Car Buying Articles

Confessions of an Auto Finance Manager

A Former F&I Guy Explains How He Did


Part 3: Lessons From the Other Side of the Desk

Over the years, I put together a checklist of advice for my friends and family when they were going to buy cars. In most cases, my advice was simply what not to do. If you follow these 10 "don'ts," you should get out of the F&I room unscathed:

1. Don't agree to be a monthly payment buyer. If you do, you'll quickly lose control of negotiations and won't be able to see the real cost of the car.
2. Don't buy a car without first checking pricing guides such as's True Market Value (TMV®). Print out this information and take it with you to the dealership.
3. Don't buy the extended warranty. The bumper-to-bumper warranty will last for at least three years or 36,000 miles. The powertrain warranty will then cover all the things that make the car go down the road, often for up to 75,000 miles.
4. If you really want the extended warranty, don't buy it for the first price they offer. Markup is about 100 percent, so there is plenty of room for negotiating.
5. Don't enter the F&I room unless you have independent financing or you have recently checked your credit report and investigated what interest rate your bank or credit union offers.
6. Don't buy paint protection (it's basically just a wax job) or fabric protection or VIN etching. These add-ons are high-profit items for the dealership and you can buy them elsewhere if you decide you really want them.
7. Don't pass up GAP insurance (the term stands for Guaranteed Auto Protection) if you're leasing, unless it's already in the contract. And buy GAP insurance if you are making a low down payment. Remember, though, that the cost for GAP is negotiable.
8. Don't forget to run your monthly payment numbers using an online calculator to get a rough idea of what your car payment will be.
9. Don't believe the F&I guy if he tells you that you have to buy the extended warranty to qualify for low- or no-interest financing. It's not true.
10. Don't sign the contract because you "just want to get it over with." Take the time to verify all the essential numbers in the contract.

Next: Part 4: New Job, Same Issues for Shoppers

Most Recommended Comments

By tel703
on 03/02/11
3:51 PM PST

As with any industry, there is good and there is bad. Ours is no different however I do believe, regardless of the type of industry, the majority of company's in business today are conscientious, straight forward and honest in their dealings with their customers. To act in any other fashion is not only wrong; it is a recipe for failure. Some of the points raised by the author of this article imply his employers were unfortunately those in the minority. Case in point: • employing convicted felons • allowing finance departments to operate with no internal profit caps • improper disclosures As for his 10 items of advice on things not to do: • #3 Don't buy the service contract - I disagree. For some customers a service contract can and often is a life saver. Factory coverage will expire based on which ever occurs first; the years or the mileage. The average customer in our market drives 18,000 to 20,000 miles per year which means their 3 year 36,000 mile factory warranty expires in two years or less. In addition, the longer term power train warranties while good are limited in coverage. • I agree customers should do their homework regarding financing however there is nothing unethical about charging a fee in the form of a rate markup for securing and processing loan arrangements for a consumer. In fact in our market, it is rare that a customer can obtain a lower rate than we are able to offer them even after a rate is marked up. And rate markups cannot be excessive as they are regulated by the individual lender. • GAP insurance is just as valuable on a retail contract as it is a lease contract based on the amount of equity going into the deal In conclusion, I agree completely with the statement, "When the F&I process is done right, and the customer is informed, it works."

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By atiaga0903
on 02/22/11
10:36 PM PST

good article. i do disagree with him saying not to buy extended warranties. a warranty is a good idea expecially if your on a budget and 5 years down the road you have a $3,000 car bill. but, as he said, do not take the first offer for the warranty. make an offer for the warranty, it shows the f&i guy that you would consider buying it but not at retail. a fixed budget at $420 a month car payment with a warranty than a invariable budget of $410 a month car payment with no warranty. : )

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By redcanyonkim
on 11/10/11
5:33 PM PST

This is the inside scoop from an auto dealer's Finance Manager on how they make profit on the deal - great to know.

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