What the Heck is an F&I Department?
Here’s something that might surprise you – Bowlus doesn’t have an F&I (Finance & Insurance) department at our dealership. Why? Because we don’t believe it is an effective and consumer-focused way to serve our customers.
Think about the last automotive dealership experience you had – once you finished working with a friendly salesperson and deciding on your purchase, you are ushered into an F&I back office to have someone “help finish up” the sale and assist with any financing AND then move you into hard sell – or attempt to sell you – a bunch of overpriced insurance products you may but probably don’t want or even need in the first place.
The F&I (Finance and Insurance) department in RV sales can be considered predatory due to several practices that prioritize dealership profits over the best interests of consumers.. These practices often exploit the customer’s lack of knowledge or understanding of financing and insurance products, leading to decisions that can have long-term financial consequences. Here’s why the F&I department can be seen as predatory:
F&I managers often use high-pressure sales tactics to convince customers to purchase additional products like extended warranties, gap insurance, and various protection plans. These tactics can lead customers to make quick decisions without fully understanding the need, cost, or terms of these products, often resulting in unnecessary purchases. At Bowlus, we’ve already covered everything you need and it’s included for free.
The F&I department may secure financing from lenders at a certain interest rate but then offer the customer a higher rate, pocketing the difference as pure profit. This practice, known as a “rate markup,” can significantly increase the cost of the loan for the customer, who may be unaware that they could qualify for a lower rate. Again, a practice we do not support.
F&I managers often bundle additional products or services into the financing package, making it seem like they are necessary or mandatory. Customers may end up paying for products they don’t need or want, with the costs hidden within the loan, increasing the overall financial burden without a clear understanding of what they are paying for.
The terms and conditions of the products and services offered by the F&I department are not always clearly explained. For example, customers might not be fully informed about the exclusions and limitations of extended warranties or insurance products. This lack of transparency can lead to customers agreeing to terms that are not in their best interest, only realizing the implications later when they need to use the product or service.
The F&I department often sells add-ons, such as extended warranties or protection plans, at significantly marked-up prices compared to their actual cost or market value. Customers may be overcharged for these products, which can often be purchased separately at a much lower cost, leading to unnecessary financial strain.
Some F&I managers might provide misleading information to make the products or financing options seem more attractive. For example, they might downplay the long-term costs of certain products or emphasize the risks of not purchasing certain insurances. This can result in customers making decisions based on incomplete or incorrect information, leading to financial commitments that are not truly in their best interest.
The primary goal of the F&I department is often to maximize the dealership’s profit rather than to find the best financial solution for the customer. Did you know the average RV dealership makes an extra 8-10% margin on every RV from their F&I department? This profit-driven focus can lead to recommendations that benefit the dealership at the customer’s expense, such as pushing higher-interest loans or unnecessary add-ons.
In summary, the predatory nature of the F&I department arises from practices that prioritize profit over the customer’s financial well-being. By employing high-pressure sales tactics, marking up interest rates, bundling unnecessary products, and lacking transparency, the F&I department can lead customers to make decisions that may not be in their best long-term financial interest. This is why Bowlus doesn’t have an F&I department so we ensure you have the best purchasing experience on your way to your future adventures.
Our sales team welcomes your questions. We look forward to connecting with you.