Penske taking steps to improve F&I revenue

Roger Penske: A renewed focus on F&I.
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DETROIT -- Penske Automotive Group Inc. lags its publicly traded dealership-group peers in finance and insurance revenue per vehicle retailed, largely because Penske dealerships lease vehicles at rates above the industry average.

But Chairman Roger Penske isn’t content with the current F&I results. He wants to raise the numbers. And he’s already seeing results.

“We’ve really focused on [F&I] in the last year,” Penske told Automotive News. “We’ve done more training.”

The company, the second-largest dealership group in the United States, has designated six “finance specialists,” he said, to consult with and train the F&I staff at Penske’s 177 U.S. dealerships.

Penske reported second-quarter F&I revenue per unit retailed of $1,107, trailing its peers by roughly $100 to $300.

Group 1 leads

Among the six publicly traded new-car groups, Group 1 Automotive Inc.’s 120 U.S. dealerships had the highest average F&I revenue per vehicle retailed in the quarter: $1,442, up 7 percent from a year earlier.

On a consolidated basis, including its dealerships in the United Kingdom and Brazil, Group 1, of Houston, had an average F&I revenue per retail vehicle of $1,319, up 10 percent.

Also topping Penske Automotive in average F&I revenue per vehicle retailed: AutoNation Inc., at $1,398; Asbury Automotive Group Inc., at $1,308; Sonic Automotive Inc., at $1,211; and Lithia Motors Inc., at $1,206. Data for AutoNation, Asbury and Lithia were for stores owned by those companies for 12 months, thus excluding newly acquired dealerships.

Luxury, leasing penalty

Penske Automotive is challenged in F&I revenue because its sales are heavily tilted in favor of what it calls “premium/luxury” brands.

Penske’s premium/luxury dealerships, including the Audi, BMW, Lexus, Mercedes-Benz and Porsche brands, account for 71 percent of its total worldwide automotive-related revenue -- that is, revenue from new and used unit sales, service, parts and F&I.

In fact, Penske booked more second-quarter automotive revenue from the Porsche brand than from General Motors, Ford and Chrysler Group brands combined.

Penske said lease penetration rates on new-unit sales of its premium/luxury brands is about 55 percent.

Leased vehicles allow less opportunity for F&I profits because lease customers rarely purchase extended service contracts or GAP.

In the F&I department, “We make about $300 on a lease contract compared to $600 to $700 on retail finance contract,” Penske said.

At Penske’s U.S. dealerships, leasing averages between 35 percent and 40 percent of new-vehicle deliveries, said Tony Pordon, Penske’s executive vice president of investor relations and corporate development.

‘Nice increase’

Still, Penske’s low $1,107 second-quarter number represented an increase of 7 percent from the year-earlier period. In the United States, F&I revenue per unit retailed rose 5 percent to $1,065. Internationally, it increased 11 percent to $1,197.

“When you look at it overall, we’ve had a nice increase,” Penske said.

Penske credits the gain to a new program he started last year that uses dedicated “finance specialists” to do consistent training at dealership F&I offices.

“Instead of a business manager at a dealership, we have people out training and teaching those at the dealership levels,” Penske said. “We put those people out in the field. These are people who act as consultants to our dealerships.”

Penske said there are two finance specialists per region.

“They are focusing just on finance and insurance, training and process,” Penske said.

U.S. only

He said that the program operates only in the United States because F&I revenues have been strong in the United Kingdom.

Penske ranks No. 2 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.

You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on Twitter

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