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Private retailers borrow tricks from public groups to lift F&I profit

Consistent processes, menus, training are among best lessons

John Bergstrom, Bergstrom Automotive: "Having the publics out there helps us be better business managers."
John Bergstrom has learned a lot about building his finance and insurance business from the publicly traded dealership groups.

The CEO of 19-store Bergstrom Automotive in Neenah, Wis., even has an executive on staff whose job is to study what the public groups are doing.

Four years of such benchmarking is paying off: Bergstrom Automotive's F&I revenue has nearly doubled since it began modeling its operations after the publics. The dealership group went from less than $400 per vehicle retailed, Bergstrom says, to around $720 in 2009.

"Having the publics out there helps us be better business managers," he says.

The gains are noticeable in all aspects of the dealership, Bergstrom says, "but especially in F&I."

Higher aftermarket sales

It's not just Bergstrom. The practices of the public dealership groups are closely watched throughout the automotive retailing world. In general, the public groups make more on F&I, and the difference largely is attributable to higher sales of products such as service contracts, experts say. The publics put a lot of emphasis on training, stressing consistent presentation of products to all customers going through the F&I office.

And over the past decade, F&I revenue at the publics has soared, now hovering near $1,000 per vehicle. In 2009's credit-challenged market, that revenue dropped. But publics on average still collected $986 in F&I revenue per new and used vehicle sold, down from $1,058 in 2008, according to an analysis by the Automotive News Data Center.

The six public companies reporting data to Automotive News had individual averages ranging from $883 to $1,116 in 2009.

On average, the largest private dealership groups make less -- but they're catching up. In 2009, the private groups on the Automotive News list of the nation's top 125 dealership groups averaged F&I revenue of $940 per new and used vehicle sold, down just slightly from 2008's average of $943.

Some private groups reported average revenue significantly higher than the publics. The individual averages of the privates cover much wider territory -- from $209 to $1,717.

Officials at NCM Associates Inc. in Overland Park, Kan., which consults with both private and public groups, say direct comparisons between the publics and privates can be tricky because of differences in reporting structure and franchise makeup.

Geography also can make a difference. Dealerships in the leasing-heavy Northeast traditionally take in less F&I revenue, says Pete DeLongchamps, vice president of Group 1 Automotive, the Houston-based public retailer.

Consistency is the key at the publics, says Charles Oglesby, Asbury Automotive CEO.

"All of us are concerned about compliance," Oglesby says, "so we have a menu-driven process that really puts everything in the consumer's hands. We also have limitations on the amount of money we can make on our customers on reserve. There's only so much margin that we will accept from our stores."

More choices

The use of menus picked up in the industry after well-publicized cases of fraud in the F&I office.

Early on, the fear was that menu selling would drive down per-vehicle F&I revenues, Asbury CFO Craig Monaghan says. But the opposite happened. When presented with more choices, customers bought more.

In the past 10 years, the averages among the large public groups have gone from probably $500 per vehicle to today's $900 or $1,000, he says.

"It's amazing," Monaghan says. "This transparency in many ways actually made us better."

Constant training and an emphasis on products that add value for consumers are other keys, says Michael Maroone, COO of AutoNation Inc., the nation's largest dealership group. AutoNation finance staffers go through training six times a year.

"It's time-consuming and expensive," Maroone says. "But when you look at our results, our results are outstanding."

The group's "big five" products -- those that sell to double-digit percentages of customers -- are service contracts, prepaid maintenance plans, tire and wheel protection, guaranteed asset protection, or GAP, insurance and security products, Maroone says.

Public dealership groups also have launched new approaches to selling. AutoNation now sells service contracts from its service lanes and credits that for improvements in F&I revenue. Asbury has a similar program that it is expanding to its 80 stores.

Galpin's Bert Boeckmann says he watches the public groups closely. "I compare everything every month."

'Every single time'

Bergstrom says selling by menu and having a consistent process are the biggest lessons learned from the publics. He watches all of them, including CarMax. He identified AutoNation and Penske Automotive Group as great examples. "We've built processes in that way," Bergstrom says. "Every single guest, every single salesperson, every single time."

It's a total change, he says. And Bergstrom says it's paying off for customers, too. He has reduced prices because sales are now spread over a wider base of customers -- yet dealership returns are better.

"If you're trying to average $1,000 per car, you used to have to do it out of 25 to 30 percent of the people," Bergstrom says. "Now if you get great processes and follow them and train to it, 75 percent of the people will buy something, maybe 78 percent."

Bert Boeckmann, owner of Galpin Motors Inc., a seven-store group in North Hills, Calif., says he watches the publics closely in addition to learning through 20 groups and manufacturer-shared data for his region.

"I compare everything every month, just to see if we're going up or down," Boeckmann says.

Galpin is near the top of the Automotive News analysis, reporting $1,383 in F&I revenue per vehicle in 2009. Service contracts and security products such as LoJack are big sellers at his Southern California dealerships.

For the past 18 months, Ford Motor Credit Co. has been helping Galpin Ford, the country's largest Ford dealership, with more consistent monthly training for employees on how to present F&I products. The captive also helps set goals and evaluate individual employee performance.

Customized menus

One process Boeckmann recommends: Sending the F&I employee to the showroom floor when a sale is about to close. The employee chats briefly with the customer and asks a prescribed set of questions, such as, "How many miles do you drive each year?" or "How frequently do you like to trade?" The F&I employee then sets up a customized menu of products for that transaction.

Structuring compensation properly also is important, Boeckmann says, so that F&I employees aren't just trying to sell what they personally will make the most money on.

"A big part is to make darn sure you've got the right kind of employees in there," he says. "We do spend the time to make sure they're reviewed properly."

Publics vs. privates
Public dealership groups generally make more on F&I than the typical large private group, but private companies are catching up. Here's how 6 public groups fared.
 2009 Avg. F&I Revenue Per New/Used Unit2008 Avg. F&I Revenue Per New/Used UnitChange
Group 1 Automotive$994$1,080–8%
Lithia Motors$948$1,096–14%
Sonic Automotive$917$1,002–9%
Penske Automotive$915$948–3%
Asbury Automotive$883$1,035–15%
Average for publics$986$1,058–7%
Average for privates$940$943–0.3%
Source: Automotive News Data Center

You can reach Amy Wilson at

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