Issue No. 10 | June 9, 2026

Intelligence for F&I agents, administrators, and dealership finance professionals.

THE VEHICLE MARKET NUMBER: $1.561 TRILLION

The Federal Reserve G.19 release from May 7, 2026 puts motor vehicle loans outstanding at $1.561 trillion as of March 2026. The average new-car 72-month loan rate was 7.55% as of February 2026. In a higher-rate financing environment, payment performance becomes more important. A contract signed at closing and later cancelled for nonpayment before the first scheduled installment clears creates potential claims exposure during the exclusionary window, even if no revenue from that contract was ever recognized.

This is not a DTC-only issue. Any F&I desk sourcing VSC volume through installment billing programs is operating inside these mechanics. Understanding where early fallout sits, flat cancel versus unfunded, changes how the desk-level P&L reads.

THE F&I ANGLE

Flat cancels and unfunded contracts look the same in a close rate summary. They are not the same problem.

A flat cancel is a customer who buys and cancels within the early contractual window, typically 30 days under many state frameworks. Full refund obligations frequently apply. The deal reverses and the cost is sunk. An unfunded contract is different: the customer executed the agreement and a down payment cleared, but the first scheduled installment never followed. The contract cancels for nonpayment. Depending on program terms, the down payment may not be refunded. The cash outcome is different. If the contract survived past its exclusionary period before that first payment failure, there is also potential claims exposure on a contract that never generated revenue.

The first-payment timeline for DTC VSC installment products, typically 31 to 45 days post-sale, is a meaningful window. A customer who signed a VSC agreement and then fails to make the first installment payment is not the same situation as a customer who exercised a cancellation right. If your administrator is blending both into a single early-cancel figure, you may be losing visibility into which variable drove the fallout: offer structure, payment setup, expectation-setting, or something else.

That distinction matters at the desk-level P&L and at the reinsurance level if you are holding VSC risk.

FROM THE BLOG

Flat Cancels vs. Unfunded Contracts in DTC VSCs

The post walks through the definitions of flat cancels and unfunded contracts, the Day 0-to-first-payment timeline that drives each outcome, and the claims exposure that can arise when a VSC contract survives its exclusionary period without ever economically funding. While the article is written for DTC operators and administrators, the installment mechanics apply equally to F&I desks using installment VSC billing.

THE DESK STAT

In DTC VSC installment programs, down payments at sale typically range from 2% to 10% of contract value. For a $2,000 VSC, that is $40 to $200 collected at signing. Depending on program structure, contract terms, and whether the outcome is a flat cancel or an unfunded contract, some or all of that amount may be refundable. Does your desk-level reconciliation distinguish between the two, or is early fallout tracked as a single number?

Until next Tuesday,

If you want to see how dealerships are separating flat cancels from unfunded contracts, including how the distinction can affect VSC reinsurance positions, reply here or book 20 minutes. We read every response.