products offered in the dealership

Survive the F&I Office: An Honest Review of the Most Common Finance Products

Chris Carter

Chris Carter

Are you curious about the products that you will be offered in the dealership F&I office? Are you uncertain about what options you should pick and how much you should pay? Read more about the most common products and what to look out for when buying your new vehicle.

Products offered in the dealership

Almost every dealership sells a variety of “add on” or “F&I” products.  These products range from extended warranties/service contracts to prepaid maintenance, tire and wheel protection, and GAP.  In this section, we will dive into the five products that most dealerships offer and give you an honest recommendation with regards to what is a good deal, what isn’t, and what to look out for. Remember, be sure to do your part to have a good experience at the dealership and learn how to finance your new dream car.

There are many companies that offer these type products and all of these products are not the same!  I have heard horror stories regarding these products in the past and cannot recommend it enough to do your due diligence to know exactly what you are buying and what company you are buying it from. 

Every dealer contracts with one or several F&I product companies to represent their products.  Some companies have products that are not worth the paper that the contract that they are printed on.  Others are very good.  Make sure you know what you are getting yourself before agreeing to anything.

The dealership that I used to work for sells products that are General Motors branded and I would like to think they sell some of the best products in the industry.  Through the 55 years of operation, this dealership has been with several F&I product companies, and the products that they sell today are among the best that we have ever represented.

They offer five products that can be added when purchasing a vehicle from most dealerships.  They are:

1. Extended Service Contract (Extended Warranty)


They technically aren’t called extended warranties, but that is what nearly every customer says they are.  This is a product that will pay to fix or repair covered issues with your vehicle up to a certain mileage or time period.  For example, you might be offered a 72 month or 84,000-mile service contract.  This means that your coverage will expire 72 months or 84,000 FROM TODAY.  Just to be clear, this means that if the vehicle you are buying has 15,000 miles on it, your service contract will expire at 99,000 miles.

What it is for?

This takes the warranty period and, more or less, extends it.  The general appeal of this product is so that you can just have a slightly higher car payment (payment for car + payment for service contract) rather than having to make a car payment and then pay a repair bill. 

Who is it for?

Really everyone.  This product is a great way to not have to worry about having  the large expense of a repair bill that will, because life always goes as planned, happen at the absolute worst time of the year.  This means that when you have a window regulator go out 2 weeks before Christmas, you don’t have to pick between opening your door at the drive-through and buying Christmas presents.

Who is it not for?

If you have lots of cash sitting in the bank or have a large positive cash flow every month and could easily pay a $500-800 repair bill and not lose any sleep, you could easily choose to not purchase an extended warranty/service contract.

Pricing

This is the one product where most dealers have the most margin.  A common standard practice is to take whatever the base price of the policy is and mark it up to $1,600.  Then, discount it $500 immediately.  If the dealership meets resistance, they commonly drop $1,400 off of the price and have a $200 margin. They very rarely discount it to our cost because the dealer has to turn around and pay our F&I manager a flat commission on this product. 

Is it worth it? 

Yes.  For what it costs, the peace of mind simply cannot be beaten.  If I were purchasing a vehicle, it would be covered by a service contract.  Just be sure to know what you are buying and from what company you are buying it from.  

2. Appearance Guard

This product represents a suite of items that helps to maintain the new appearance of your vehicle while it is financed.  This includes paintless dent repair, windshield repair, interior fabric repair, and key fob replacement.  

What is it for:

I won’t get into the specifics of what is covered and what isn’t, but this is an extremely low-cost way to protect the appearance of your vehicle from things that happen in life, such as spilled juice on cloth seats and shopping cart dings.  This allows you to protect against things that are too small to get your insurance company involved in (or wouldn’t be covered), but still have a great looking vehicle while you are still making payments.

Who is it for:

If you are financing your vehicle, I would say this product is for you.  It is a super low-cost solution to having to ride around with a door ding while still making car payments.  If you use this product 2 times over the time that the vehicle is financed, it more than pays for itself.  If nothing else, you can use Appearance Guard to get a new key fob when you inadvertently drop yours in a cup of coffee.

Who is it not for:

If you are paying cash for a vehicle or buying a very used vehicle that might already have some nicks, dings, and scratches, I would just save your money and skip this product.  Additionally. If the outward appearance of your vehicle doesn’t matter to you and you are not worried about trade-in value/resale, they just save the few dollars per month.

Pricing

Appearance guard coverage for 72 months is priced at $418 at my old dealership.  Cheap, right? I think so. The cost is $318 and they rarely discount this product because the margin is so low.  This means that, depending on your interest rate, this product adds around $7-10 per month to your car payment but provides a lot of peace of mind.

Is it worth it? 

If you are financing your vehicle, I would buy appearance guard UNLESS you plan to literally drive this vehicle until the wheels fall off and don’t care about resale value.  It is just too cheap to pass up the coverage and benefits associated with this product. 

3. GAP (Guaranteed Auto Protection)

This product is only used once – in the event that you total your vehicle.  With the average vehicle financing term increasing to over 72 months, there is a good chance that you will owe more than your vehicle is worth early on in the repayment process.  GAP pays the difference between what you owe and what the vehicle is worth in the event that you suffer a total loss. 

