Car Financing – The F&I Department

OK, you’ve finally gotten through the front end part of buying your car. You have worked hard done some tough negotiating and feel like you have negotiated a good and fair deal on your car purchase and trade-in. Now it’s time to head into the dealer’s F&I (finance and insurance) department and go through the formality of signing the financing paper work on the back end of the deal.

You may have noticed a couple of terms: front end and back end. I used these terms to illustrate a point to you. From a car dealer perspective there are two distinct parts (profit centers) to each deal. The front end of the deal is the new car price, your trade in, any dealer add on’s that they got you to buy with your new car, etc. All of this, most everyone is indeed familiar with. The second part of the deal, the back end, is not a place to let your guard down. The back end is the F&I department. The F&I manager is every bit as responsible for making sales numbers and profit margins as everyone else at the dealership and they are sales people NOT financial advisers and their purpose is to help maximize the profit on the deal.

Don’t assume that you are going to be offered the best possible interest rate you can get by the F&I manager. Quite the opposite! Adding a point or two (or more) to your contract interest rate above what you qualify for is a serious profit maker for the dealer.

Also keep in mind that all of your hard work negotiating your deal on the front end has been by in large verbal and perhaps a handshake. True, as a result, you may have a signed buyers order or worksheet that the salesperson and or manager have signed off on, but it is in the F&I department where all of this gets put into contract form.

Stay focused. Some dealers and salespeople may even imply that in order for the deal to get approved, you have to finance through their finance department. You don’t. In fact, if you have done your homework and found a better financing offer, you should take it. At the very least, you know what numbers you qualify for, and as such you should ask the car dealership to try to better what you already have.

Read the contract. Sound so basic, but most people don’t. Don’t just assume that everything that you negotiated with the dealership on the front end will make its way to the back end of your car deal. If you’ve had a long day negotiating to get the price you want, don’t give it all back in the F&I department by getting lazy at this very crucial time.

Without question, the single biggest mistake car buyers make is failing to prepare. That, and setting your expectation that car buying and the negotiating process within can take at best several hours to accomplish. Know that you are going to be at the dealership for a while can help you stay energized and focused. Do your homework. Know your credit score. Get your financing pre-approved and see if the dealer can beat what you already have. Be familiar with all the areas of potential sales and profit that the dealer can potentially land. Know what extras (if any) you will and will not pay for. Make sure the contract in the F&I department reflects all the negotiations that you have worked to accomplish before hand. Then, finally, remain on your toes and don’t drop your guard once in the F&I department.