MCLEAN, Va. -- Combined income from F&I and service contracts contributed 25.2 percent of new- and used-vehicle department gross profit in 2003, up 1.2 percent from 2002. The figures were released today in the National Automobile Dealers Association's 2003 NADA Data report, an analysis of the auto retail industry.

Paul Taylor, NADA chief economist, attributes the growth to the increased attention to F&I by public groups and consolidators, higher finance penetration rates and more emphasis on F&I CSI.

Service contract penetration climbed to 31.9 percent -- the highest it has been since 1992. This was due to lower leasing rates, innovative service plans and the greater push for F&I overall, said Taylor.

Franchised new-vehicle dealers enjoyed a successful 2003, selling 16.6 million vehicles and total dollar sales of almost $700 billion, up 3 percent from 2002. Taylor predicts that light vehicle sales in 2004 will reach 16.8 million units because of economic growth and continued incentives.

"Interest rates and gas prices are variables to watch," said Taylor. "Indications are that interest rates will edge up through the course of the year, though not spike dramatically. Gas prices are in the consciousness of many Americans but unlikely to reach levels nationally that will significantly impact buying decisions on a broad scale." NADA expects gas prices to come down late fall.

The report is available online at www.nada.org.