Car dealership customers can drive off the lot in a vehicle without putting a dime down on it. They can decline aftermarket accessory offerings. They can pass on finance and insurance products.

But, as dealers well know, no one can drive off the lot in their new purchase without first obtaining insurance.

As New York dealer Brian Benstock tells WardsAuto, “One hundred percent of our customers are required to purchase vehicle insurance.”

And that’s true not just in New York, but in all states.

Insurance rates have dramatically increased in recent years, notes Benstock, general manager and vice president of Paragon Honda and Paragon Acura in the borough of Queens, NY.

Add it to the growing list of vehicle-affordability concerns.

“Over-zealous (rate raising) impacts the products we sell and our ability to sell them,” he says.

Getting car insurance is part of the dealership sales process that can bog down deals, put customers into sticker shock and sometimes make them reconsider or walk away from deals.

Says Matthew Edmonds, CEO of digital insurance firm In the Car, of insurance-premium sticker shock: “Let’s say you had a Honda Accord that is 15 years old, and you are spending $80 a month on it for insurance. Now, you are going to buy a brand-new Ford F-150. Your insurance could be $300 a month. The salesperson must deal with that.” (Platinum trim levels of that pickup truck can retail for more than $90,000.)

Between 2022 and 2023, the Bureau of Labor Statistics reported that motor vehicle insurance costs jumped 20.3%, the biggest hike in over a decade.

From January 2022 through the end of 2024, overall industry rate levels were up about 35%, according to LexisNexis Risk Solutions.

Consider some of the factors driving insurance rate hikes:

Tech and Crashes:

These include more severe accidents, higher repair costs due to inflation and advanced vehicle technology, and rising replacement parts prices. Natural disasters and car thefts are culprits, too.

Regional Differences:

Every state has its own insurance regulations. The impact of rate increases varies by state, with Florida experiencing significant jumps and Missouri seeing a decrease in some periods.

What can dealers do?

Some F&I managers suggest alternative options to buyers who either don’t have insurance or balk at the price. One alternative, called embedded insurance, is merging the insurance premiums into monthly car payments.

Among the alternatives for car buyers who don’t already have their own car insurance are Polly, Insurify, Credit Karma and the new digital product called In the Car, the same name of the company that offers it.

In the Car CEO Edmonds was part of a team that created and ran Tesla Insurance, which integrates the purchasing of its own brand of insurance with the vehicle at the point of sale.

General Motors has a similar white-label insurance program. Start-up Rivian is following suit.

Edmonds is trying to recruit other automakers and their dealers to offer their own branded insurance through his company’s new product.

Revenue Boost

Manufacturers understand the costs of fixing their products better than anyone else, Edmonds says. “So, they can use those data points to price an insurance product that is ultimately the most effective.”

Those products give manufacturers and their dealers additional revenue, he says. “We can guarantee real OEM parts vs. aftermarket (knockoffs). And ultimately, it keeps the consumer within the brand’s ecosystem.”

Dealers can’t sell insurance directly. Some say in-store insurance agents have been ineffective.

In the Car operates a digital platform that lets car buyers get insurance at the point of sale in less than a minute.

Among other sources, the company uses information already provided during the sales process and taps it from the dealership management system (DMS).

With the help of artificial intelligence and algorithms, the product combines that information with data about a customer’s driving record, credit score (people with low credit scores pay higher car insurance rates), prior loss claims, the number of people in the household and other cars in a family fleet.

Edmonds’ company is referred to as a managing general agency. “In insurance-speak, we’re not an insurer because other companies we work with take the risk from a financial perspective,” he says.

To him, the best-case scenario is when a dealership salesperson talks about insurance at the point of sale, then mentions the In the Car product.

If customers are interested, they get a link and tap it on their phone. A quote appears in as little as 30 seconds. “It appeals to young consumers because it’s all digital,” Edmonds says.

A study by Polly, an embedded auto insurance provider, says 84% of Gen Y and Gen Z want insurance included in the car deal.