Lithia works to energize F&I after flat forecast
Holzshu: Looking at different products and services that can be offered to energize F&I operations.
Lithia Motors, expecting flat F&I revenue per vehicle this year, is looking for ways to improve, including working with underperforming stores.
For the fourth quarter, the dealership group said its F&I revenue per vehicle was $1,097, or $75 below the industry average. That was up 2.7 percent from a year earlier. For 2013, Lithia said it expects to average around $1,100 per vehicle, essentially flat with the current level.
"We're doing a lot of things, looking at different products and services that we can offer in F&I to improve that number," CFO Chris Holzshu said.
"It's a goal of ours," he said, referring to a measurable increase. In the meantime, the company's guidance for a flat performance this year "is based on what we're seeing right now."
The six large publicly traded new-vehicle retailers averaged F&I revenue per vehicle of $1,172 in the fourth quarter, up from $1,108 a year ago. The highest was AutoNation Inc. at $1,307; the lowest was Penske Automotive Group at $986.
Like some other dealership groups, for 2013 Lithia is concentrating on improving its bottom performers. "We have a number of stores that are underperforming in F&I. So yes, it's a focus area for us," Holzshu said.
Subprime customers with credit scores of 620 or below made up 13 percent of the customers Lithia financed, the company said. That was flat with a year ago, but overall unit sales increased, so the absolute number of subprime customers increased 26 percent, Holzshu said.
Contributing to that increase, Lithia said, was that it sold 38 percent more used vehicles with 80,000 miles or more -- internally called the value segment -- in the fourth quarter vs. a year earlier.
Holzshu said Lithia has been working to sell more vehicles in that segment, but it's a limiting factor on F&I revenue per vehicle.
"The one caveat I would say when you compare it with our peer group, just keep in mind that the value auto segment, which does make up 18 percent of our used-car sales, has very low F&I penetration," Holzshu said. "It's just a lower-priced vehicle, generally basic transportation, and the F&I per unit on that product is about half of what it is on our core product and our new-car sales. So it does bring our average down."
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