Public groups' Q3 gross profit per vehicle rises

Each of the publicly traded dealership groups in the third quarter posted year-over-year increases in average finance- and-insurance profit per vehicle retailed.

Asbury Automotive Group Inc. posted the largest percentage increase for the period, with an 18 percent rise to $2,254. Asbury was the only publicly traded dealership group to post a double-digit percentage increase. The next biggest uptick was from Group 1 Automotive Inc., with $2,477 in same-store U.S. third-quarter average F&I gross profit per vehicle retailed, up 9.7 percent.

Mirroring second-quarter performance, these six retailers kept their average F&I gross profit per vehicle retailed around $2,000 in the third quarter.

AutoNation Inc. posted record F&I gross profit per vehicle retailed in the third quarter. Average same-store F&I gross profit per vehicle retailed totaled $2,766, up 7.6 percent from $2,571 in the same quarter last year. F&I as a percentage of revenue was relatively flat compared with the second quarter, at about 5 percent, with percentage of gross profit also relatively flat, at 28 percent.

CEO Mike Manley credits the company's third-quarter growth in F&I as one of the drivers of its 4.5 percent uptick in overall revenue to $6.67 billion.

The retail giant in October said it finalized its purchase of Irvine, Calif., auto finance company CIG Financial. AutoNation is starting to integrate CIG as its captive finance arm for its used-car AutoNation USA stores. Manley said the acquisition is a key part of the company's growth strategy. (See story, Page 29.)

AutoNation ranks No. 1 on the Automotive News list of the top 150 dealership groups based in the U.S. The Fort Lauderdale, Fla., company's retail sales of new vehicles totaled 262,403 last year.

Group 1 Automotive Inc. posted U.S. same-store F&I gross profit per retail unit of $2,477, up $218 and 9.7 percent.

"We're seeing improved product penetrations nearly across the board," Group 1 COO Daryl Kenningham said on the dealership group's third-quarter earnings call in October.

Group 1 leaders told analysts that the company is bullish on its F&I business. Pete DeLongchamps, Group 1's senior vice president of manufacturer relations, financial services and public affairs, said on the earnings call that one-third of Group 1's F&I business comes from loan origination, with the rest coming from product sales.

"We're very happy with the equilibrium," DeLongchamps said. "But I think the key is to keep that one-third rate and the rest of the increases come from additional product penetration. We've still got some room to run."

Group 1 Automotive ranks No. 4 on the Automotive News list of the top 150 dealership groups based in the U.S. The Houston company's retail sales of new vehicles totaled 146,072 last year.

In its third-quarter earnings call, Lithia Motors Inc. CEO Bryan DeBoer praised the retailer's F&I performance for the period.

"F&I is still remaining strong," DeBoer said. "We're not seeing weakness."

Lithia's third-quarter F&I was up almost $100 per unit, which DeBoer said "is a nice number" that helps offset some of the declines in gross profit per used vehicle.

DeBoer also mentioned the importance of F&I transparency in the earnings call.

"One thing that we've learned is that transparency in our F&I products is an important part, and if certain products are eliminated, there's usually other products that will be out there in the future for hybrids or for electric vehicles where we're reconditioning cars," he said. "Or, more importantly, we really believe that F&I becomes the conduit for subscription services that help create a bond with the consumer that's in-home, or that's a more convenient experience than what they're looking for coming into a dealership."

Lithia Motors ranks No. 2 on the Automotive News list of the top 150 dealership groups based in the U.S. The Medford, Ohio, company's retail sales of new vehicles totaled 260,738 last year.

Sonic Automotive Inc. showed the smallest percentage increase in average F&I gross profit per vehicle retailed at its franchised dealerships, which totaled $2,406, up 4.6 percent from the same period a year ago.

F&I in the third quarter accounted for just more than 4 percent of the company's revenue, just as it did last year. F&I as a percentage of gross profit dropped slightly to 23 percent from 25 percent a year earlier.

Sonic boasted record third-quarter revenue of $3.4 billion, up 12 percent year over year, and record third-quarter gross profit of $580.7 million, up 23 percent, with record net income for the period of $87.3 million.

"Our quarterly results reflect another period of solid financial performance, including record third-quarter revenues, gross profit and earnings per share," said Sonic CEO David Smith in a statement.

The Charlotte, N.C., retailer ranks No. 7 on the Automotive News list of the top 150 dealership groups based in the U.S. with retail sales of new vehicles totaling 103,486 last year.

Asbury Automotive Group Inc.'s same-store dealership gross profit per vehicle rose to $2,254 in the third quarter, up 18 percent from a year ago but down 6 percent from the second quarter.

The retailer said in a government filing that its improved gross profit per vehicle helped prop up the company's same- store F&I net revenue amid a year-over-year decline in vehicle sales volume.

Dan Clara, Asbury operations senior vice president, thanked Asbury's F&I staff for an "impressive result." The company's third-quarter same-store F&I gross profit per vehicle remains far above its pre-pandemic level of $1,628 in 2019.

Total Care Auto, the F&I products provider the company bought as part of the December 2021 Larry H. Miller Dealerships acquisition, generated $23 million in gross profit in the quarter, not counting the impact of doing business with other Asbury subsidiaries.

Asbury CEO David Hult said on the earnings call the company had started expanding the Total Care Auto portfolio to the rest of its locations, a process he expects will take until the end of 2023. The Larry H. Miller F&I offices have higher product penetration than legacy Asbury stores, and Asbury plans to bring the Larry H. Miller pay structure and sales methodology to its legacy stores in pursuit of the same results, Hult said.

"We don't see any reason that F&I goes backward at the store level," Asbury CFO Michael Welch said. Total Care Auto will continue to grow and improve that number, he added.

Hult also said on the call that Asbury would like to improve dealerships' F&I products penetration. Currently, products represent 70 percent of Asbury's F&I business, with the rest derived from lender payments to Asbury for arranging indirect auto loans. Asbury would like to achieve a 75-25 split, he said.

The company has seen "zero" issues with customer credit availability, Hult said. Issues could still arise, but Asbury's customers have been bringing good down payments and credit scores to deals, he said.

Asbury Automotive ranks No. 5 on the Automotive News list of the top 150 dealership groups based in the U.S. The Duluth, Ga., company's retail sales of new vehicles totaled 109,910 last year.

Penske Automotive Group Inc. posted third-quarter F&I results of $1,922, up 8.7 percent.

CEO Roger Penske responded in the third-quarter earnings call in October to an analyst's question on the Federal Trade Commission's proposed dealership compliance rule by saying he fully supports the elimination of unfair, deceptive practices.

"Look, this is not the kind of business we want to be in," Penske said. "I think any of my peers, also, would feel the same.

"About 40 percent of our reserve comes from finance and 60 percent comes from product," Penske said. "To me, with us being a big player in leasing, we don't have a lot to sell to a lease customer because typically those are two- or three-year leases.

"I think we've got to clean up the practices for sure. It only makes our industry better," he added.

Penske Automotive ranks No. 3 on the Automotive News list of the top 150 dealership groups based in the U.S. The Bloomfield Hills, Mich., company's retail sales of new vehicles totaled 195,384 last year.

John Huetter, Lindsay Van Hulle and Jack Wallsworth contributed to this report.