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Public Groups Report Solid F&I Performance for Q3

October 24, 2013

By Brittany-Marie Swanson

Asbury Automotive Group, Sonic Automotive Inc. and Lithia Motors Inc. all reported solid F&I performance for the third quarter of 2013, according to earnings calls held by the dealership groups this week.

Lithia Motors officials said F&I profit per vehicle retailed increase from last year’s $1,069 per copy average to $1,106 during the third quarter. And of the 31,700 vehicles sold by Lithia in the quarter, the dealer group arranged financing for 72 percent of vehicles retailed during the quarter.

As for F&I product sales, service contracts penetrated at a rate of 43 percent, an increase of 170 basis points vs. the same period in 2012. The group’s lifetime oil offering penetrated at a 37 percent clip, an increase of 150 basis points from the same period last year.

Sidney DeBoer, Lithia’s founder and executive chairman, said the company is honing in on F&I as an area where improvements can be made.

“And the first choice is always gross on the car deal, but there's often a lot more that can be done,” he said. “And as those store leaders mature and get after F&I, we think there's lift. We're really delighted to see some of the others move their numbers up because that means we have more upside as well.

“And we're really focused on it. It's one of the areas Lithia can provide some training and support to the stores and get results.”

Sonic Automotive, which saw F&I profit per retail unit rise 6.1 percent to $1,136, also reported a revenue increase of 6.8 percent for its F&I operations. This, along with a 5.5 percent increase in new-vehicle revenue, 6 percent for used, and a 7.8 percent revenue increase in fixed ops, drove revenue up 5.4 percent to $2.2 billion during the quarter. This growth in revenue resulted in gross profit of $326 million for the quarter, an increase of 7 percent from the year-ago period.

During the call, officials delved into its customer service initiative called One Sonic-One Experience, which Executive Vice President of Operations Jeff Dyke called “a major game changer.” The program has been in development since 2007 and will be rolled out in the second half of 2014, officials said.

With this initiative, Sonic has set a goal to cut the car buying process down to 45 minutes using  several new proprietary inventory management and pricing tools and a fully-developed "customer-centric" Customer Relationship Management (CRM) tool. The initiative also calls for a single individual, or what the company refers to as guest advocates, to complete the entire buying transaction, eliminating back-and-forth negotiations and waiting lines for appraisals, F&I and deliveries.

“They're going to be able to sign in an iPad and get the heck out of there if they want to and we're going to do it, and we've put that benchmark of 45 minutes out there,” Dyke explains. “The consumer is going to have to at least consider purchasing a car at Sonic Automotive in the markets that we are in because of the experience.”

Officials with Asbury Automotive reported a 20 percent increase in F&I revenues compared to the same period last year. The group’s F&I operations realized a 5 percent year-over-year increase in profit per vehicle retailed, with its F&I operations averaging $1,305 per copy.

The company also addressed recent concerns about the Consumer Financial Protection Bureau’s targeting of dealer markups. President and CEO Craig Monaghan, echoing what industry associations such as the NADA have said in recent months, pointed out that there is still a lack of understanding regarding what the CFPB is looking for. 

“As far as the CFPB, it's — there is not a lot of clarity from our side of the picture, we've not really had any impact to speak off,” he explained. “I think it's wait and see from our standpoint, but at this point in time it's of no relevance to us right at this moment.”

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