Dealership gross profits see bigger impact from F&I

F&I products made up 16.3 percent of gross profits last year on average, up marginally from 16 percent in 2013.

The average dealership gained more from F&I last year, even though retailers’ overall sales penetration for products such as extended service contracts and GAP dropped a fraction of a percentage point.

On average, F&I accounted for 39.6 percent of gross profit for new- and used-vehicle departments combined in 2014, up from 38.8 percent in 2013, according to the 2014 NADA Data released by the National Automobile Dealers Association last week.

That number has been increasing since a recent low of 25.7 percent in 2009, when the downturn forced customers to cut back on spending, cash purchases ticked higher, and credit was harder to get, especially for customers with subprime credit.

The National Automobile Dealers Association reported that finance income -- defined as dealer reserve, flat fees and other finance-related income -- made up 23.3 percent of gross profits for new- and used-vehicle departments combined in 2014, a slight increase from 22.8 percent in 2013.

F&I products made up 16.3 percent of gross profits last year on average, up marginally from 16 percent in 2013. NADA reported that F&I product sales penetration declined a tiny bit, to 41.7 percent of new vehicles retailed from 41.9 percent in 2013. That number hit a recent high of 42.1 percent in 2012.

The small average decline in sales penetration comes despite all-out efforts by publicly traded new-car retail groups and other dealerships to increase F&I penetration.

Analysts said one factor hurting F&I sales penetration is the steady gain in leasing. Lease customers usually aren’t interested in the two biggest F&I products, extended-service contracts and GAP.

Most leases come with GAP added into the price. And lease customers generally don’t keep a vehicle past expiration of the manufacturer’s warranty.

According to Experian Automotive, lease penetration reached 25.1 percent of new-vehicle volume in the fourth quarter of 2014, an increase from 24.2 percent in the year-earlier period.

You can reach Jim Henry at

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