Finance and Insurance Products Will Account for 35% of Gross Dealership Profit by 2025
This report covers the automotive service and maintenance contract market in terms of volume (in million units) and value ($ billion) across North America. The key products covered in the study include vehicle service contracts, prepaid maintenance plans, tire and wheel protection, and appearance protection. It discusses the unit shipments, revenue forecast, distribution ecosystem, digitization and the future aspects of finance and insurance (F&I) products. The base year for the analysis is 2018 and the forecast period is from 2018 to 2025.
Marginal growth in new vehicle sales and compressed dealership profitability makes them depend on auto ancillary components, such as finance and insurance (F&I) products to ensure sustainable and incremental profitability. Protection against price inflations, one-time investment towards the service and maintenance requirements of the vehicles attracts customers towards F&I products. By bringing the customer back to the dealership for vehicle service requirements. The customer develops a positive image towards OEMs and influences future purchase decisions. This increases the revenue potential for dealerships through parts and service sales. As most F&I products are paid up front, these packages can help improve cash flow and provide incremental profitability to the OEMs.
In traditional auto retailing, F&I products are introduced in the final stages of the purchase cycle resulting in pressurizing the customer to make a buying decision. The dealer-centric approach does not address the actual needs of customers. Consumers are demanding a hassle-free online purchase experience similar to non-automotive sectors. To remain relevant, it is imperative that OEMs and dealership develop a consumer lifecycle engagement plan and adopt an omnichannel, customer-centric sales strategy. The study addresses the bottleneck involved in the F&I sales process and also discusses the digital solutions that address these challenges.
Key Features
The aim of this research service is to provide an overview of the automotive service and maintenance contract market, including market size and structure.
- To analyze vehicle sales, average miles traveled and average maintenance and service costs and to understand the demand factors driving the automotive service and maintenance contract market in North America
- To estimate the total market opportunity based on a top-down analysis of vehicles in operation, replacement rates, and available pricing data
- To provide insight into service offerings, distribution ecosystem, and market developments that will influence the evolution of service contracts and the aftermarket
Key Issues Addressed
- What are the factors influencing the adoption of service and maintenance contracts in North America? What is the future of these F&I products in the short to medium term?
- What is the size of the service and maintenance contracts in 2018? What is the impact on dealership profitability?
- What are the service offerings that are covered under each F&I product? How are they expected to evolve?
- What is the scope of digitization and future growth opportunities?
