F&I Compliance Tip: Properly Disclose Aftermarket Products

Make no mistake: the world of aftermarket product sales is changing, right along with the ongoing evolution of automotive retail. A 2015 study commissioned by MakeMyDeal showed just how quickly it’s happening: As a part of the survey, 63 percent of consumers said that “they would be more likely to buy F&I products if they could learn about them on their own time, before finalizing their vehicle purchase.” Add in the scrutiny by the FTC and the CFPB, and the message is pretty clear: dealerships need to adjust the way they approach F&I product sales.

Why it Matters

Unfortunately, it’s not quite as simple as going online with a few product blurbs and images. According to the Dealertrack 2016 Compliance Guide, “NADA research has determined that more than 50 percent of the profits for the average dealership come from the sale of aftermarket products, and the majority of these sales are for vehicle service contracts.” It’s a significant area that is likely to become even more valuable as automotive retail shifts to a truly online to in-store journey, where F&I products are researched online before the buyer visits the showroom.  Indeed, according to the MakeMyDeal study, 83 percent of car buyers want to shop F&I products online right now. That makes it critical that your F&I consumer presentations include required checkpoints and disclosures.

Best Practice Tips

Consistency is the key to creating the type of experience that meets compliance standards and helps to create an environment of trust and credibility:

  • Offer every product to every customer every time. Use a good electronic menu product for consistency, and understand what is legally required by your state’s law. Prepare scripts, FAQs, and presentations that fairly and honestly state what the product is and how much it will cost.
  • Use a menu for consistent selling, and charge each customer the same price for each aftermarket product or groupings of products. Do not surcharge credit customers, as the surcharge is considered part of the “finance charge” under TILA and must be calculated into the APR and disclosed in the RISC.
  • Monitor and adjust your menus, presentation scripts, and practices to address consumer feedback and your CSI scores. Adapt your menu and aftermarket product selling to take into account changes in the law or unintended consumer negative reaction.
  • Obtain customer signatures to signify their acceptance or rejection of each product, and store them in case of future audits. Every customer should sign a final menu that clearly shows which products were offered, which were accepted and which were declined.

To learn more about the disclosing aftermarket products, gain access to the free 2016 Dealertrack Compliance Guide by clicking here.