It's No Longer the Unattainable

Dealership chains' finance and insurance revenue averages easily are surpassing $1,000 per vehicle, according to a Ward's analysis.

Not long ago, such $1,000 yields were considered unattainable. But 15 out of the top 20 dealers on the annual Ward's Meagadealer 100 averaged more than that on new-vehicle, used-vehicle and fleet sales.

The highest average in the top 20 went to Houston-based Group 1 Automotive, with a record $1,644 per vehicle average.

Group 1's 96 dealerships reported $172.9 million in F&I revenues for 2004 on a total of 184,307 vehicle sales.

“We have always regarded F&I performance as a crucial part of the sales transaction,” says Group 1 CEO B.B. Hollingsworth in a retirement message. “It's a key to customer satisfaction and to repeat buying of vehicles and service products.”

Group 1's climb to record levels stems from increased sales of service and maintenance contracts. Dealers began intensifying their efforts to sell more F&I products and services when sales began to slow down in the group's Southwest base area on Ford and General Motors vehicles.

The push to exceed the $1,000 mark in revenues per vehicle resonates at private as well as publicly owned megadealer groups. For example, Hendrick Automotive Group, based in Charlotte, NC, averaged $1,370 F&I sales per vehicle sold.

Hendrick has 49 stores, concentrated in the Southeast. President and CEO Jim Perkins put them on an F&I “upgrade alert” when GM and Ford sales began to tail off last summer. The Hendrick collection achieved $67.2 million in F&I revenues on 92,116 vehicle sales last year.

Rising sales of import and luxury brands — reported by nearly all dealers surveyed by Ward's — helped the spike in F&I yields, combined with increased loan contracts and the decline in leasing.

“It's easier to sell extended service contracts, along with GAP (guaranteed auto protection) policies and maintenance agreements, on loans,” Perkins says. “That's a big reason F&I sales have gone up and yields per vehicle sold have risen as well.”

The drive to surpass the $1,000 F&I revenue mark has not been without its detractors among publicly owned dealerships. Sonic Automotive President and COO Jeffrey C. Rachor issues a caution.

“Driving for too much out of F&I runs the risk of exposing our managers to the temptation of non-disclosure of items added to the contract,” Rachor says. “We want to increase sales of F&I, but without high pressure to reach inflated targets.”

As it was, Sonic averaged $1,149 in F&I yields per vehicle in 2004. Three other publicly owned megadealers passed the $1,000 hurdle as well: UnitedAuto Group at $1,176, Asbury Auto at $1,165 and AutoNation at $1,094.

F&I-minded Lithia Motors, one of the first public dealership groups to surpass the $1,000 mark in 2003 and 2004, eased to $984 as Big Three dealerships experienced lower vehicle sales in Lithia's midsize-market network.

On the issue of F&I malpractices, publicly owned megadealers are especially vulnerable.

An AutoNation Chevrolet store in El Monte, CA, and two Sonic Automotive stores in Clearwater, FL, were involved in litigation in recent years because of alleged customer abuses in their F&I departments.

“We have tightened up our disclosure guidelines, while at the same time moved the F&I-per-vehicle number steadily upward,” says AutoNation Inc. President Mike Maroone.

The No.1 megadealer reported F&I income of $618.5 million last year on sales of 677,217 vehicles.