What is it for?

As stated earlier, GAP will pay the difference between what you owe on the vehicle and what the insurance company says the vehicle is worth in the event of a total loss. This would allow you to pay off the remaining loan balance and walk away from the totaled vehicle and go buy another vehicle.  GAP is really that simple.

Who is it for?

It is for individuals who are either financing their vehicle for a long period of time (more than 72 months), have a high-interest rate, or are in a situation where the principle on the vehicle will not be paid off quickly.  An example of this situation would be rolling negative equity from a previous vehicle that was traded in on the new vehicle.  

Who is it not for?

It is not for people who have low-interest rates, short terms or put down a large amount of cash down.  In fact, many lenders will not allow dealers to sell GAP if the loan to value is less than 75-80%.  

Pricing

The standard price for GAP is $795 for 72 months of coverage.  The common cost of this policy is $215 which leaves plenty of room for negotiation.  My old dealership commonly sells 72 months of coverage for $350. 

Is it worth it?

This one totally depends on the specific situation of the person and the vehicle.  If you fit any of the criteria in the “who is it for” section, you should strongly consider buying GAP.  If you do not fit any of these criteria, I would skip it and not think twice about it.

4. Tire and Wheel Protection

This product covers your wheels and tires and, depending on your situation, could be a great purchase!  In the event that you hit a covered road hazard (my old F&I manager always says “A 2×4 in the middle of the road”), this product will pay to fix or replace your wheels and tires.  Additionally, the cosmetic option of this product will pay to fix things such as curb rash.

What Is It For?

Wheels and tires on a vehicle get a ton of wear and tear.  Whether you live in an urban setting or out in the country, wheels and tires are the things that really take a beating every single day.  This is a coverage option that you can use in the event that you run over something or just get a little too close to the curb when parking uptown.

Who is it for?

If you have large, expensive factory wheels on your vehicle or if you commonly curb your wheels, this product is for you.  Through using it once over the course of your coverage, the policy will more than pay for itself.  This product’s selling feature is similar to appearance guard in do you really want to have to make a car payment when all of your wheels have damage or you have to replace 2 tires after running over something on the interstate.

Who is it not for?

If you are purchasing a vehicle that has small wheels, hubcaps, or non-low profile tires, this product isn’t for you.  Additionally, if you never have to parallel park near curbs or other items that are just waiting to take a bite out of your shiny rim, you can live without the tire and wheel protection.

Pricing

The maximum term for the Tire and Wheel Product with cosmetic protection is 60 months.  The common retail price on this amount of coverage is $765.  My previous dealership’s cost for this policy is $315. They commonly sell this product for $450.

Is it worth it?

Again, if you fit the mold of the “who is it for” section, then yes.  However, I would recommend negotiating hard on this item if you are interested in the coverage.  Most dealerships that I know do not sell many T&W products and would be willing to sell at close to cost if they find someone that is interested in it.  Its rarity is not because it is a bad product.  Rather, it is commonly not presented well, and/or the customer does not fully understand the benefits. 

5. Pre-Paid Maintenance

This product allows you to factor in preventative maintenance into your monthly vehicle payment.  Instead of having to pay out of pocket for an oil change, tire rotation, and filter changes, it is all rolled into one monthly payment.  The premise behind this is that if the dealer locks you into returning for maintenance at the store, you are much more likely to purchase your next vehicle from this dealership.

Is it worth it?

No.  PPM varies based on the vehicle and maintenance schedule recommended by the manufacturer.  In every scenario that I’ve tried, it is less expensive to pay out of pocket for these maintenance items than to have this policy.  As a result, I do not recommend pre-paid maintenance for anyone.

Summary

There you have it!  That is a summary of the five F&I products that are presented to each and every customer that visits most dealerships.  Please remember that some of the products represent great value in specific situations but the most important thing is to know what you are buying and what company represents the policy.

More information about the products I discussed today can be found by clicking here.

If you have any questions regarding whether you should purchase a specific product or an unbiased review of the product offering/quote, please feel free to contact me

Thanks again for being an informed consumer! Did you decide to purchase a product from the F&I office? Be sure to leave a comment to let us know what you bought, what it covers, and how much you paid for it. 

Share:

Share on facebook
Facebook
Share on twitter
Twitter
Share on pinterest
Pinterest
Share on linkedin
LinkedIn

This Post Has 5 Comments

  1. I believe this is an informative article and it’s extremely useful and knowledgeable.

    I really enjoyed reading this postBigig fan, thank you!

    King regards,
    Harrell Dencker

  2. I read a good deal of interesting posts here. You spend a
    whole lot of time writing, Thanks!
    Best regards,
    Balle Raahauge

  3. Found your post interesting to read. I can not wait to see your post
    soon. Good Luck for the upcoming update.This article is truly
    very interesting and effective.
    Best regards,
    Abildgaard Dencker

Leave a Reply

On Key

Related Posts

buy a car online

How To Buy A Car Online in 7 Easy Steps

Are you curious how to navigate the process of buying your next car online? Read this article to learn a step by step process to save time and money the next time you are shopping for a new vehicle.