What Happens in the Finance and Insurance office?
The trip to the finance and insurance office is an often-overlooked aspect of car buying, and it can be a source of stress and frustration. By the time you walk in, you may have already spent hours at the dealership, test-driving and agreeing on a price. Once on the office, you will probably spend 30 minutes listening as an F&I manager presents a number of products and services that you might not be familiar with. If you agree you buy any of them, you may drastically raise the monthly payment you would have settled on.
What is the F&I office?
The finance and insurance office is where the dealership draws up sales contracts, where you arrange payment for the vehicle, and where you will be offered additional products for purchase.
Why do I have to go there?
The sale of a new or used vehicle is not official until it is in writing and you sign the contract. There are several legislative and mandated legal forms that you have to sign to conclude the sale. And then you actually pay for the vehicle.
If you require finance for the vehicle the F&I manager takes down the application form to set up your payment plan and apply for the finance. If you have been preapproved for a loan, the F&I manager will probably ask if he can try beat the interest rate. Finally, this is where the dealership will offer you a variety of products that can be added to your loan.
Can the salesperson do all this?
Remember the legal forms and paperwork we mentioned earlier? The F&I manager is one of the few people in the dealership who knows all the products being offered and is trained to know the forms that need to be signed.
How long will it take?
Your time in the office will depend on the time of day, the number of people ahead of you and whether you have your loan documents in order. Salespeople outnumber F&I managers, so on a busy weekend, you could face a bottleneck.
Once inside, you can expect to spend about 30 to 45 minutes. But if you want to hear the pitch for each product this will add to the total time. If you have a preapproved loan and say “no” to all the products you are being offered, you may be able to shave off some minutes. But then again, a determined F&I manager might work hard to counter your sales objections. That back-and-forth could take a while.
Why should I prepare?
Because dealerships make a lot of money on F&I products! You will find that an F&I manager is often the dealerships best salesperson give that F&I products have the highest profit margins for the dealership. With this in mind, it is important to know what to expect.
What will the F&I manager offer?
Here are the products you will likely encounter in the F&I office. We cannot list every one or name the exact price: everything varies by dealer, region and vehicles.
Extended warranty: This warranty kicks in after your new-car limited warranty has expired. You need to consider carefully how long you will be keeping your motor vehicle with regards to this product. Generally, this product can also be bought at a later stage provided the existing warranty is still valid. Prices can vary widely depending on the vehicle, coverage and brand.
Maintenance and service plans: Plans such as these bundle oil changes and other scheduled maintenance into a package. These products will be positioned in a way to “lock in” your price now to hedge against labor costs in the future. Essentially, you would only have to worry about your car repayment for the duration of the maintenance or service plan. Most manufacturers only offer a standard service plan on their new cars for a limited time and or mileage duration. These plans tend to be very expensive and some may limit you to one dealership for service, so make sure to ask about that aspect before buying. Once again you really need to make a firm decision on how long you would like to keep your car to see if you need these products.
These products can range from a simple car alarm to a tracking unit or safety film. In etching, in which a car’s vehicle identification number is engraved on windows and sometimes on valuable engine or body parts. The products are often positioned as an enhancement to the factory security features. You are not obligated to buy them, so if you do not want to spend the money, ask to have any device removed or deactivated before you take possession of the vehicle. You are not responsible to pay for a product if it was already fitted to the vehicle.
Road hazard and wheel warranties:
This combo covers the wheels the wheels and tires in the event of damage. If you often drive on the roads with potholes or debris, or simply have bad luck with curbs, this warranty might be worth considering. One thing you need to make a calculated decision on is whether to take a term policy which might be expensive or a monthly policy.
Paint and fabric protection:
These products offer protection to both inside and outside of your vehicle by adding a chemical sealant to the fabric or paint. Modern automotive paint has come a long way in terms of durability, but if you want extra paint protection, make sure you research what it costs before heading to the dealership.
Top up insurance:
This pays off any difference between what your vehicle is worth and what you would owe after and accident write off or theft. This product is normally worth considering if you have put less than 10 percent down on a financed vehicle.
Excess waiver and use protection:
These products cover you for small scratches and dents that are below the excess of your insurance amount. It will not cover you in an accident however that is what insurance is for. If you tend to get scratches and nicks on your vehicle this protection is worth considering. One thing you need to make a calculated decision on is whether to take a term policy which might be expensive or a monthly policy.
Credit Insurance or payment protection:
These plans are designed to kick in if you lose your job, die, or unable to make your car repayments for a certain period of time. In general, consumer groups have found that the cost of this coverage outweighs the benefits.
Are any of these items worth it?
It is hard to make a blanket statement on these products. People’s needs and buying scenarios differ greatly. For example, do you really need gap insurance if you have made a sizable down payment on a car you are buying? Or if you take excellent care of your vehicle, why pay for excess wear protection?
As far as extended car warranties go, a survey conducted found that 55 percent of vehicle owners who had bought and extended warranty had not used it for repairs during the life of the policy. Those who did use the coverage, however, were quite pleased with it.
An alternative to an extended warranty is self-insurance: Set up an automatic savings account and you do not tap into the fund unless it is used for car repairs. If you trade in or sell your car after a few years and have not had to use the money, you can keep funding the account for your next car, or perhaps use the money for a down payment. It is more flexible than locking up your money in an extended warranty you might never use.