The prospect of U.S. consumers making vehicle purchases completely online without setting foot inside dealerships raises many issues for auto retailers, but especially for finance and insurance managers.
Their concern is straightforward. Can they effectively sell the F&I products so vital to most dealerships' profitability without face-to-face contact?
The worry is that price-conscious consumers scrolling through a long list of online purchase options will bypass F&I products without giving them much consideration. "Everybody is scared about the loss of profitability online," says Jim Maxim, president of MaximTrak and chief digital officer at RouteOne. "Once you go that route, there's nothing to retain those F&I profits."
Maybe. One study found that consumers purchased more F&I products from the comfort of their living room than after multiple hours in the dealership.
Resisting fully online vehicle purchases misses the bigger picture. Ultimately, some buyers will choose to skip the brick-and-mortar environment. Dealers must bow to those buyers' preferences.
Such a shift won't happen overnight, but it's coming. Cox Automotive expects 10 percent of the auto industry's transactions to be online by 2019. Many consumers are accustomed to completing much of their day-to-day purchases online. Whether they'll feel differently when it comes to car buying is uncertain.
Electronic contracting has been part of the auto industry for years. Some automakers' captive lenders already handle most of their contracts electronically, and most F&I product providers offer e-contracts.
Dealers know they cannot insist that prospective buyers bow to their existing sales process. Auto buyers have too many other choices for that approach to be sustainable. So dealerships must figure out how to present the benefits of F&I products to prospects who prefer to purchase online.