The automotive industry made its way through 2021 given a handful of unique challenges still plaguing many manufacturers and dealers. While car shopper demand has remained high and profit per vehicle is at a healthy level, inventory levels caused by the ongoing microchip shortage remains an issue in 2022.

This year promises to show signs of growth, albeit mildly, and dealers with the right F&I strategies should see continued opportunities for profits from sales of F&I products for customers looking at new and used cars and trucks.

Used Sales Still Strong, New Inventory Slowly Coming Back

According to industry estimates, sales of new vehicles are expected to increase from roughly 15 million units in 2021 to approximately 15.7 million in 2022, even though vehicle production in North America could see as many as nearly two million additional vehicles in production over the next year.

F&I profits haven’t been hard to come by since the start of the pandemic. Total F&I revenue for some of the largest dealership groups in the U.S. jumped 4.5% in 2020 compared with 2019. What’s more, 29 dealership groups reported average F&I revenue per vehicle above $2,000, a noticeable increase from 16 dealerships in 2018 and 12 in 2017.

Fewer new vehicles have fueled higher overall transaction prices for each vehicle, raising the prospects for further F&I profitability. What’s more, with fewer new cars and trucks to choose from, more consumers have been pursuing deals on used vehicles. The sale of used cars and trucks means more consumers are seeking vehicle protection plans to keep older-model and even gently used vehicles in top shape after purchase — further driving up the profitability for F&I products.

This trend is expected to continue well into 2022 for dealers across the country. Demand and prices of used vehicles has remained high. The average transaction price for a used car was $25,410 in the second quarter of 2021, up from $22,977 in the first quarter and 21% year-over-year, according to data from Edmunds.³

Where Are Dealers Focused on F&I in 2022?

While experts believe used vehicle prices will begin to trickle down as new vehicle inventory climbs in 2022, the opportunity for F&I product sales will remain healthy.

With this used inventory still in high demand entering 2022, here are the F&I product trends that are expected to be in focus in the coming year: 

Pre-Owned Vehicle Service Contract Programs: With multiple levels of coverage and a range of model years and mileage bands, many consumers are choosing auto care plans for used vehicles.  

Certified Programs: Dealers tend to gravitate toward certified programs, such as limited warranties, because they offer numerous options relative to eligibility, coverage, and deductible options. Additionally, many certified programs offer dealers investment opportunities in the form of dealer participation programs.  

Ancillary: Ancillary programs are in high demand because they protect key elements of the vehicle and can be added individually, or as part of a combination program to complement the coverage a vehicle service contract program provides.   

Five years ago, dealers reported most car shoppers purchased F&I products such as tire and wheel protection (37.9%), exterior appearance products (37%), windshield repair (35.6%), and key fob replacement (34.8%). Based on recent data, consumers today have prioritized ancillary packages in the following order: key fobs, tire and wheel replacement, windshield repair, exterior appearance protection, interior protection, and theft deterrent.⁴ 

GAP: In the event of a total loss or unrecovered theft, GAP (guaranteed asset protection) will, in most cases, pay the difference between the actual cash value and the scheduled balance owed to the lender. While GAP is not a new product, it has grown in consumer popularity because of an increase in total loss vehicle claims due to increases in accidents, storm damage, and skyrocketing costs. 

Theft Deterrent Still Popular as More Cars Stay Home

Most F&I products have remained somewhat stable in terms of the breakdown of what was sold pre-pandemic versus today. However, the largest jump since the pandemic began has been identified in theft-deterrent systems. Twenty-one percent of dealers⁴ reported selling these systems prior to the pandemic, and today this number has jumped to 31% of dealers. This is mostly since many cars, even after purchase, are remaining parked at home as more people work from home today and seek extra security for their vehicle. While more people have returned to at least a mixture of office life, there are still plenty of cars in the parking lots at home in 2022.

Since the pandemic began there has been an increased emphasis on selling vehicles through contactless transactions over the internet — generally referred to as digital retailing. This movement toward digital retailing is expected to grow even more so in 2022. The inclusion of F&I product research and selection has been a main area of focus for thousands of dealers looking to increase and expand their digital retailing options for customers

With these strategies in mind, auto dealers and their manufacturing partners will be better equipped with the right F&I product portfolio to meet the needs of the growing number of people shopping for new and used vehicles in 2022.

Tim Blochowiak is vice president of dealer sales for Protective Asset Protection, a full-service provider of F&I programs offering vehicle protection plans, GAP, ancillary products, training, and other services through vehicle dealerships.