Overview of the F&I Process
To put these negotiations in context, it's important to understand the sequence of events that occur when someone buys a car. When the customer's negotiation with the car salesman is finished, it's time to move into the F&I room, where the F&I manager draws up the contract. He (or she) also often tries to sell additional products such as warranties, alarms, maintenance plans, GAP insurance, window tint, VIN etching (a theft-deterrent service) and wheel and tire warranties.
"These are all profit sources for the dealership," Weintraub says. "There is a value to everything they sell, if the price is right. But the average person is not prepared to negotiate these products because they don't know what the price should be. It is a completely blind negotiation."
A recent trend in dealerships is to bundle these items and sell them using the menu system. For example: "The Platinum package is [X price], but you can also choose the Gold, Silver or Bronze package." Though an F&I manager will try to persuade you that you need to buy one of these packages, you can say no to all of them or "unbundle" a package and buy a selected item, such as an extended warranty.
Preparing for the F&I Room
If you know you'll be buying a car, you can assume you will be offered an assortment of products in the F&I room. It makes sense, then, to prepare for this encounter by keeping three things in mind:
- What products the F&I manager will offer.
- Which products you will want to purchase.
- What a fair cost might be for the product or service.
Weintraub says his approach is to try to buy the warranty at "cost plus," meaning a fair profit for the dealer above his cost for the warranty. The difficulty is establishing exactly what cost is. As you will see in the following dialogue, Weintraub has a method for getting a good quote and also for revealing the dealer's cost. This approach can be used for other F&I products.
On this particular day, Weintraub was doing a preliminary negotiation on a warranty for a client who was leasing a Toyota Avalon but would be driving extra miles that would put him past the limits of the included factory warranty: 54,000 miles over the three-year period of his lease. So he needed to extend the warranty to remain covered. For more info on warranties, see "How To Get the Best Price on an Extended Car Warranty."
Call #1: Negotiating for an Extended Warranty
In the following dialogue, Weintraub presented himself as an average consumer rather than as an industry insider. Someone could use this research approach when buying a car, or when buying an extended warranty for a car that already had been purchased. Weintraub called the main dealership number and asked to speak to someone in finance.
Weintraub: "I'm thinking about leasing a Toyota Avalon Limited. I drive 18,000 miles a year. What's the shortest warranty I can get up to 55,000 miles?"
Finance Officer: "You probably want to get a five-year/60[-thousand miles]."
W: "I'm just trying to prepare before I finalize the deal about what my costs would be."
FO: "You'll be looking at spending maybe $1,300."
W: "$1,300 for a five-year/60? I'm not sure I'm going to buy the car from your dealership. But would you sell the warranty to me for $100 over?"
FO: "$100 over what? Cost? No, I can't. The way things are going with the car business, they don't do a lot of business on the front end anymore, so..."
W: "How close can you come to that?"
W: "And how much over is $1,195?"
FO: "$300 over."
W: "I didn't want to spend more than $1,000 on a warranty. So if push came to shove, would you do it for $1,100?"
FO: "I'd have to take it up to the boss."
W: "So you're saying that $1,195 is $300 over? So your cost is $895?"
FO: "Pretty much."
W: "It kind of makes me nervous when you say 'pretty much.'"
FO: "I have about 15 different models I'm looking at..."
W: "Do you have your sheet in front of you so I can know exactly where I stand?"
FO: (After a long pause, reading from sheet of costs) "Hmmmm...$1,250. I was a little off. But I'll do $1,195 because I quoted you that."
W: "So $1,195 is like $245 over. I will make sure that if I do this deal that I talk to you."
"You have to be assertive when negotiating," Weintraub said after he hung up. "This guy was being nice but when he was giving us a number he says 'pretty much.' I don't like dealing with 'pretty much.'"