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Publics see F&I gains in Q3, buoyed by add-on sales

An increase in F&I product penetration helped all six public new-car dealership groups to reap third-quarter gains in F&I revenue per vehicle retailed. AutoNation Inc., the largest of the companies, set a record.

In the third quarter, AutoNation averaged $1,549 in F&I revenue per vehicle retailed on a same-store basis, an all-time high for the six public retailers. It was a 10.4 percent increase over the year-earlier period.

Higher product and vehicle service contract penetration, along with higher amounts financed per transaction and more customers financing their vehicles through AutoNation stores, drove the surge, said Marc Cannon, AutoNation’s chief marketing officer.

Lithia Motors Inc. reported the second-largest rise in average F&I revenue per vehicle in the quarter, up 5.9 percent to $1,274 on a same-store basis.

F&I product sales are increasing service retention at Lithia dealerships, company executives said during an earnings call last week. Service contract sales rose 45 percent in the third-quarter on a same-store basis, the company said.

“We’re looking at the products and making sure we have the right products at each store and making sure our pricing is in line with the market,” Lithia CFO Chris Holzshu said during the call.

Sonic Automotive reported the next-largest increase. On a same-store basis, its third-quarter F&I revenue per vehicle jumped 5.6 percent to $1,279, thanks to high vehicle service contract penetration, CFO Heath Byrd told Automotive News in an email.

Appearance protection

Group 1 Automotive Inc. said its third-quarter F&I revenue per vehicle retailed rose 3.8 percent to $1,518 on a same-store basis.

“We work every day to improve underperforming stores and increase our product penetrations,” Peter DeLongchamps, vice president of financial services and manufacturer relations, said during a conference call last week.

Through September, Group 1’s U.S. dealerships have sold vehicle service contracts at a penetration rate of 40 percent. GAP policies are selling at a rate of 28 percent. The company said it arranged financing on 73 percent of new- and used-vehicle transactions.

Group 1 is also working to sell F&I products that make “trade-ins cleaner and worth more money,” such as dent policies and paint and fabric protection, DeLongchamps said.

The company said consolidation of its lender base, pre-recession loan availability, improved subprime lending and compliance training also helped boost F&I profitability per retail unit.

“More lenders have realized that the risks are lower” with subprime lending, DeLongchamps told Automotive News. “They have a little more appetite to buy a little bit down the FICO [credit score] band.”

Training, execution

Penske Automotive Group Inc. and Asbury Automotive Group also are emphasizing F&I products.

Penske’s F&I revenue per vehicle retailed rose 2.5 percent on a same-store basis to $1,123, “essentially driven by improved product penetration,” Tony Pordon, executive vice president of investor relations and corporate development, told Automotive News. “Our focus has been to increase training and improve processes to drive product sales.”

Asbury Automotive Group’s third-quarter F&I revenue per vehicle rose 2.1 percent on a same-store basis to $1,362. Matt Pettoni, Asbury’s vice president and treasurer, said higher penetration of “value-enhancing insurance products” and Asbury’s F&I team’s execution drove the rise.

AutoNation, of Fort Lauderdale, Fla., ranks No. 1 on Automotive News’ list of the top 150 dealership groups based in the U.S., with retail sales of 318,008 new vehicles in 2014. Penske ranks No. 2 on the list, with retail sales of 216,462 new units last year, and Group 1 ranks No. 3, with retail sales of 166,896 new units. Sonic ranks No. 5 on the list, with new-unit retail sales of 135,932; Asbury ranks No. 7, with 91,560; and Lithia ranks No. 8, with 91,192.

You can reach Hannah Lutz at hlutz@crain.com

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