Public retailers make F&I per-vehicle gains; Group 1 breaks $1,500

The first four large public new-car retailers to report fourth-quarter earnings all gained in F&I revenue per vehicle retailed in the period, and three reached all-time highs.

Group 1 Automotive Inc.’s U.S. operations led the way, hitting a record $1,521 for the quarter, up 7 percent from the year-earlier period. Group 1’s previous high was $1,475, reached in the third quarter of 2014.

AutoNation Inc. reported an F&I average of $1,444 for the fourth quarter, up 5 percent. The company’s previous high was $1,407, in the first quarter of 2014.

Asbury Automotive Group posted a record $1,374 in the fourth quarter, up 2 percent from the year-earlier period. Asbury’s previous high was $1,344, in the fourth quarter of 2013.

Penske Automotive Group today reported average F&I revenue per vehicle of $1,070, up 2.8 percent from the year-earlier period, but not a company record.

The two public retailers yet to report, Sonic Automotive Inc. and Lithia Motors Inc., are scheduled to release fourth-quarter financial results on Feb. 25.

Consistently the highest

Group 1, AutoNation and Asbury are consistently the highest in F&I revenue per vehicle of the six large publicly traded new-car retailers. Roughly speaking, all three have gained about $100 per vehicle every year since 2010. But last year, Group 1 put some distance between itself and its nearest rivals in F&I revenue per unit.

All three companies pursue a similar approach with F&I: They limit themselves to a short list of lenders and F&I vendors as well as to a short menu of F&I products. In turn, higher volumes enable them to negotiate more favorable pricing.

The strategy has worked particularly well for Group 1, which likely will prove to be the first of the public retailers to reach the $1,500 milestone.

“It’s working for us,” said Pete DeLongchamps, Group 1’s vice president of manufacturer relations, financial services & public affairs, during a conference call for investors and analysts last week.

“We pay close attention to vehicle service contracts. We work hard on [prepaid] maintenance, which improves the retention rates for us. Road Hazard Tire is a product that we believe in, along with dent insurance and sealant. And that’s pretty much the products that we focus on.”

Less dependent on reserve

Success in selling F&I products also means that retailers can rely less heavily on dealer reserve, the small amount of interest dealerships add to the lender’s buy rate on a consumer auto loan as compensation for arranging the loan.

According to CEO Earl Hesterberg, Group 1 gets about a third of its F&I revenue per vehicle from dealer reserve.

Group 1 Automotive ranks No. 3 on the Automotive News list of the top 125 dealership groups in the U.S., with retail sales of 155,866 new vehicles in 2013. AutoNation ranks No. 1 on the list, with 292,922 new units; Asbury ranks No. 7, with 86,685; and Penske ranks No. 2, with 199,795.

You can reach Jim Henry at autonews@autonews.com

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