Here’s the script for the “F&I Products” video above:
During the sales presentation of your time in the business office, you will learn a lot about and will have the opportunity to buy a host of optional back end coverages and F&I products.
Many of the products that the business manager will present can offer massive value to your vehicle ownership, as long as you can get them at the right price. It’s important that you understand more about what some of the most popular F&I products are before they’re presented to you for the first time in an emotional moment so that you can make logical decisions.
The first one is the big one and where I’ll spend the most time…
An Extended Warranty, also known as a Vehicle Service Contract.
In the event of defective equipment after the manufacturer’s warranty, repairs will be paid directly through this coverage depending on the type of defect and coverage you select. These warranties are available on all new cars and on most used cars as long as they aren’t too old or the mileage is too high. Though some manufacturers may offer more, As a general rule of thumb, all new makes and models will have a three year or 36,000-mile bumper-to-bumper warranty, expiring based on whichever event occurs first.
Basically, any manufacturing defect causing part failure within that term will be paid by the manufacturer. Extended warranties provide differing levels of coverage depending on price and what you select. The most basic can be an extended “Powertrain” coverage, which will basically cover any internal component that oil touches. So not much, really.
On the high end, You can purchase coverages that will basically extend bumper-to-bumper for a hundred thousand miles and everything in between. A couple of points here. Purchasing this type of coverage is kind of a gamble. Consumer Reports conducted a survey finding that only 55% of all extended warranties have ever been used. I’m sure though that the half who did use them were grateful they had the coverage because fixing even minor problems can be expensive enough that some people won’t do it, so forget about major problems!
Oh…you do your own maintenance? Well, I’d love to know how you maintain a touchscreen display, a heater core, or all the dozens of parts that move when you just press the unlock button on your key fob.
One final recommendation here. If you do choose to buy an extended warranty, just make sure that it is from the manufacturer of your car and not from the dealer group, or a warranty service company. When you buy a manufacturer warranty, and your car has a problem, you can take it to any franchise service location anywhere in the country, and it will get fixed with the shop able to bill the manufacturer directly, it’s quick and easy.
If you buy one from a warranty service company, you will likely have a more negative experience. It’s not clean cut. You’ll have to call them and find out which shop they’ll allow you to use. There can be deductibles, and if there is any language in the legalese warranty that will allow them room to wiggle out of paying anything, trust me, they will find a way to do it.
The next one up is a vehicle maintenance plan.
It’s a coverage that will pay for all regular service intervals, like oil changes and factory milestone services like the ten or twenty thousand mile service. Keep in mind that you may void your factory warranty if you skip or delay service intervals for too long. These can be worthwhile if you put enough miles on the car, or you usually find yourself living paycheck to paycheck.
Where I think they have the greatest benefit, though, is that if a parent is buying a car for their teen or young adult. Sure an oil change can be relatively inexpensive, but when you get into the more financially demanding factory service intervals, I can see where a kid in college working part-time might skip that kinda thing if they have to come out of pocket at the wrong time.
After that, we have GAP coverage.
GAP will cover the difference between what you owe and what the car is worth in the event of a total loss accident. Here’s an example:
Say your credit is great, and you buy a car with $0 down. That means that you didn’t pay any of the tax, title, or registration, and let’s assume you added a couple of coverages on the backend. Maybe the vehicle price is $35,000, but your actual loan amount is $41,000. Now your car is going to lose say $4,000 in value as soon as you take it home.
Let’s say you get in a total loss accident two months after buying it. The vehicle insurance will pay you a claim for only what the car is worth. Except now, your car is only worth $31,000. Remember how you still owe, $41,000? Yeah, in this entirely realistic scenario, you could still owe $10k on a car that you will never drive…while needing to get a different car that you can drive! GAP is another gamble just like the extended warranty, but if you do end up invoking the coverage, it can save you thousands of dollars. I highly recommend this coverage for very inexperienced drivers. It is useless, though, if you’re driving off the lot with equity already built into the car.
The next offerings are insurance style coverages
These are usually designed to pay the loan in the event that you can no longer make payments. Credit Life will pay your loan off in the event of your death so that you aren’t passing a vehicle debt along to your estate. Credit Disability will make your car payments in the event that you can no longer work because you have a qualified disability. If you feel like you may be prone to either of these two situations, then one or both may be smart coverages to add. Just make sure you read the fine print before signing up so that you fully understand how it works.
Vehicle Theft Recovery is another popular offering
LoJack is the big player in the industry. It’s pretty straight forward. If your car is stolen, the police will be able to track its location and recover it…just hopefully before it gets totaled in a high-speed chase. If you’re buying a car that’s popular with thieves, or something very high-end, you may want the coverage.
Key Replacement is next up on the list.
Cars don’t start anymore like they used to, with just a basic old metal key. Most modern cars have electronics in the key that will unlock the doors and trunk. Many keys are more like proximity remotes now where you never have to take them out of your pocket. You can’t just cut one at the Home Depot. As you can imagine, if you lose one, it can be several hundred dollars to replace it. You only get two keys with a new car. If it’s used, sometimes you only get one! Are you prone to losing things?
Finally, they will offer you something basically like a Scratch, Dent, and Ding coverage.
Some dealer groups may sell it as a “Multi-Shield” coverage. This will cover all of those little nicks and dings on the body or windshield that you’ll notice every time you look at your car. These policies also cover tire damage. My only recommendation here is to read the contract before buying it. I almost bought this coverage in California because I wanted the tire coverage until I read the contract. The policy I was looking at said that it wouldn’t cover any damage from running the tire up against the curb, which is probably the most common way to damage a tire.
The F&I products I’ve mentioned here may not represent everything that you’re offered, though it will certainly cover most things. Just make sure you check the fine print before buying anything.