Five of the six largest new-vehicle retailers improved their F&I performance in the first quarter. Among the reasons cited for the gains: acquisitions, F&I product sales and working more closely with the sales team.
Executives at the companies also generally agreed that financing remains readily available, but they didn’t comment extensively on that point.
Lithia Motors Inc. grew its same-store F&I profit per vehicle 4.8 percent, or $62, to $1,353, an all-time record for the retailer. The penetration rate increased for service contracts and lifetime oil changes. In the quarter, Lithia arranged financing for 73 percent of customers, while the penetration rate for service contracts was 46 percent and that for lifetime oil was 27 percent.
Chris Holzshu, Lithia’s chief human resources officer, said much of the F&I boost was driven by dealership acquisitions.
“Our goal is not to continue to raise the top, but really focus in on maximizing the opportunities we have in our recent acquisitions over the past few years and making sure we have the right people and the right products at the right price,” he said.
There is a significant spread between the company’s highest- and lowest-performing stores, Holzshu added.
“The best F&I stores we have are doing $2,000 to $2,300 per copy. On the low end, some of the recent acquisitions we have are doing $500, so there’s a large disparity between them,” he said.
Holzshu said Lithia, of Medford, Ore., will work with its recently acquired stores to find ways to improve F&I performance. He added that subprime “continues to be about 13 percent of our business. We feel we’re steady in the availability of credit for our customers.”
Asbury Automotive Group Inc. also had a wide F&I-profit-per-vehicle gap between high- and low-performing stores. “There is so much that goes into a retail unit in F&I. The market could determine that, and it is extremely important to have the right individual at the desk with the right training,” said Dan Clara, Atlanta market managing director.
Between the top and bottom F&I performers, there is a spread of about $300 per car, he said, depending on the brand and the market.
“There’s always the bottom 25 percent that needs to do better. A lot of it boils down to training, the processes, following the procedures that we’ve got in place,” said Asbury CEO Craig Monaghan.
The Duluth, Ga., dealership group’s same-store F&I gross profit per vehicle strengthened 6.4 percent, or $91, in the quarter, to $1,519.
“There are really team processes happening in the store these days when we sell a vehicle. The F&I office is working with the desk in order to try to maximize” profit, Monaghan said. “F&I is very fundamental for us. We do recognize that some competitors do a better job than we do, but we’re always making progress.”
At Sonic Automotive Inc., in Charlotte, N.C., F&I gross profit per vehicle edged up 0.8 percent, or $11, to $1,370 on a same-store basis.
CEO Scott Smith said that, in terms of F&I margins, “We had an all-time record month in March, and we’re pacing to have an all-time record month in April.”
Group 1, Penske
Group 1 Automotive Inc., of Houston, grew its F&I gross profit per vehicle at its U.S. dealerships 3.7 percent, or $58, to $1,629 on a same-store basis. CEO Earl Hesterberg said the company is focused on “maximizing the opportunities of vehicle service contracts [and] maintenance contracts.”
Penske Automotive Group Inc., of suburban Detroit, increased its U.S. same-store F&I gross profit per vehicle 5.3 percent, or $57, to $1,123. The figures typically lag other public dealership groups’ numbers because of Penske’s higher proportion of luxury-brand dealerships, where high leasing rates mean lower F&I sales.
Penske’s U.S. retail automotive same-store F&I revenue rose 2.1 percent to $73.8 million.
Penske also said its stand-alone used-vehicle dealerships’ F&I gross per vehicle retailed was $1,147 in the latest quarter, without giving a year-earlier figure. During the first quarter, Penske acquired used-only groups in the U.S. and the U.K.
AutoNation Inc. was the only public dealership group to see its same-store F&I gross profit per vehicle slip. The company is forecasting a slight decline or flattening out of F&I to continue this year as its used-vehicle volume expands as a share of total unit sales. F&I profits on used vehicles tend to be smaller than those on new, in line with used vehicles’ lower transaction prices, the company said.
The Fort Lauderdale, Fla., retailer’s average gross F&I profit per vehicle retailed fell 0.8 percent, or $13, to $1,634 on a same-store basis.
Despite the drop, AutoNation still had the highest F&I gross profit per vehicle retailed among its peers.
Jamie LaReau contributed to this report.