Credit/Shutterstock
Many of today’s credit union members face significant affordability challenges, particularly when it comes to vehicle ownership. The rising costs of vehicle maintenance and repairs, coupled with high interest rates and inflated vehicle prices, have created a perfect storm that threatens the financial stability of many households.
As credit unions strive to support their members through these difficult times, offering the right mix of Finance and Insurance (F&I) products has become a leading best practice. These products not only help members maintain their vehicles in good condition but also provide financial protection against unexpected repair costs, which are increasingly burdensome due to labor and parts price volatility.
Recommended For You
As one example, mechanical breakdown protection options can help credit unions and their members prevent delinquencies if there is a catastrophic or expensive repair needed on the vehicle.
The current economic environment is marked by high inflation and rising costs for essential goods and services, eroding consumer spending power and making it harder for individuals to manage their finances effectively.
Since 2019, the sticker prices for new vehicles have skyrocketed by 25%, and that isn’t the whole story. Looking at transaction price data, consumers are spending an astonishing 33% more on average for a new car than they were five years ago, as reported by Automotive News on Feb. 5, 2025.
Where F&I Products Make a Sizeable Impact
F&I products, such as vehicle service contracts and GAP insurance, are essential in mitigating the financial risks of vehicle ownership by providing comprehensive coverage for repairs and protection against inflationary repair costs. Given the current economic conditions, where repair costs have surged by 28% over the past three years, according to the Wall Street Journal, these products help credit union members budget effectively and avoid financial shocks from unexpected repair bills.
With high vehicle prices and interest rates stretching consumer budgets, leading to increased auto loan balances and delinquency rates, credit unions face significant risks. Emphasizing the value of F&I products can reduce long-term costs and financial risks for members. By educating members on these benefits and offering flexible repayment terms and lower interest rates, credit unions can support members in managing vehicle-related expenses more effectively.
Addressing Negative Equity and Repossession Challenges
Negative equity, where a borrower owes more on their auto loan than the vehicle's current value, has become increasingly prevalent due to high vehicle prices. This situation can lead to significant losses for credit unions in cases of default, as vehicles with negative equity yield lower recovery values upon repossession.
Offering F&I products like GAP insurance can provide financial protection in the event of a total loss, covering the difference between the vehicle's actual cash value and the outstanding loan balance. This not only benefits members by preventing financial hardship but also reduces potential losses for credit unions.
Enhancing Member Engagement and Retention
F&I products also play an important role in enhancing member engagement and retention for credit unions. By providing valuable products that improve the ownership experience, credit unions can foster loyalty among their members. This approach not only boosts member satisfaction but also increases the likelihood of repeat business, which is essential for sustaining long-term relationships with members.
Moreover, the strategic integration of F&I products into the auto lending process can streamline the buying experience, making it more beneficial for both the credit union and its members. By offering a comprehensive suite of F&I products, credit unions can differentiate themselves from other lenders, positioning themselves as trusted advisors rather than just financial service providers.
Navigating Affordability Challenges With F&I Products
The affordability challenges facing credit union members who own vehicles are multifaceted and require a thoughtful approach. By offering the right mix of F&I products, credit unions can help members manage the rising costs of vehicle repairs and mitigate financial risks associated with unexpected breakdowns. These products not only provide immediate financial benefits but also foster long-term relationships by enhancing the ownership experience and promoting member loyalty.
As credit unions navigate the complexities of the current economic landscape, it is essential to prioritize strategies that address the root causes of affordability challenges. This includes educating members about the value of F&I products, offering flexible financing options, and addressing issues like negative equity and rising delinquency rates. By doing so, credit unions can play a pivotal role in supporting their members through difficult economic times, ensuring that vehicle ownership remains a viable and sustainable option for those who rely on it.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
