What Happens in the Finance and Insurance Office? | Edmunds

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What Happens in the Finance and Insurance Office?

A Car Shopper's Guide to Navigating F&I

The trip to the finance and insurance office is an often-overlooked aspect of car buying, and it can be a source of stress and frustration. By the time you walk in, you may have already spent hours at the dealership, test-driving, negotiating and agreeing on a price. Once in the office, you'll probably spend 30 minutes listening as an F&I manager presents a number of products and services that you might not be familiar with. If you agree to buy any of them, you may drastically alter the monthly payment you'd settled on.

With some planning and knowledge of the products, however, you can enter the F&I office with confidence and perhaps shave minutes off the time you spend there. Here are some commonly asked questions about the F&I office and what's sold there.

What is it?
The finance and insurance office is where the dealership draws up sales contracts, where you arrange payment for the car and where you'll be offered additional products for purchase.

Why do I have to go there?
The sale of a new or used car is not official until it's in writing and you sign the contract. There are also several dealer-, city- or state-mandated legal forms that you have to sign to conclude the sale. And then you need to actually pay for the car.

The F&I manager takes the down payment and makes arrangements with the finance company to set up your payment plan. If you have been preapproved for a loan by your bank or credit union, the F&I manager will probably ask if he can try to beat the interest rate. Finally, this is where the dealership will offer you a variety of products that can be added into your loan.

Why can't the salesperson handle the paperwork?
Remember all the legal forms and paperwork we mentioned earlier? The F&I manager is one of the few people at the dealership who knows all the products being offered and is trained to know the forms that need to be signed. Some dealerships have done away with the traditional F&I process, but they are the exception.

How long will it take?
Your time in the office will depend on the time of day, the number of people ahead of you and whether you have your loan documents in order. Salespeople usually outnumber F&I managers, so on a busy weekend, you could face a bottleneck that can have you waiting a half-hour or so before you even walk into the F&I office.

Once inside, you can expect to spend about 30 to 45 minutes. But if you want to hear the pitch for each product and negotiate a better price for any of them, this will add to the total time. If you've been preapproved for a loan and say "no" to all the products you're being offered, you may be able to shave off some minutes. But then again, a determined F&I manager might work hard to counter your sales objections. That back-and-forth could take awhile.

Why should I prepare for the F&I office?
A survey of 150 top dealer groups showed that customers paid an average of $1,359 for F&I products in 2015, according to Automotive News. And though the argument might be that this would add only about $20 to $40 to your monthly payment, it still is a significant amount. Plus, you'll find that an F&I manager is often the dealer's best salesperson, given that F&I products have the highest profit margins for the dealership. With this in mind, it is important to know what to expect.

What will the F&I manager offer me?
Here are the products you'll likely encounter in the F&I office. We can't list every one or name the exact price; everything varies by dealer, region and vehicle. One thing to keep in mind: The price of nearly all these products is negotiable, so feel free to make a lower offer or ask for a discount.

Extended warranty: This is technically called an extended service contract. This warranty kicks in after your new-car limited warranty has expired. It is also one of the most expensive items the F&I manager will offer you. Prices can vary widely, depending on the vehicle, coverage and brand.

Not sure if you need the warranty? Ask yourself these questions to help you weigh the pros and cons. If you do choose to buy a warranty, you'll want to stick with the manufacturer's product and stay away from third-party warranties.

Bear in mind you can purchase an extended warranty any time until the new-car warranty expires, which can buy you some extra time to think about it and shop for a better price.

Maintenance plans: Plans such as these bundle oil changes and other scheduled maintenance into a package. This product will be positioned as a way to "lock in" your price now to hedge against rising labor costs in the future. Essentially, you'd only have to worry about your car payment for the duration of the maintenance plan. These plans may limit you to one dealership for service, so make sure you ask about that aspect before buying.

Anti-theft products: These products can range from a simple car alarm, a starter interrupt, VIN etching or a GPS locator. Some dealerships install these products on all their vehicles when they place them on the lot. They are often positioned as an enhancement to the factory security features. You're not obligated to buy them, so if you don't want to spend the money, ask to have the device removed or deactivated before you take possession of the car.

Road hazard and wheel warranties: This combo warranty covers the wheels and tires in the event of damage. If you often drive on roads with potholes or debris, or simply have bad luck with curbs, this warranty might be worth considering.

Paint & fabric protection: These products offer protection to both the inside and outside of your new car by adding a chemical sealant to the fabric or paint. Modern automotive paint has come a long way in terms of durability, but if you want the extra protection, make sure you research what it costs before heading into the dealership.

Gap insurance: This pays off any difference between what your new car is worth and what you would owe after an accident or theft. Many new-car leases include gap insurance already, but it is worth considering if you've put less than 10 percent down on a financed vehicle.

Excess wear and use protection: Primarily for leases, this coverage protects you in the event you return the vehicle with a few dents, scrapes or stains in the upholstery. It will not cover the vehicle in an accident, however. That's what car insurance is for. If you tend to be hard on your leased cars, this protection is worth considering.

Credit insurance or payment protection: These plans are designed to kick in if you lose your job, die or are unable to make your car payments for a certain period of time. This article goes more into detail about the coverages, but in general, consumer groups have found that the cost of this coverage tends to outweigh the benefits.

Are any of these items worth it?
It's hard to make a blanket statement on these products. People's needs and buying scenarios differ greatly. For example, do you really need gap insurance if you've made a sizable down payment on a car you are buying? Or if you take excellent care of your leased vehicle, why pay for excess wear protection?

As far as extended warranties go, a 2014 Consumer Reports survey found that 55 percent of owners who had bought an extended warranty hadn't used it for repairs during the life of the policy. Those who did use the coverage, however, were quite pleased with it. In other words, your general satisfaction with these products will likely depend on whether or how often you use them.

The truth is that people purchase many of these products more for peace of mind than their actual usefulness. So ask yourself if peace of mind is worth the price of the warranty.

To find a dealership that knows how to treat shoppers right, please visit Edmunds.com's Dealer Ratings and Reviews.

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