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The PVR Question

The editor wonders if there’s a better way to accurately gauge the level of success achieved in the F&I office.

September 14, 2012

Generation Y and today’s Internet customer were the hot topics at the National Automobile Dealers Association (NADA)’s annual get-together this past February. But there was something else stealing the attention of exhibitors and attendees. Several days earlier, AutoNation had made a big announcement during its quarterly investor call.

The dealer group, one of the country’s largest, had reported its year-end numbers for 2011. Incredibly, AutoNation’s F&I operations had achieved a profit per new-vehicle retailed of $1,204 for the full year. It was the first time in the group’s history — maybe in any public group’s history — that PVR surpassed the $1,200 mark.

And let me tell you, the show floor was buzzing over the news. But I couldn’t tell whether they were shocked at the feat or shocked that it was reported. Last month, I got my hands on a ranking of dealer groups and their F&I operations. Asbury has also joined the $1,200 club, while Group 1 is just about there at $1,191.

Those companies deserve our thanks and praise for allowing the rest of the industry to live above $1,200 PVR in the public eye. Unfortunately, I’m not sure PVR is the right gauge for F&I performance.

From the second I took this job, I was told that PVR was off-limits for most dealers. According to the stories I heard, the magazine used to publish an annual list of its Top 100 dealers. But that list, which included PVR numbers, was being used against dealers in court. As I heard it, attorneys for disgruntled customers would hold up the list while asking the dealer why their numbers were so much higher than what we reported for other dealers on the list.

And that’s why a lot of you hesitate when I ask about PVR. Some of you even joke that you have an off-the-record and an on-the-record answer to that question. Off the record, your PVR is well north of what the public groups are reporting. On the record, you’re right there with them.

That’s why I had to figure out other ways to gauge performance. I can usually get an F&I director to spit out a few product penetrations, but it’s just not the same as PVR, is it? Luckily for me, Sonic started talking about products sold per transaction back in 2010. The company had announced it was moving to a one-price F&I strategy in an effort to get to a minimum of two F&I products sold per transaction.

Yes, it was nice to have another measure of F&I performance, but, given the regulatory environment we entered with the passage of the Dodd-Frank Act, I wondered if counting products was easier for regulators and consumer advocates to digest than stating how much we make per deal. If anything, it removed dealer participation from the equation, and we all know how consumer advocates feel about that.

And that’s my message: Maybe it’s time the industry move to counting products rather than profits per deal. Personally, I feel the count offers more transparency than PVR. For one, you can’t hide your ability to sell.

But like I said, consumer advocates hate dealer reserve, and they’ve mounted the strongest push so far to rid our industry of it. In fact, last September, I wrote about a conversation I had with Gary Rivlin, staff writer for Newsweek. He contacted me about a “consumer-oriented package” he was putting together. It was supposed to provide car shoppers with things to watch out for. Rate markups were atop his list.

See, Rivlin had picked up a copy of a report issued by the Center for Responsible Lending. The organization’s numbers appeared to show that, in 2009, dealers used rate markups to overcharge consumers to the tune of $26 billion. Funny thing is, the CRL never did explain its understanding of dealer reserve to Rivlin, and it never did reveal exactly how it came up with its number.

Will dealer participation go away? I don’t have an answer. I do know that the Federal Reserve Board has twice shot down assertions that dealer markups should be a required disclosure under Regulation Z. And the Federal Trade Commission and the Consumer Financial Protection Bureau have indicated that they won’t act unless they have facts to support a change in rules.

Still, I think now is a good time for us as an industry to move toward “products per deal” to gauge F&I performance. Regulators like consistency just as much as they like transparency, and it’s time to prove to them that we’re in the business of selling protection products, not rate.


  1. 1. Robert I. Laird [ September 26, 2012 @ 10:51AM ]

    I agree with you that PVR is a vital number to be aware of in the automotive industry. So many times PVR is used as the 'gauge' of determining the success of a finance department. Recently, we made the move from focusing on PVR to focusing on product percentages and their average profit per product. We pride ourselves on showing the customers their options along with how these options could benefit them. We want the customers to make an educated decision when it comes to them deciding what options they want to protect themselves and their family.

    What we do is look at the percentage of sales for each product and times it by the average gross made on the product. Example: 1 finance manager running 55% Mechanical Breakdown Insurance at $850 average profit. This would equate to $46750 in gross per 100 vehicles sold. If I have a finance manager running 50% and $1000 respectively, that manager would be generating

    $50000 in gross per 100 vehicles. In our rating system the manager at 50% is above the manager at 55%. We do this because we don't want someone selling products at a very low average just to keep their percentage up. We figure this for all products and rank them in each category. After adding up the totals, the store/manager with the lowest number is awarded the Finance manager of the year and recognized at our annual awards banquet.

    I am the finance director for a 12 store dealer. Since we have gone to this method of measurement I have seen a large increase in sales and gross. As a group we are running the best numbers ever, and our chargeback percentage is less than 5%.

  2. 2. BG TANZER [ September 26, 2012 @ 12:56PM ]

    If it is true that we are under the microscope from any and all conumer protection advocates who will use any bit of information as a sledge hammer against us then why publicize ANY F&I information ??? Auto manufacturers will not divulge how much they make on the sale of a vehicle. They will state X dollars revenues from multiple sources, they sold X number of units but they will not disclose profit on the car it self. Every market and dealer is different but one thing in common is the dealer expects confidentiality from it's employees so why share such critical information to outsiders ??? As far as the huge publicly traded dealers, if they want to share profit information to raise the value of their stocks then let them enjoy the wrath of the consumers for "making too much profit".

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