Larry H. Miller purchase gives Asbury in-house F&I advantage

The $3.2 billion acquisition of Larry H. Miller Dealerships will give Asbury Automotive Group Inc. a highly profitable in-house F&I products provider.

Total Care Auto produces about $240 million in revenue, has about 2 million contracts open and delivers EBITDA margins of more than 20 percent, Asbury said in announcing the deal. Asbury CEO David Hult said on an analyst call Wednesday that Total Care Auto's margins in some cases can exceed 30 percent.

And 90 percent of Total Care Auto's claims wind up with the work being done at locations within the Larry H. Miller group.

"It's really a great business model," Hult said.

So Larry H. Miller — and now Asbury — is basically paying itself back whenever customers use the products for free repairs and service.

"That money all stays in-house, or a good majority of it," Hult said.

Scaling Total Care Auto at Asbury "really puts a nice business model together for us and really stabilizes our organization," Hult said.

Asbury even paid a 10 times multiple for Total Care Auto compared with a 6 times multiple for the dealership group (excluding real estate).

"It's a big, dense business," Hult said.

Larry H. Miller's overall service contract penetration exceeded Asbury's, he said.

"These two companies, even though they're in separate silos, are so intertwined so perfectly, and they feed off each other extremely well," he said.

Hult said he learned from the Larry H. Miller group that the symbiotic relationship helped with customer retention. It was "powerful" for the group to control claims and care for customers.

"The average dealer can't do that," he said.

Asbury is the sixth-largest new-car dealer in the country, based on Automotive News' 2020 rankings. Larry H. Miller Dealerships ranked eighth.