Finance and insurance revenue at the nation's 150 largest dealership groups rose more than sales volume did in 2016, a good sign for the businesses' bottom lines, but the pace of growth for F&I has slowed from prior years.
Retail customers of the 150 largest groups spent an average of $1,367 on F&I products last year, 2 percent more per new and used vehicle sold, according to Automotive News' fourth annual F&I survey. Total F&I revenue for the groups rose 5.9 percent, down from 14 percent growth a year earlier, while their new and used retail sales increased 3.8 percent.
The survey looked at the retailers on Automotive News' list of the top 150 dealership groups based in the U.S. as measured by new-vehicle retail sales in 2016. The results were drawn from the 145 groups that reported F&I revenue data for both 2016 and 2015. The 3,385 stores they operate represent about 20 percent of the nation's new-car dealerships.
Of those groups, 97 showed growth in per-vehicle F&I revenue, though only 30 achieved increases of more than $100.
Total F&I revenue declined from 2015 at 38 groups, most of which also reported lower vehicle sales.
"F&I is growing, but not as fast as it used to be relative to the rest of the business," said John Pappanastos, CEO of EFG Cos., which offers F&I products through dealerships.
Persuading consumers to spend more on F&I products is getting tougher for a number of reasons, including rising vehicle prices and an increasing number of shoppers who are upside-down on their trade-in. Many buyers already are taking out longer loans than in the past to keep monthly payments within their budget, and that leaves less room to wrap in the cost of an extended service contract or protection plan.
On average, data provided by the groups show that F&I accounted for just 3.6 percent of total revenue in 2016, with that proportion ranging from less than 1 percent at two groups to 8.2 percent at Car Pros Automotive Group, which has 11 stores in Washington state and California.
While new vehicles generate razor-thin profits for dealerships, the F&I office can account for as much as 40 percent of a store's gross margins, Pappanastos said.
That makes focusing on F&I offerings important as sales flatten or decline after seven consecutive years of growth for the U.S. industry.
"Dealers are looking to maintain their profit, and F&I is saving most of them," Pappanastos said. "The rest of the auto-dealer profit model is under pressure."