Group 1, AutoNation, Asbury, Sonic and Lithia posted improved F&I results in the fourth quarter, although the retailers gave mixed views this month on whether growth will continue. Penske slipped a bit but will continue to focus on F&I training, the company said.
Among the six publicly held new-car retailers, Group 1 Automotive was the standout in the quarter, breaking $1,600 in F&I gross profit per unit and becoming the new F&I leader. But don’t expect F&I performance to improve much more, company executives warned.
Group 1’s F&I gross profit per vehicle retailed was $1,636 last quarter, a 6.6 percent, or $12, increase. The dealership group has been working on F&I processes “over the years” and has sold more F&I products, said Pete DeLongchamps, vice president of financial services and manufacturer relations.
“We’ve had increases in most of our product offerings. Our reserves have stayed pretty constant, so I think that we’ve reached a high level,” he told investors on Feb. 2. “I would suggest that you don’t model anything higher than this; we’ve got rising interest rates coming toward us.”
Group 1, of Houston, examines dealerships that produce below average F&I results by brand and helps them improve, DeLongchamps told Automotive News.
“So if you raise the average, you improve individual stores, it makes a difference. But when I look at our penetration rate for product, when I look at our application rate for finance, I’m pretty comfortable where we are,” he said. “We’ve grown our business almost $100 a year for the past six years, so it would be impossible to keep that trajectory.”
Lithia, Asbury, Sonic grow
Lithia Motors’ F&I gross profit per unit rose 9 percent in the fourth quarter to $1,295, a $108 rise over the 2015 period.
Lithia, of Medford, Ore., arranged financing on 73 percent of vehicles sold last quarter. It sold service contracts on 45 percent of them and a lifetime oil product on 26 percent, CEO Bryan DeBoer said in an earnings call Feb. 15.
“This increase helps us to be more aggressive on vehicle gross profit. Our penetration rates increased in all categories,” he said.
Unlike Group 1, Lithia sees opportunities for continued improvement in F&I, said CFO Chris Holzshu, including at stores it acquired through the purchases of DCH Group and Carbone Auto Group.
Lithia group’s F&I gross profit per unit is about $1,350, Holzshu said, and the DCH Group’s is $1,150. For Lithia’s most recent acquisitions, including Carbone, F&I per unit is less than $900, he said.
“What we’re really trying to do is focus on maintaining the products and the performance that we have in our Lithia core stores, continuing to push DCH, which has come a long way over the last 24 months, to continue to find incremental opportunity there. And then, obviously, bring on acquisitions and get the synergies that we found and with the products and the people that we have to help push the performance with recent acquisitions,” Holzshu said.
Asbury, of Duluth, Ga., also showed significant F&I growth, with its gross profit per unit rising 4 percent, or $60, to $1,512, in the fourth quarter.
“We feel comfortable that we can stay there,” COO David Hult told Automotive News Feb. 7. “We like the fact that two-thirds of that dollar amount per car is actually in product sales. We feel we have a really good product lineup to offer our consumers.”
Sonic Automotive Inc., of Charlotte, N.C., also showed improved F&I results. Its same-store F&I profit per vehicle rose 1.5 percent, or $20, to $1,342.
AutoNation steadies, Penske falls
F&I gross profit per unit held steady for AutoNation, the previous F&I leader. The Fort Lauderdale, Fla., dealership group reached $1,569 in the fourth quarter, up $4, or 0.3 percent, over the year earlier period.
There is still room for growth, but “probably not at the pace it’s been in the past,” Bill Berman, the company’s president, said Feb. 3.
AutoNation’s consistently strong F&I results are driven by dealership performance and products, Berman said. “We constantly work with our bottom quartile stores to improve the performance, and the branded products are definitely a contributor.”
Penske Automotive Group’s U.S. F&I gross profit per unit dipped 0.7 percent, or $8, to $1,107. The dealership group, of Bloomfield Hills, Mich., continues to work with captives and has expanded F&I training, Chairman Roger Penske said. “We’re a little bit handicapped because the big portion of our business is leasing,” he added. “When you’re leasing a car for three years, you don’t buy an extended service contract.
“But we look at the total gross profit on the deal because you might end up with less financing but get more money on the front end than you do with F&I.”
Laurence Iliff and Jamie LaReau contributed to this report.