“Going to F&I” is the final step in buying a car at a dealership. It can also be the most frustrating, as you’re likely to have already spent hours at a dealership test driving, negotiating and, inevitably, waiting around.
F&I literally stands for Finance and Insurance, and is the office where you will sign all required legal documents associated with a car purchase. This can include signing financing agreements, or if you’re financing the car separately or purchasing with cash, hand over the required payment. This is handled by a dedicated “F&I manager” specifically trained and familiar with the various forms and contracts required.
Because there are far fewer F&I managers than salespeople (in fact, there’s usually only one), this can lead to a sort of bottleneck at the dealer, especially on weekends or other busy days. As a result, be prepared to wait a half hour or longer just to get into F&I. Ideally, the dealer will be using that time to prep your car, while you could also ask your salesperson to begin explaining the many (and often complicated) features of your new car.
Once you’re in F&I, you can expect the process to take another half hour or longer depending on the amount of paperwork that needs to be signed. This can depend on the state in which you live, and whether you’re financing, leasing or paying with cash. Crucially, however, it can also depend on whether you purchase any of the many products and services that the F&I manager will offer. This would be the other primary task of the F&I manager: pad the deal.
This is where doing some research ahead of time will literally pay off, as you’ll know what products you might be interested in, what constitutes a good or bad example of that product, or most simply, tell the F&I manager “no” to everything and save yourself a lot of time. Frankly, the safest course of action is to just say “no” as these products are often of dubious value and can usually be purchased after the fact. Besides, “just an extra $20 per month” might sound like a good deal, but multiply that by months and by years and by the interest rate … and well, it’s suddenly a very hefty charge.
Nevertheless, F&I managers aren’t snake oil salesmen and the products can be beneficial to certain car buyers. Their prices are also negotiable. Below are some of the most common products.
Probably the most common F&I product purchased. It’s also one of the most expensive. On the surface, it makes good sense: protect yourself from future maintenance and repair costs after the new-car warranty has expired, especially as the car gets older and therefore more likely to require maintenance and repairs. And below the surface, maybe it will make sense for you as long as you confirm it’s a warranty backed by the manufacturer as opposed to a third party (those are definitely not recommended).
However, the value of any warranty is largely determined by how it was used. If your car breaks a lot, it was worth it. If it was a reliable champ, you wasted a big chunk of dough. Of course, you won’t know that answer at the time of purchase, and as such, putting a value on that warranty is difficult. You can bet that the price the dealer quotes is doing their profit margin a favor, not your pocketbook.
It’s also important to note that you can buy an extended warranty at any time before your new-car warranty expires. If you’re on the fence, it’s probably best to just say “no” and see how things are going as your car ages.
Vehicle Service Contracts / Maintenance Plans
This provides pre-paid service visits for your car similar to what some manufacturers include in the new-car warranty. Basically, you’re paying in advance for scheduled service visits, locking in the price to prevent future increases in labor or parts costs. It also means you won’t literally have to hand over money during those future maintenance costs. However, you’re still paying for them and the parts/labor inflation argument is dubious – especially since the maintenance plan will likely cost more than those scheduled maintenance visits (why else would the dealer offer them?). Finally, it’s important to note whether the maintenance plan applies only to that specific dealer, or if you can use it at any of the brand’s dealers. You never know when you, or the dealer, might move.
A more sensible idea would be to take whatever amount the dealer quotes you and put it in an interest-bearing account. Draw from it for maintenance, and don’t be surprised if there’s a lot left over at the end of the plan period.
Wheel and Tire Warranties (aka Road Hazard)
If you live in an area with terrible pavement, this one might be a good one to consider — especially since wheels keep getting bigger and tire profiles smaller. The chances of damage to either and the cost to replace/repair them is therefore even higher. This is especially true of run-flat tires. Now, many tires do come with some sort of warranty, but they often only cover tire defects as opposed to damage. In that case, getting a tire/wheel warranty could be a good idea.
So how much do you pay? Well, we wish we had an easy answer, but it can depend on the wheel/tires on the car. If you’re interested, we would suggest finding out the tires in question and then calling a tire shop or two and asking about the cost of replacements. That should be a good starting point. You can also call the F&I managers of your potential car’s brand and ask the cost of a wheel/tire warranty ahead of time. F&I managers can charge more than double the cost of the policy itself, so remember, everything is negotiable. For some in-depth tips about negotiating with an F&I manager over the phone, this feature by Edmunds.com provides some tricks of the trade from a car-buying pro.
Paint and Interior Protection Plans
Modern paint and rust proofing have become so advanced that these are usually unnecessary. Keeping your car clean, especially in the winter, will probably be just as effective. If you’re concerned about stains or tears on the interior, there are very nice seat covers and spray-on treatments you can buy for a lot less.
You can research this more fully in our article Gap insurance basics. However, in even more basic terms, gap insurance covers the difference between what you paid for the car when new versus what you would still owe should it be totaled in an accident or stolen. This is included in new car leases.
Car alarms, stolen vehicle locators and other anti-theft products
These may have value, but the F&I office is probably not the best place to buy them. You won’t have the time or opportunity to fully research the best products and what you should pay for them. Should any alarm or vehicle locator like LoJack already be on the car, you certainly don’t need to purchase them. You can ask for them to be removed, or if necessary, cancel the deal. This goes for any accessory installed on the car by the dealer, be it an alarm or running boards.
You should also note that many cars now include stolen vehicle location services within their suite of emergency communications systems. These include GM’s OnStar, BMW Assist and Toyota Safety Connect just to name a few.
Packages or Bundles
F&I managers will often package several of their products into packages to make it easier to buy. Well, theoretically. It also makes it more expensive and makes you think you’re required to buy more just to get one desired product. However, these bundles are not like the optional packages offered on the car itself. They can definitely be unbundled to buy a single element, and if they say that’s not possible, forget about it. Again, you can purchase virtually all of the F&I products after the deal is done.