5 of 6 publics top $2K in per-car F&I profit

This article was originally published here: https://www.autonews.com/finance-insurance/5-6-publicly-traded-dealership-groups-top-2k-car-fi-profit.


Five out of the six major publicly traded dealership groups produced more than $2,000 in same-store finance-and-insurance gross profit on every vehicle transaction during the first quarter.

Of those, Group 1 Automotive Inc. joined AutoNation Inc. above the $2,500 mark.

A year ago, only AutoNation’s F&I operations made more than $2,000 per vehicle on a same-store basis.

Asbury Automotive Group Inc. breached the $2,000 mark during the first quarter with a $2,376 same-store gross profit, joining four of its peers there.

Penske Automotive Group Inc. is the last of the six below $2,000, but it’s less than $100 away.

AutoNation’ same-store F&I gross profit per vehicle retailed stayed around the $2,700 level at $2,691 in the first quarter. That is down slightly from its 2021 fourth-quarter mark of $2,703 but up 21 percent from the first quarter of 2021.

AutoNation said this led to higher F&I gross profit and revenue of $351.1 million, up 12 percent from a year earlier, tempered partly by less new-vehicle volume.

Despite the auto retail industry’s inventory challenges, all six publics saw higher F&I same-store revenue and gross profit compared with a year earlier.

AutoNation, in a government filing, credited increased F&I product penetration, vehicle service contract margins and larger amounts being financed for its improvement in per-vehicle F&I profit over the first quarter of last year.

AutoNation, of Fort Lauderdale, Fla., ranks No. 1 on Automotive News list of the top 150 dealership groups based in the U.S., with retail sales of 262,403 new vehicles in 2021.

Group 1 broke the $2,500 mark during the first quarter with an average $2,504 same-store F&I profit on every deal, up 30 percent from a year earlier.

Group 1’s same-store F&I revenue rose as well, to $131.9 million, up 16 percent compared with the same time last year.

The company called the gain primarily the result of increased revenue from finance, vehicle service contracts and other F&I products as well as higher penetration rates.

“Our F&I attachment rate is high,” Group 1 U.S. operations President Daryl Kenningham told investors in April.

Pete DeLongchamps, Group 1 senior vice president of manufacturer relations, financial services and public affairs, said Group 1 made a 1 percentage point margin for arranging financing, which he said “we’re comfortable with.”

The gains displayed by Group 1 resulted from increased product penetration and success with more customers, he said.

Group 1 CEO Earl Hesterberg also told investors that should vehicle or finance margins soften, costs might fall to court demand — but demand would grow.

“The power of F&I is in incremental volume,” Hesterberg said.

Higher sales volume would prove to be “a powerful offset” for a hypothetical $200 decline per vehicle, he said.

Group 1, of Houston, ranks No. 4 on Automotive News‘ top 150 dealership groups list, with retail sales of 146,072 new vehicles in 2021.

Sonic Automotive Inc. saw same-store franchised dealership F&I gross profit reach $2,280 on vehicles sold, a 26 percent increase from a year earlier.

Looking more broadly, the company said its overall F&I gross profit per vehicle reached a record $2,448, a 28 percent increase from the same time last year.

Sonic, in a government filing, attributed its same-store F&I gross profit increase to higher vehicle financing profit and a higher F&I product penetration rate.

The company’s same-store F&I revenue also rose 6.6 percent, to $6.1 million.

Sonic said this gain included 4.6 percent higher revenue from arranging vehicle financing compared with a year earlier.

It increased revenue on each financed deal by 25.6 percent but handled 16.7 percent fewer deals and saw a 1.1 percentage point decline in the percentage of customers having Sonic set up financing.

Sonic, of Charlotte, N.C., ranks No. 7 on Automotive News‘ top 150 dealership groups based in the U.S. list, with retail sales of 103,486 new vehicles in 2021.

Lithia Motors Inc. increased same-store F&I gross profit per vehicle by 28 percent over a year earlier to $2,251 during the first quarter.

The retailer grew same-store F&I revenue 16.6 percent to $218.4 million, attributing that gain to a 16.6 percent bump in service contract revenue.

Lithia is the only one of the six publics that owns a captive finance company, Driveway Finance. It said the subsidiary became its No. 1 lender during the first quarter, with a 6.2 percent penetration rate.

The retailer expected to report a penetration in the mid-7 percent range for the year.

Lithia also projected the captive would, for the full year, have a $1.7 billion loan portfolio and serve a mix of about 70 percent used vehicles and 30 percent new vehicles. The retailer is predicting a $9 million loss this year but $19 million in revenue in 2023 and $210 million by 2025.

Lithia COO Christopher Holzshu credited the company’s ranks of finance managers for its performance.

“Customizing their presentation to each consumer increased our penetration rates in all major product lines, driving meaningful increases in F&I per unit,” Holzshu said on an April earnings call.

Lithia, of Medford, Ore., ranks No. 2 on Automotive News‘ list of the top 150 dealership groups based in the U.S., with retail sales of 260,738 new vehicles in 2021.

Asbury’s $2,376 first-quarter same-store F&I profit per vehicle was up 36 percent from a year earlier following what Dan Clara, Asbury’s senior vice president of operations, described to investors as “strong, consistent and sustainable growth” in F&I. He called it a “tremendous result” and said the company’s overall F&I gross profit per vehicle also reached a record $2,481 during the first quarter.

Asbury also said both overall F&I revenue and same-store F&I revenue rose over first-quarter 2021 levels, and it attributed the overall F&I revenue gains to higher new- and used-vehicle sales in the first quarter of 2022 compared with a year earlier.

Asbury also had its first full quarter as owner of Total Care Auto, which it bought in December as part of the Larry H. Miller Dealerships deal. Asbury said in a government filing that Total Care Auto produced $57.3 million of revenue, mostly from premiums on the F&I coverages offset by an unrealized investment loss. It delivered a gross profit of $56.6 million.

Asbury, of Duluth, Ga., ranks No. 5 on Automotive News‘ top 150 dealership groups list, with retail sales of 109,910 new vehicles in 2021.

Penske made $1,932 in same-store gross profit per vehicle globally during the first quarter, up 27 percent from a year earlier but down $27 from the fourth quarter of 2021. Precise U.S. figures are unavailable, but the company did say overall F&I gross profit per vehicle rose 35 percent in the country.

Penske attributed the year-over-year gain during the fourth quarter to higher vehicle prices and seeking to improve penetration through strategies including training, focusing on underperforming sites and digital sales platforms.

The retailer also noted a revenue assist from increased F&I product penetration rates that it attributed to more customers buying vehicles instead of leasing them.

Penske, of Bloomfield Hills, Mich., ranks No. 3 on Automotive News‘ list of the top 150 dealership groups based in the U.S., with retail sales of 195,384 new vehicles in 2021.