When the Internet hit the automotive scene, some dealers worried they might get bumped out as middlemen. But others offered reassuring words.

“They said, ‘Well, people still will have to come to the dealership to get the car,’” says David Duncan, president of Safe-Guard Products International.

But the same might not be said of the finance and insurance department, an important dealership profit center.

If shoppers find it necessary to visit the dealership to see, test-drive and take delivery of a car, they might feel otherwise when it comes to in-store buying of F&I offerings such as extended vehicle-service contracts and appearance-protection plans.

Traditionally, dealerships have pitched such products during face-to-face meetings with car buyers. But e-commerce is booming, and although online F&I transactions are limited now, they could catch on soon.

“We have to be prepared as professionals to provide F&I over the Internet,” Duncan says at an F&I Technology and Management conference.

That creates challenges, but ones that dealers can’t ignore, he says. “We have to take our heads out of the sand or we won’t have F&I products to sell.”

Some experts believe the somewhat impersonal nature of the Internet might impede dealerships’ online F&I sales efforts. Simply listing F&I products online isn’t the same as actively selling them in person.

One way to deal with that issue is for dealerships to post or email customers videos highlighting F&I products, Duncan says.

But Kelly Price, president of National Automotive Experts, expresses skepticism that an F&I video can get the job done.

“You can send all the videos you want, but just presenting products is not going to sell them,” she says. “People aren’t going to check yes-or-no boxes on an online F&I menu.”

An F&I manager’s job includes ensuring car deals comply with the law, reviewing paperwork with customers and more, Price adds. “Just on the regulation side, there is a liability of not having waivers. After getting in an accident, someone sued a dealership, claiming it hadn’t offered gap insurance.” 

Dealer-customer dialogue is important for online F&I selling to succeed, says Bob Corbin, CEO of IAS, an F&I provider.

“You’ll need some sort of instant chat, some form of 2-way communication, because selling doesn’t begin until the first ‘no,’ he says. “Good F&I people are able to overcome objections, but you need a channel to do that.”

Products have become a primary source of dealership F&I revenue. Previously, markups on auto-loan interest rates accounted for a big chunk of the business.

“But people are not going to go for big rate markups,” Duncan says, citing heightened consumer awareness as well as recent federal legislation limiting so-called dealer “reserve” on loan rates.

“So where does a dealer make F&I profit?” he says. “On F&I products such as gap insurance, extended-service contracts and wheel- and tire-protection plans.”

Price cites an improvement in products, especially ones that maintain the look of a vehicle. “Products are better, so the F&I presentations are better,” she says.

“It no longer is just putting wax on a car, but rather a substance that can enhance the vehicle’s sustained appearance. We spend a lot of training on paint and fabric protection, because today there is a lot to talk about.”