehicle maintenance and repairs has risen to over $1,000 per year for vehicles older than five years. The increase in maintenance costs, coupled with rising insurance premiums and fuel prices, has put additional strain on consumers' budgets. In fact, a recent survey found that nearly 45% of respondents reported difficulty affording vehicle maintenance and loan payments, with this figure rising to nearly 60% among Gen Z consumers.

The Role of F&I Products in Addressing Affordability Concerns

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:

Tips for F&I Success Throughout the Customer’s Journey

In addition to offering F&I products at the point of sales, various opportunities throughout a customer’s ownership cycle can 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 share informative articles, videos and infographics about the benefits of F&I products and the potential costs of vehicle ownership without protection.

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.

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.