With sales of new vehicles recovering slowly and new-vehicle gross profits under pressure, the heat is on the F&I department to increase sales per vehicle.
The six biggest public dealership groups are leaning on their F&I departments this year, employing new tactics such as “boot camp” F&I training; enlisting service advisers to sell F&I products; and, for one group, a goal of selling at least two F&I products per new vehicle.
All that effort seems to be paying off.
Of the six biggest public groups, Asbury Automotive Group had the largest percentage increase in F&I revenue per vehicle in the third quarter compared with a year ago, an increase of around 12 percent to $1,013. Lithia Motors Inc. saw a 10 percent increase to an even $1,000.
“I am extremely pleased with the progress that our F&I team continues to deliver,” said Asbury COO Michael Kearney.
Even with the jump in F&I revenue, Asbury's gross profit per new vehicle sold was down 5 percent on a same-store basis, to $2,027 for the quarter. Asbury's net income overall jumped 69 percent in the third quarter to $12.5 million. The absence of a year-ago loss for discontinued operations was a big contributor to this year's improvement.
“F&I continues to benefit from increased product sales and improved consumer credit, consistent rates from lenders, and our focus on training of our F&I personnel and best practices,” Kearney said during a press conference.
Besides increased F&I training, including a self-styled, online boot camp for F&I managers looking to sharpen their skills, Asbury is enlisting service advisers to sell extended service contracts and prepaid maintenance. In addition to more F&I revenue, the practice also generates more parts and service business, Kearney said.
For the other four big public groups, F&I revenues per vehicle gained around 5 percent. AutoNation Inc., the country's No. 1 dealership group, had the highest F&I revenue per vehicle for the quarter at $1,130.
Sonic Automotive has a goal of two F&I products per new vehicle sold, said Jeff Dyke, executive vice president of operations. “This plan was developed to help our F&I team offset the decrease in profit coming from finance commissions, which has been an industry trend that we've all had to face over the last couple of years.”
At Group 1 Automotive Inc., the recent recession and worry over unexpected expenses have prompted more customers to buy extended service contracts, says Troy Ward, Boston-based regional F&I director. “They're something customers really want to have.”
Extended service contracts are a tougher sell, though, for retailers that have a lot of lease business. Lease customers are less likely to buy extended service contracts if their lease is shorter than the manufacturer's warranty. They also don't usually buy GAP policies at the dealership because GAP is added automatically to most leases.
At Penske Automotive Group, the majority of sales are lease deals. Penske's third-quarter F&I revenue per vehicle was $953, up 5.3 percent from a year ago.
“We're lower than most of the people in our peer group because our sales are 55 percent premium luxury, and that's leased,” Chairman Roger Penske said during a conference call. “We don't have the ability to sell some of the products that you do with some others.”
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