The Intersection 2-26-23

Rising interest rates and elevated vehicle prices during a time of broader inflation could make vehicle affordability an issue for dealerships and the car-buying public.

And this might be felt most acutely within dealership F&I offices, where professionals have to shape a financed car deal into a format acceptable to the customer, lender and store — and then try to sell the customer more stuff on top of the vehicle itself.

This quarter’s F&I special section in the next issue of Automotive News explores affordability from F&I and consumer perspectives.

Experian’s fourth-quarter data reveals that customers committed to 2.2 points more in interest and $70 more each month on new-vehicle loans compared with the fourth quarter of 2021. It also found the proportion of consumers late on their loan payments was greater than a year earlier.

Our section cover story examines finance managers’ ability to sell vehicle protection products when interest rates consume a larger portion of a customer’s monthly payment. Hear from F&I provider JM&A Group, dealership accounting firm Crowe, Nissan of Bowie Dealer Principal Damon Lester, and Jack Kain Ford General Sales Manager David Griffith.

A story on Cars.com’s recent January poll of customers planning to buy vehicles in 2023 shares consumers’ financial mindset going into a dealership, including how much they plan to spend and save. Cars.com also found 58 percent of the shoppers already had to delay their purchase, and many of them did so for financial reasons.

Lithia Motors Inc. CFO Tina Miller told investors her company anticipated the factors of consumer affordability and interest rates would push down Lithia’s F&I gross profit per vehicle in 2023. Read more about affordability and F&I at Lithia and other major auto retailers and see fourth-quarter results in our latest F&I earnings roundup.

“That context and insight is all well and good,” you might say. “But what do I do with the customer right in front of me?” We can help there as well. Guest columnist Justin Gasman, financial services director at Mike Maroone Cadillac-Buick-GMC, shares some advice for handling a consumer who balks at the higher interest rate available on their deal.

We hope this F&I special section helps you in your business. Hurry and check it out before the Fed raises interest rates again.

— John Huetter