5 of the 6 public dealership groups raise average FandI profit per vehicle

Sonic posted record-high total F&I gross of $104.1 million in the second quarter.

Five of the six public new-vehicle dealership groups improved average F&I gross profit per vehicle in the second quarter, driven primarily by F&I training efforts, growing F&I product penetration and increased retail sales, the companies said.

Group 1 Automotive Inc., of Houston, lagged as the only major dealership group to report declines in F&I profit. Average F&I gross profit per vehicle decreased on a same-store basis 1.8 percent to $1,649, still putting Group 1 at No. 2 among the public retailers. AutoNation Inc. ranked No. 1.

New accounting rules surrounding revenue recognition affected F&I numbers this quarter, according to Pete DeLongchamps, senior vice president of manufacturer relations, financial services and public affairs at Group 1. But even though F&I profit per vehicle was down, same-store F&I gross profit rose 1.5 percent to $95.3 million.

In the first quarter, Group 1 launched Val-U-Line, a proprietary brand for older, higher-mileage used vehicles. “With the addition of Val-U-Line, it’s a mix among math issue. Our F&I business actually was very good and it’s exactly what we had expected,” he told Automotive News.

The other five dealership groups boosted same-store F&I profit per vehicle:

  • AutoNation Inc., of Fort Lauderdale, Fla., rose 6.8 percent, or $114, to $1,789.
  • Asbury Automotive Group Inc., of Duluth, Ga., rose 2.2 percent, or $33, to $1,551.
  • Sonic Automotive Inc., of Charlotte, N.C., rose 8.4 percent, or $115, to $1,481.
  • Lithia Motors Inc., of Medford, Ore., rose 0.5 percent, or $7, to $1,305.
  • Penske Automotive Group Inc., of Bloomfield Hills, Mich., rose 7.8 percent, or $90, to $1,247.

Sonic, AutoNation, Penske rely on products

On a consolidated basis, Sonic posted record-high F&I gross profit per retail vehicle at $1,572, up 14 percent — or $193 — from a year ago. Sonic also posted record-high total F&I gross of $104.1 million.

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Jeff Dyke, executive vice president of operations, told analysts Friday that continued F&I growth is sustainable largely because of the company’s ongoing relationship with F&I product and training company JM&A Group and strong F&I penetration at Sonic’s used-only EchoPark locations.

“The relationship between JM&A and Sonic Automotive is really paying off. Our F&I numbers at EchoPark are fantastic,” Dyke said. “We’re executing our playbook process. We’ve just done a really, really good job.”

Among F&I products, Dyke said, service contract penetration is gaining speed, in the mid-40 percent range companywide and closer to 50 percent at EchoPark.

“We just keep executing. We keep growing,” Dyke said, adding that the company anticipates same-store F&I profit per retail vehicle will continue to rise.

AutoNation also pointed to F&I product sales, specifically sales of its AutoNation-branded maintenance package and vehicle service contract, as a driver of F&I profit per vehicle growth.

“Every quarter that goes by, a larger percentage of customers choose to take the AutoNation maintenance and service contracts,” CEO Mike Jackson told Automotive News Wednesday. “It’s valued price. They trust the brand and they choose it.”

Penske Automotive Group noted that F&I was up in the U.S. and the United Kingdom.

“Higher average selling prices coupled with strong product penetration rates, particularly in the U.S., drove the higher F&I,” Anthony Pordon, Penske’s executive vice president of investor relations and corporate development, said in an email to Automotive News. “We have been focused in driving a greater penetration of extended service contracts, asset protection, security [LoJack] and pre-paid maintenance.”

Lithia, Asbury

Lithia CEO Bryan DeBoer said the slight increases in same-store F&I profit per vehicle was driven by a 7.1 percent uptick in vehicle sales revenue. Of the vehicles sold in the second quarter, Lithia arranged financing on 73 percent, sold service contracts on 45 percent and sold a lifetime oil product on 24 percent, according to the company.

Asbury’s F&I profit gains were driven largely by a generally favorable consumer lending environment, which allowed more customers to purchase a broader array of F&I products. Also bolstering profits is Asbury’s continued focus on improving the F&I results at lower-performing stores through training programs, the company said in a filing to the U.S. Securities and Exchange Commission.

Numbers would have improved even more, according to Asbury CFO Sean Goodman, if not for revenue recognition adjustments that reduced F&I profit by $12.

“If there was no recognition, it would be up 3 percent,” Goodman said.

Hannah Lutz and Melissa Burden contributed to this report.

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