There’s upside in F&I, Lithia Motors Inc. and Asbury Automotive Group Inc. say. Lithia has consistently improved its F&I performance. While Asbury’s F&I gross profit per unit retailed on a same-store basis was essentially flat in the third quarter, executives say there’s room for growth.
Lithia showed the greatest percentage increase, and Asbury the smallest, during a third quarter that saw all of the publicly traded dealership groups post higher F&I average gross profit per vehicle retailed.
On a same-store basis, Lithia’s F&I average gross profit per vehicle retailed jumped 8.1 percent to $1,302 in the third quarter, a $98 increase over the year earlier. Lithia is still on the lower end of the F&I PVR spectrum, ahead of only Penske Automotive Group, but it posted the sharpest percentage growth.
By selling products and managing dealer reserve and pricing methodologies, “we are able to really extract those profits out of the store,” CEO Bryan DeBoer said during Lithia’s earnings call last week.
Lithia’s F&I focus is paying off, said CFO Chris Holzshu. One driver of its F&I success is having the right people at the finance desks, he said.
“We’re focused on getting the right people in our F&I offices and motivating with the right pay plans that really generate additional sales for the company,” he said.
Often, he said, “that means providing less transactions to each F&I manager, but encouraging to make sure they offer all the opportunities that we have for customers to protect their vehicles.”
Next, Lithia had to ensure it had the right mix of F&I products.
“We’ve done a lot with our partner vendors to try and make sure that we’re bringing in new products that are refreshed and really meeting the customer’s needs in this environment,” Holzshu said.
The third driver is adjusted pricing, Holzshu said. Lithia had a “stale pricing template” for several years, he said. Over the past year to 18 months, the retailer has made changes to ensure that the customers are given the right prices at the right time.
“Those three things together have really led to what you’re seeing overall in F&I,” he said. “But like everything we do, when we break it down into the individual stores, we’ve got a lot of stores that are really outperforming our expectations in F&I, and we have a lot of stores that are still fighting to move up above that $1,000 [or] $1,100 number. And so we are continuing to try new things, focused on our people, and we feel like there is still upside to F&I going forward.”
Asbury’s average F&I gross profit per vehicle retailed was essentially flat at $1,393, up $1 from the 2015 quarter because of “chargebacks, some turnover in folks and in some cases … just poor performance in product sales,” said COO David Hult.
“This quarter was a small setback for us when it comes to F&I, and we’re pretty positive about the fourth quarter as it relates to F&I,” he said.
CEO Craig Monaghan said there are opportunities in F&I. Strong F&I results improve an entire store, he said, “because it brings us incremental F&I benefits as well as benefits in parts and service.”
On a same-store basis, F&I average gross profit per vehicle also rose at the four other publicly traded new-car dealership groups. .
At AutoNation Inc., same-store F&I average gross profit per vehicle retailed grew 3.9 percent to $1,617, the highest of any public retailer. At Group 1 Automotive Inc.’s U.S. stores, it increased 3.3 percent to $1,578. At Penske Automotive Group Inc.’s global operations, it rose 2.5 percent to $1,152. At Sonic Automotive Inc., same-store F&I profit per unit jumped 5.1 percent to $1,341.