How F&I Can Get Ahead of the New FTC Rule Changes Now & Be Better For It

Dealerships have gotten a rude awakening from the FTC in recent weeks with the proposed new rules for car buying that ranges from price disclosures to increased levels of documentation in F&I. If approved, it would be the first meaningful rule issued since Dodd-Frank in 2010. And it’s looking like the industry is ready to put up a fight.

But when looking at the spirit of the new proposed rules, there are ways F&I in particular can steel themselves against this and be able to stay out of the FTC crosshairs.

It may take a bit of creativity, a change in pricing philosophy, and a mindset shift when it comes to how to present and price not just the car but the F&I products as well. All is not lost if you’re already doing the right things now.

The Buying Landscape has Changed

Understanding what car buyers are looking for and what they expect from the process is the most obvious starting point. Since COVID in 2020, buyers have been doing a higher amount of online research than ever before…they want to know more about popular F&I products, they want to know what financing options are available, and how they may compare with their own bank or credit union. 

Bottom line…they know more than ever before. 

Millennials and Gen Z specifically go online to find out everything and many want a transparent and informative experience when trying to buy a car. If your dealership is not offering that, you’re behind the curve.

How to Be Ready to Avoid Each New Rule in F&I

Let’s take a look at some of the new proposed rules as they pertain to F&I and see where there are opportunities for being able to side-step running afoul of them while still being able to maintain a high PVR and great customer satisfaction…

Ban of products without ‘benefits’ - Well, this one should be easy. Every F&I product you offer should be presented with a ‘benefit’ first, consultative approach. Whether you preload or sell in the office, every product DOES have a benefit and it’s up to the F&I staff to make sure that implicit benefit is always upfront and clearly explained. Dealers who are not already doing this are likely the reason why these proposed changes exist in the first place.

Posting a complete list of optional add-ons and pricing online - If you are preloading ancillaries, they should already be clearly disclosed on the Monroney addendum anyway. Car shoppers should never wonder how much it’s adding to the sales price. They also state that you can offer a ‘range’ of what products and protections would cost in F&I which, while fair, may not be that easy. The most obvious reason is that different models may have different VSC costs for example. But again, F&I can try to offer an approximate amount for each model online as an example for popular units. Easy enough and gives customers an idea of the average cost before talking with their F&I manager. They are mentally prepared and so is your staff to help explain features, benefits, and be better armed to counter objections.

Price disclosures in writing, with or without financing - Unfortunately, some dealers have made headlines over the last year for quoting one price for a car with in-house dealer financing and another price for a cash deal or bank draft. The price of the car should be the price of the car, period. It shouldn’t matter if the buyer is not financing at the dealership. F&I still has plenty of income opportunities without punishing the cash buyer. 

Express, Informed Consent - As for F&I disclosures, they propose that customers must decline in writing both added options and F&I coverages…not relying on prechecked boxes that imply a ‘No’. Again…easy enough to create a form that does just this. In the long run, customers may prefer a physical copy of their declination of products/options and see it as an added level of due diligence for them. But this doesn’t have to be a negative process change, especially if your staff spins it as added transparency for the buyer.

It’s Not the End of the World

We’ve talked a lot about the importance of transparency for today’s car buyer. The FTC’s proposed changes don’t seem to be something designed to bring the industry to its knees but rather to respond to complaints and concerns of buyers over the last few years that have seen some pretty unusual practices pop up. It doesn't spell doom and the changes can be dealt with easily if stores are not already implementing them now.

There is plenty of money to be made in F&I specifically and record numbers over the last year have shown that. Doing business the way the government wants you to do it can seem like overreach but at its core, it’s about making sure every dealership is achieving new levels of success while giving car buyers an experience that exceeds their expectations and breaks decades-old stereotypes. And who can’t get behind that? 

date published
August 19, 2022

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