Dealer Groups Enjoy Robust F&I Gains

July 27, 2012

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HOUSTON — Five of the largest publicly traded dealer groups all watched their finance and insurance segments strengthen during the second quarter as new- and used-sales volumes climbed across the board for these companies.

What's triggering the F&I surge? For Group 1 Automotive, Peter DeLongchamps quantified the company's record F&I gross profit per unit sold by telling investment analysts that, "I will tell you that certainly low interest rates are a tailwind for the F&I business. There's no question about that.

Group 1 generated $1,191 in gross profit per retailed unit in connection with its F&I work. DeLongchamps, the company's vice president of financial services and manufacturer relations, elaborated about the strong performance when Group 1 revealed its second-quarter financial statement earlier this week.

"We continue to work on our processes," DeLongchamps said in light of Group 1 posted $65.4 million in F&I revenue during the quarter, a 40.7 percent climb year-over-year.

"We redoubled our efforts on training. We're really paying close attention to the non-performing stores," he continued. "I've got seven regional finance directors that are executing on the plan. It's just a lot of hard work and basic fundamentals on doing business the right way."

No matter the processes in place, DeLongchamps also pointed out how the general availability of credit into the automotive industry plays an important role, too.

"The credit availability is robust. The relationship that we have with our key lenders is probably at an all-time high. Accessing credit at our dealerships is not an issue," DeLongchamps highlighted.

Group 1 wasn't the only large public dealer group to enjoy F&I success during the second quarter.

Asbury Automotive Group generated a 21-percent rise year-over-year in second quarter F&I revenue as the figure increased to $42.8 million. Asbury garnered $1,200 in F&I gross profit per retail vehicle sold, marking a rise of 8 percent year-over-year for a development that greatly helped the company's bottom line.

Asbury executive vice president and chief operating officer Michael Kearney noted in a conference call this week, "Consistent with what we are seeing across our industry, retail margins continue to be under pressure as Japanese branded inventory levels and sales volumes recover. However, we again demonstrated the diversity of our business by delivering growth in both F&I and parts and service gross profit."

Like at Group 1, Kearney mentioned how training is helping Asbury's F&I performance.

"In addition to excellent F&I process execution and our continuous training program, we continue to enhance our regional finance team management," Kearney explained. "As part of this process, we are creating a more customer-facing experience while increasing productivity.

"We continue to be the beneficiaries of the much-improved lending environment, higher advance rate, consistent application of lender requirements and aggressive lease terms," he added.

Over at Sonic Automotive, the company's second-quarter F&I revenue moved up from $55.3 million to $65.3 million year-over-year.

Meanwhile, Lithia Motors determined F&I constituted 3.3 percent of total second-quarter revenue, up from 3.1 percent a year earlier. Lithia said its F&I gross profit per unit sold shot up 55 percent to $1,059 from $1,004.

Furthermore, AutoNation boasted a $46 year-over-year climb in F&I gross profit per unit retailed as executives said recently the figure settled at $1,282.

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