Saleswise, the auto industry has established an impressive run over the past few years. But now, front-end margins are tightening, dealership-automaker relationships are on edge, and regulators are more stringent.
Despite the industry’s ups and downs, dealers at events I’ve attended over the past few weeks had a common feeling about one department: They love F&I.
Anxiety still exists in the F&I world after the Consumer Financial Protection Bureau accused Honda and Toyota’s captives and Ally Financial of discriminatory auto lending. The CFPB ordered the captives for Honda and Toyota to cap the amount of retail margin dealers can absorb on auto loans.
It’s been almost a year since the CFPB’s last big action against an auto lender, and since the actions, it seems that many dealerships have leaned on F&I product sales over dealer reserve for F&I profit.
That strategy has paid off. F&I and service continue to be the hot spots for dealership profit, and with maintenance-driven F&I products, they go hand in hand.
F&I profit per vehicle is at a healthy average for the biggest public dealership groups. Both Group 1 Automotive and Lithia Motors, which reported third-quarter financial results last week, had F&I profit per vehicle above $1,300. Lithia’s F&I profit per vehicle increased 8.1 percent to $1,302. Group 1’s similar F&I profit grew 3.3 percent to $1,578.
Coming off a high in 2015, at least among the six largest public retailers, F&I continues to strengthen, and dealers appreciate that they can count on it. As one dealer put it, “Thank God for F&I.”