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Is there room for fixed F&I pricing at your dealership?

A fixed price for F&I products is a better and more trustworthy approach for all customers yet it has not been widely adopted.

Who likes to haggle? No one. But in F&I this has been seen as not only expected but customary for decades. No two buyers tend to get the same price for F&I products.

But could fixed pricing have a logical use case in today’s dealership environment? Maybe…

A fixed price for F&I products is a better and more trustworthy approach for all customers yet it has not been widely adopted. Why? What are the benefits of offering set pricing and how can it reduce the friction between F&I and the buyer?

Dangers of inconsistent pricing

Imagine yourself on the other side of the desk when buying a car. Would you want to have an $1,800 VSC presented only to have the F&I manager start peeling back the price every time you said ‘No, I can’t afford that.’ What would go through your mind? You would likely feel like you’re being scammed.

If car buyers sense that you are hitting them at the top end of pricing just to make more profit, two things will happen:

  • Compromised Trust – They are trusting F&I professionals to handle the more delicate steps in the car buying process from loan approval to tags. And most car buyers already have a negative view of F&I to begin with. If a buyer sees that the price you FIRST quote has that much room for negotiation, you put yourself in a less-than-trustworthy position.
  • Compliance AlertIf enough people complain about this sales strategy, it will get the attention of state regulators. At a time when the top headlines for dealers have to do with new proposed FTC regulations on transparency for car buyers, this is NOT something you want your dealership to be known for. Just the mere volume of clearly overpriced VSC and GAP (unless it’s already capped in your state) will set off alarm bells.

Why are dealers still doing this? The answer comes easier now than it did a few years ago. Low inventory means fewer deals but the ones you do get, you try to maximize the margins both in sales price and F&I with reserve being higher due to higher prices and product being priced higher as well.

Profit is key in any market, and no one can blame a dealer for trying to raise that bar.

But like the ‘market adjustments’ to MSRP, wildly varied F&I pricing is also coming under more scrutiny.

2 big reasons to consider fixed pricing

All generations of car buyers deserve to have more transparent and reasonable F&I pricing but Millennials and Gen Z are expecting it. They research more about the entire car buying process and they know what F&I products are designed to do and how it can protect them but with that comes research into common prices…better to give them what they want right from the start.

Besides appealing to younger buyers, set pricing will allow the discussion with your buyer to be less about the cost of the protection and more about value. F&I staff can hit home on the benefits of their suggested products and can highlight that the prices are set for ALL buyers and therefore no shell game, no time wasted on negotiation.

Another benefit is that this forces your F&I staff to have deep knowledge of two things right away – the buyer’s needs and comprehensive product knowledge. They will know the products that fit the customer best and can easily justify a reasonable price. Better interviews and constant F&I product education makes this part easy.

Final thoughts….

If your buyer understands the pricing structure and the reason why a specific F&I product is perfect for THEM and their driving experience, you won’t have to negotiate and revert to the back-and-forth haggling. You instantly take away the time-sucking, trust-eroding poison pill of F&I with a fair set price. Higher PVR and CSI…all good.

Car buyers will appreciate the transparency and if they understand that flat rate pricing is across the board, it could be the one thing that helps to set your store apart from everyone else in your market.

Think about it…word gets out that your dealership offers a set price for all popular F&I products, making it an easier process, and suddenly more people want to buy from you.

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Kristine Cain
Kristine Cain
Kristine Cain is a contributing writer for CBT News. She has over 26 years of experience in the automotive industry specializing in F&I and B2B sales.

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