LAS VEGAS -- Take away automakers’ dealer incentives, and dealerships are averaging higher gross profits on F&I than on selling the vehicle, regardless of the credit score of the customer, DealerStrong founder and CEO Greg Goebel says.
Three years ago, the reverse was true.
Even a year ago, gross profits from a vehicle sale topped those from F&I in some credit-score categories, Goebel told Automotive News. But the discrepancy now is across the board.
“Three years ago, F&I [gross profit] benchmarks were about one-third what they are today,” he said.
Goebel presented data backing up his assertion at the Industry Summit this month, an annual F&I conference here. DealerStrong’s data was drawn from more than 1.5 million vehicle transactions at more than 800 dealerships, as tracked by ProMax Unlimited, and covered a 16-month period through August.
Average vs. benchmark
Although Goebel said the average F&I gross profit per vehicle topped the average vehicle gross profit per unit, the difference was greater when examining benchmark data, representing the gross profits earned by the top-performing one-quarter of all dealerships.
For example, in the near-prime category, which DealerStrong defines as consumers with credit scores of 621-680, the latest benchmark F&I gross profit per new-vehicle transaction was $2,167, while the benchmark vehicle gross profit was $1,303.
Or consider what DealerStrong calls the Tier 1 of subprime, consumers with credit scores of 576-620, just low enough to slip into the subprime category. There, the latest benchmark F&I gross profit per new-vehicle deal was $2,652 while the benchmark vehicle gross profit was $1,233.
Another example: deals involving consumers with no credit score. The category comprises consumers who Goebel called credit ghosts, individuals who have no prior credit history, as well as consumers who have gone through bankruptcy and had their previous credit history erased.
For new-vehicle deals involving consumers with no credit score, the latest benchmark F&I gross profit per sale was $1,565 while the benchmark vehicle gross profit was $946.
For new-vehicle sales, all those figures exclude factory-to-dealer incentives, which Goebel said averaged $915 per vehicle in the 16-month period through August.
DealerStrong’s data for the second quarter is available on the company’s website, www.dealerstrong.com. The data is labeled as “3Q2015” because DealerStrong uses it to project profit benchmarks that dealerships should target in the third quarter. DealerStrong, of Evansville, Ind., provides training programs for dealerships, focusing especially on subprime financing.