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F&I’s biggest hurdles in 2025—and how dealers are clearing them

F&I’s biggest hurdles in 2025—and how dealers are clearing them

3 strategies straight from the dealership floor...

Anna del Villar & Car Dealership Guy
March 13, 2025

Hey, everyone — The robotaxi wars are heating up.

Austin, TX is steadily becoming a crowded playing field of autonomous vehicle companies battling it out for self-driving dominance.

Waymo made its debut last week—teaming up with Uber to put robotaxis on the app for the first time.

But it might not have the road to itself for long—Elon says Tesla’s first paid robotaxi service is coming to Austin in June.

—CDG

First time reading the CDG Newsletter? Subscribe here.

F&I—also known as Finance and Insurance in dealerships—is the backbone of store profitability. It’s where revenue is made after the sale—through financing, extended warranties, GAP insurance, and more.

And while auto retailing is a historically low-margin, high-volume sales business…

The good news for dealers? F&I gross profit per vehicle retailed (PVR) is increasing—and in fact—PVR for the public dealership groups reached its highest level ($2,501) in 5 years.

via Haig Partners

But it’s not all smooth sailing. On the ground—there are 3 massive obstacles the F&I office is facing today. And here’s what top operators are doing about them...

Obstacle #1: Tight budgets are weakening F&I’s appeal.

Take new car prices as an example—the average transaction price recently hit $49,740 in December 2024, and monthly payments are averaging $742. This leaves less room in the budget for higher-margin F&I products…

The problem: F&I is built on effectively communicating the value of these protection products. But when affordability craters, that pitch often falls flat.

The fix: According to one operator I spoke to in Texas—it comes down to ensuring that every F&I manager presents the customer with a three-step “reality check:” the challenge, pain, and remedy framework—100% of the time.

Challenge: First, ask the consumer how they have been impacted by the economy.
Pain: Then dig deeper to find out what is causing the most pain (inflated repair costs? Elevated interest rates?)
Remedy: And finally—offer a tailored solution.

To hold his team accountable—he also closely tracks menu utilization metrics. That gives him a better idea of who is and isn’t following the process.

Obstacle #2: More costly financing is leading to lower financing penetration.

As of Q4 2024—auto loan rates were at 6.35% for new cars and 11.62% for used, which are only slightly lower year-over-year. So—it’s not a shocker to see cash deals continuing to increase.

The problem: A significant F&I profit driver is attached to financing. When buyers opt for cash, dealers don’t make any commission or receive any fees for arranging the car loans (also called ‘reserve’).

The fix: If fewer customers are financing due to high rates, how do dealers compensate for the ones who are? Curate more value-added products.

Take one Nissan GM I spoke to who saw his tire-and-wheel combo package (including key replacement, paintless dent removal, cosmetics for the rims tires, and roadside assistance) bloating costs and baffling buyers.

Turns out customers thought a paintless dent repair would cover a caved-in door panel replacement (hint: it won’t). So, he pared down the package and separated out the products to provide better value and get rid of any confusion.

As a result: Customers are buying the new package more often now, especially combined with service contracts—keeping his customers returning to the service bay for long-term revenue cycles.

This leads me to an important point: F&I is a vital tool for service retention, as Jeff, a CDG follower on LinkedIn, also pointed out.

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Obstacle #3. Negative equity is still choking deals.

Longer loan terms (68 months for new cars) and high prices have pushed 24.2% of trade-ins underwater, with an average negative equity of $6,469.

The problem: F&I lives on sales volume—new deals mean new upsells. And buyers with negative equity often can’t trade in easily, slowing the “sales to F&I pipeline.”

Via Experian

The fix: According to one high-volume Finance Director in Michigan—training a steady flow of potential F&I managers to introduce F&I early in the sales process is key.

Top sales talent get handpicked for a 6-month F&I boot camp—seminars, mentorship, and shadowing to see exactly where 66% of the group’s 2024 income came from. Being part of the program isn’t an automatic guarantee for promotion to F&I manager, but just by acquiring the knowledge, participants become even better salespeople.

The most interesting part? Explaining protection products during the vehicle presentation (when customers are typically at peak excitement about their purchase) taps into the customer’s emotional investment, making them more receptive to add-ons and boosting penetration for the dealer. (not a new concept—but I’m amazed at how many dealerships still don’t do this.)

Big picture: Customers are more payment-conscious than ever, but that doesn’t mean they’re saying no to F&I products… It means they need a better reason to say yes. The sharpest dealers are tapping into this shift—reframing F&I as a buffer against the headwinds. And it’s working.