October 16, 2024
Our Q3 Embedded Insurance Report is out today. A few of the key insights that struck us:
Back-End Gross Continues to Drive Dealership Profitability
If you're in the automotive industry, you know margins on vehicle sales are returning to pre-COVID levels. That trend isn’t going anywhere. In our Q3 2024 Embedded Auto Insurance Report, we found front-end gross dropped another 21% year-over-year, down to an average of $1,304 per transaction. That’s rough. But here’s the good news: back-end gross is holding steady, and for many dealerships, it’s becoming the primary driver of profitability on car sales.
Our data shows back-end gross now makes up 59% of the total profit on vehicle sales, the fifth quarter where it’s been over 50%. It sure looks like the future of dealership profitability lies in optimizing back-end sales—and one of the best ways to do that may just be by embedding auto insurance into your F&I strategy. Dealerships that offered embedded insurance quotes through Polly saw an 18% higher back-end gross profit compared to those that didn’t in Q3.
As the market shifts, dealerships have a choice—continue down the same path of shrinking front-end profits or evolve by maximizing their F&I opportunities. If you’re not already integrating insurance into your F&I process, you’re missing out on a huge revenue stream.
Adding insurance quotes to your F&I offerings is a win-win. It helps your customers save time and money by bundling their insurance with the vehicle purchase, and it boosts your back-end gross. Our 2024 Embedded Car Insurance Study showed that you’re your key customers wanted insurance options in the dealership. Providing insurance at the point of sale not only gives them what they want, but also increases your profit margins.
Stabilizing Insurance Rates: A New Opportunity
After a steep 52% rise in insurance rates over the past two years, the market caught its breath in 2024 – seeing only a 3% increase in the last four quarters. We found the average monthly quote plateaued at $199 in Q3 of this year, a slight 0.4% dip from the previous quarter. While this may seem like a small shift, it signals something much bigger: stability.
For consumers, stabilized rates mean fewer surprises when budgeting for their next vehicle purchase. They can walk into the dealership with a clearer understanding of their total cost of ownership, which improves their overall confidence in the car-buying process. When customers feel more secure about their financial decisions, they’re more likely to move forward, closing deals faster.
And the opportunity doesn’t stop there. Stabilizing rates are expected to drive a shift in consumer behavior. According to JD Power data, 49% of auto insurance customers were actively shopping around earlier this year, driven by rising costs. Now that rates are holding steady, we anticipate that more consumers will want to shop for savings at the dealership—a win for both parties. This trend puts dealerships in the driver’s seat, ready to meet consumer demand head-on with embedded insurance solutions that deliver savings, security, and simplicity.
The Bottom Line
The data makes one thing clear: front-end margins may be shrinking, but there’s immense potential in new F&I strategies like embedded insurance. Dealerships that adapt to the changing profit landscape by focusing on back-end gross will thrive.
Offering embedded auto insurance isn’t just going to be a nice-to-have; it’s becoming a necessity for dealerships looking to maximize profitability.
If you’re ready to future-proof your dealership and start increasing back-end profits, it’s time to take a serious look at embedded insurance. The opportunity is real—don’t get left behind.
Want to see the full report? Check it out here.
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