Record F&I revenues still can grow
Maroone: Plenty of opportunity with F&I.
F&I income per vehicle still has room to grow, say executives of some publicly traded dealership groups that showed best-ever results.
"There's still a little bit of an upside. We can always perform a little bit better," Group 1 CEO Earl Hesterberg told reporters and analysts last week during the company's third-quarter conference call.
Group 1 reported record F&I revenue per vehicle of $1,220.
AutoNation Inc., the nation's largest retailer, topped that with a record $1,290 in F&I revenue per vehicle in the quarter. Sonic Automotive had a record $1,068. Asbury Automotive Group and Lithia Motors also saw higher F&I revenues per vehicle.
"We think there's still plenty of opportunity," COO Mike Maroone said during AutoNation's conference call.
Separately, Power Information Network reported that sales penetration for extended-service contracts -- one of the biggest contributors to F&I income -- grew to 46 percent of new-vehicle loan customers for the whole U.S. industry in the third quarter. PIN data show penetration was 43 percent in the fourth quarter of 2011. Service contract penetration is much lower for lease customers, holding steady at around 11 percent.
The public dealership groups seem to be following a similar formula: doing more F&I training, presenting shorter menus of core F&I products to every customer, and negotiating better pricing with lenders in exchange for a higher share of loans and leases.
Lenders enter auto finance all the time, but Group 1 wants to do more business with a few preferred lenders, especially the captive finance companies, said Pete DeLongchamps, vice president financial services and manufacturer relations.
"What we're really focusing on is making sure we go to the OEMs for financial services," he said. Group 1 also is leveraging its relationships with regional banks, he said. "Where the lending situation is today, we can expand our opportunities with our existing partners."
AutoNation also follows a "preferred lender network" strategy and forges alliances with the manufacturers and captives for extended-service contracts, Maroone said during the company's conference call.
An analyst asked Group 1's Hesterberg how high he thought F&I revenue per vehicle could grow. Was a gain of $100 feasible?
"A hundred dollars is a little high," Hesterberg said. "But there's nothing wrong with going for another $20 or $30."
Maroone said that by definition the retail group has dealerships that are above and below average, so there's room to improve the bottom performers.
"If you look at the bandwidth among our stores and our regions, we think there's still plenty of opportunity, as long as they execute the F&I process the way we're training them to do it," he said. "I don't want to predict how high it could go."
You can reach Jim Henry at email@example.com.