F&I revenue growth slows in Q2 for some major dealership groups

Of the four publicly traded new-car dealership groups that have reported second-quarter results, only one has posted a higher rate of growth in F&I revenue per vehicle retailed than it did a year ago.

Lithia Motors Inc. today reported average F&I revenue per vehicle of $1,206, up 9.4 percent from the 2013 period. Last year at this time, its per-vehicle F&I revenue rose 4.4 percent from the year-earlier period.

Lithia showed second-quarter gains in extended service contract penetration, up 2 percentage points from the 2013 period, to 44 percent, and in sales penetration for lifetime oil and filter, up 1 percentage point to 38 percent.

Lithia’s quarterly presentation to analysts also admitted that the company’s average revenue per vehicle lags that of its peers, which averaged $1,211 in 2013 vs. Lithia’s $1,122 that year. That slide in the presentation carried the headline, “Opportunity exists in F&I.”

The growth in F&I revenue per vehicle has slowed at the other three groups, but a couple insist they can keep raising the bar in F&I.

‘Some plateaus’

“We have seen some substantial increases” over the past few years, Michael Kearney, COO of Asbury Automotive Group Inc., said during a conference call for analysts and investors on Tuesday. “I think, and we have noted it before, that our growth can be a little lumpy. We will have some nice increases and then we will have some plateaus.”

Asbury reported average F&I revenue per vehicle retailed of $1,308 for the second quarter, an increase of only $3, or 0.2 percent, from the second quarter of 2013. In the 2013 quarter, F&I revenue per vehicle was up 9.5 percent from the year-earlier period.

Kearney said Asbury would stick to its strategy for improving F&I revenues, which he characterized as “disciplined execution of F&I sales processes and training.” Like other public groups, Asbury is concentrating on improving results at the bottom one-third of its 81 dealerships.

'Work on those'

“There is always a bottom third of the team, and we will continue to work on those,” he said. “So we are quite confident we will continue to grow it. I can’t tell you where the high end is.”

Sonic Automotive Inc. on Tuesday reported average F&I revenue per vehicle retailed of $1,211 in the second quarter, up 5.5 percent from the year-earlier period. In the 2013 quarter, the number was up 7.4 percent from the year-earlier period.

Last week, AutoNation Inc., the nation’s largest retailer, said it had average F&I revenue per vehicle retailed of $1,398 in the second quarter, up 1.7 percent from the year-earlier period. Last year, AutoNation’s F&I revenue per vehicle in the second quarter was 7.7 percent higher than it was in the year-earlier period.

“I don’t think that we feel like we have flattened out,” said AutoNation COO Mike Maroone. He said AutoNation has put a “huge” effort into selling extended service contracts and that the company would continue to move the needle in F&I.

“Ability to grow”

“I’m very confident of our ability to grow that going forward,” Maroone said. “We have had a steady growth path for almost 10 years, and I don’t think this quarter would be anything to indicate that there won’t be future growth.”

AutoNation ranks No. 1 on the Automotive News list of the top 125 dealership groups in the United States, with retail sales of 292,922 new vehicles in 2013. Sonic ranks No. 4 on the list with 132,363 new units retailed; Asbury Automotive ranks No. 7 with 86,685 new units; and Lithia Motors ranks No 8, with 67,177 new cars retailed in 2013.

No. 3 Group 1 Automotive Inc. is scheduled to report second-quarter results on July 24, and No. 2 Penske Automotive Group Inc. is expected to report on July 30.

You can reach Jim Henry at autonews@crain.com

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