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Perhaps you’ve been in this situation before. You found the car you want to buy and feel confident you’re about to get a great deal. Then, it happens. You walk into the dealership’s Finance and Insurance office, or “F&I” for short, and you’re met with a new array of decisions.
Which services do you need, what products can you skip, and how will this all affect financing? The F&I office can be a dizzying step when buying a car, but there are a number of products offered here that consumers should be aware of, and if priced competitively, take advantage of.
Below are some of those options, and the most popular of which is the extended vehicle service contract, commonly referred to as an “extended warranty.”
Vehicle service contracts
Though not a warranty, per se, service contracts cover the cost of specified vehicle repairs over a given period, often after a vehicle’s original warranty ends or to complement existing coverage. This can mean fewer headaches if and when components do go wrong.
When buying a service contract, experts stress that you know exactly what’s covered, when coverage begins, and for how long it lasts. You should consider the financial stability of the company offering the contract, and how long you plan to keep the vehicle, as not all contracts transfer with ownership. Further, check how claims are handled, for instance, are deductibles paid per visit or per item repaired?
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“The pricing of a service contract, along with the vehicle’s age and brand, needs to be taken into account before buying,” advises Karl Brauer, Senior Director of Insights at Kelley Blue Book.
Brauer recommends factory-backed service contracts, because it ensures they can be fulfilled at dealerships nationwide, and suggests they can be a good investment on some vehicles, but notes they aren’t always needed. “For volume brands with excellent reliability ratings, a service contract may not make sense.”
GAP coverage and credit insurance
While a service contract protects your vehicle, GAP and credit insurance protect the financing used to pay for it. GAP coverage, short for “guaranteed asset protection,” covers the difference between the cash value of vehicle, whether stolen or totaled, and the remaining balance owed on its loan or lease. If you plan on long financing terms or a small down payment, GAP coverage can be a great asset, and it may be required by your lender and on some leases.
By comparison, credit insurance (typically “credit disability” and “credit life”) pays your auto loan if you become disabled or die, and may even be worked into your loan agreement. Like service contracts, both GAP and credit insurance can be purchased at a dealership, though it pays to shop around beforehand as well.
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“If you think you might want GAP insurance, you should first check with your own insurance company to see if they offer it and for how much,” suggests Brauer. “Some companies include it with basic policy coverage, which means buying it from a dealer would be a waste of money.”
Many other services and options
Vehicle service contracts and GAP coverage remain two of the most common F&I products, but they certainly aren’t the only items on offer.
- Wear and Tear: Leasing a car? “Wear and tear” coverage repairs exterior dings and interior blemishes upon lease turn-in, rather than sticking you with the bill. “It really helps limit exposure for those unplanned expenses at the end of a lease,” says Cheryl Piantedosi, Executive Director of Student Services at the Automotive Dealership Institute, who notes this type of coverage is gaining momentum as leasing increases in popularity.
- Prepaid Maintenance: Instead of paying up each time you bring your car in for regularly scheduled maintenance, like an oil change, dealerships offer prepaid maintenance plans to consolidate that payment upfront. It keeps customers coming through the door… just don’t forget you have it.
- Key Replacement: If you’ve ever lost or broken a set of modern car keys, you’ll know how expensive they can be to replace and reprogram. To offset this, F&I offices now offer key replacement services, however you may be able to find more cost-effective alternatives outside the dealership.
- Tire and Wheel: You guessed it. This service repairs or replaces wheels and tires damaged by potholes, curbs, and debris. Some plans provide even greater value with towing and roadside assistance options. “This has become extremely popular over the last couple years,” notes Piantedosi, who cites the lower profile tires and larger wheels of today’s vehicles.
Fabric and paint protection, additional vehicle undercoating, and theft-deterrent VIN window etching are also commonly offered, though like other options on the list, it pays to shop around.
And when you are ready to speak with F&I staff, don’t be surprised if you’re handed a high-tech tablet at some point. Many dealers are now using these devices to streamline the F&I process, giving customers a more satisfactory and faster buying experience. “Customers can just pick and choose which products work best for them,” explains Piantedosi. “It makes it much simpler.”
Know before you go
“The most important suggestion I give car buyers about dealer services is to give them some thought and price them out ahead of time,” says Brauer. “You don’t want to go into any car purchase without doing all your research ahead of time, and this includes researching the cost of related services.”
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In addition to the sticker price, buyers should consider the long term effects of rolling these services into a vehicle’s financing package, as interest over the life of a loan—especially one with long payment terms—can dramatically increase total expenses. Also, double check any existing services you already pay for, such as roadside assistance or tire repair through an auto club, as it doesn’t make sense to double up on coverage.
At the end of the day, every car buyer has unique needs and dealers are certainly looking to fulfill them. After thorough research of the products available and their potential benefits, all shoppers should feel confident in finding what they need at the right price.
This story originally ran on KBB.com.
