Group 1 leads peers in F&I revenue per vehicle; Penske trails again

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Group 1 Automotive Inc.’s 120 U.S. dealerships had the highest average F&I revenue per vehicle retailed in the second quarter among the six publicly traded new-car groups. It was the fourth quarter in a row that Group 1 posted higher results than its peers.

Group 1 reported a U.S. average F&I revenue per vehicle retailed of $1,442 in the second quarter, an increase of 7 percent from a year ago. On a consolidated basis, including its dealerships in the United Kingdom and Brazil, Houston-based Group 1 had an average F&I revenue per retail vehicle of $1,319, up 10 percent.

Penske Automotive Group Inc. brought up the rear among its peers, with average F&I revenue per vehicle retailed of $1,107 in the quarter, up 7 percent from a year earlier.

At its U.S. stores alone, Penske averaged F&I revenue per vehicle retailed of even less, $1,065, although that was up 5 percent. Penske’s international dealerships saw average F&I revenue per vehicle retailed of $1,197, up 11 percent.

Gains for all

All six publicly traded new-car groups improved their F&I revenue per vehicle in the second quarter from year-earlier levels.

But only Penske, of suburban Detroit, and Lithia Motors Inc., of Medford, Ore., posted a bigger percentage increase this year than they did last year. Those two also had the lowest year-earlier numbers.

Sonic Automotive Inc., of Charlotte, N.C., posted its highest average F&I revenue per vehicle for any quarter, at $1,211, up 6 percent from a year earlier. Its previous record was $1,206 in the first quarter of 2014.

Pete DeLongchamps, Group 1 vice president of manufacturer relations, public affairs and financial services, said in a conference call last week that Group 1 has stuck to the basics in F&I.

‘Great partners’

The retailer put a business plan in place five years ago, he said. “We’ve been executing on it. We continue to work very hard on the underperforming stores. And we’ve got great partners, both on our product side, but with our lenders as well.”

DeLongchamps has said in the past Group 1 limits its dealerships to a short list of preferred lenders headed by captive finance companies, plus a few big banks and a few credit unions that are strong in a particular market.

In return for more volume, lenders in general across the industry may be more generous in their approvals, and F&I product vendors may offer more favorable pricing. Several public dealership groups report they’re following similar strategies in F&I.

While Group 1’s average F&I revenue per vehicle increased in the latest quarter, it rose at a slower pace than a year earlier. In the second quarter of 2013, its average F&I revenue per vehicle retailed increased 10 percent. That slowdown was seen at several other publicly traded dealership groups as well.

Group 1 said its U.S. sales penetration for extended service contracts was even with a year ago, at 40 percent. U.S. sales penetration for GAP improved to 26 percent from 24 percent a year earlier. Prepaid maintenance improved to 10 percent penetration from 9 percent.

Leasing’s impact

At Penske, the lower average F&I revenue per vehicle is partly a result of the retailer’s higher reliance on luxury-brand sales, which tend to have higher rates of leasing. Lease customers are less likely to buy such mainstay F&I products as extended service contracts and GAP, or guaranteed asset protection.

F&I’s share of gross profit slipped marginally at Penske, to 16.8 percent from 16.9 percent a year earlier, but that was due in part to a surge in the share of gross profit from commercial vehicles, car rentals and others, to 4.2 percent from 1.7 percent.

Penske Automotive ranks second on the Automotive News list of the top 125 dealership groups in the United States, with retail sales of 199,795 new vehicles in 2013. Group 1 ranks No. 3, with new-vehicle retail sales of 155,866. Sonic is No. 4, with 132,363, and Lithia is No. 8, with 67,177.

You can reach Jim Henry at autonews@crain.com.

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