In another quarterly earnings cycle studded with record gains amid the ongoing coronavirus pandemic, finance-and-insurance profits at all six public new-car retailers stood out as a leading driver in 2020's fourth quarter.
Despite dwindling new- and used-vehicle inventory, virus constraints and an increase in digital transactions, F&I profits continued to climb at the industry's largest public new-car retailers. Robust profits in the back half of the year were enough for half the publics to eke out stronger full-year profits over 2019.
AutoNation Inc., of Fort Lauderdale, Fla., boosted fourth-quarter F&I profit per vehicle retailed 11 percent to a record $2,209. Sonic Automotive Inc.'s record finance and insurance gross profits were most improved over the previous year's quarter, surging 12 percent to $1,855 on a same-store basis. In total, the Charlotte, N.C., company's F&I profit per vehicle eclipsed $2,000 for the first time in the fourth quarter, Sonic President Jeff Dyke told analysts and investors on a Feb. 17 call.
"[We] continue to expect growth in this area in 2021," Dyke said.
Sonic is predicting "low, double-digit growth" for F&I gross this year, CFO Heath Byrd also said on the call.
"We continue to see opportunity to increase our [gross per unit] and even continue to surpass the $2,000 per unit," Byrd said.
The other public groups reported these results in same-store F&I profit per vehicle:
- Group 1, of Houston, up 10 percent, or $190, to $2,027
- Asbury Automotive Group, of Duluth, Ga., up 7.4 percent, or $126, to $1,817
- Lithia Motors, of Medford, Ore., up 7.6 percent, or $115, to $1,635
- Penske Automotive Group, of Bloomfield Hills, Mich., up 10 percent, or $139, to $1,475
Daryl Kenningham, president of U.S. and Brazilian operations at Group 1, told analysts Feb. 4 that dealership employees overcame lower inventory challenges through a disciplined approach to gross margins. Selling vehicles online also didn't negatively impact the company's profits.
About 11,000 of the company's vehicle sales were done through its digital retailing tool, AcceleRide, which Kenningham said had front-end and F&I grosses comparable to in-store profits.