Revenues Up Sharply

Top-volume dealership consolidators' finance and insurance revenues and sales per unit grew significantly in the second quarter. Three of the top six are closing in on F&I sales averaging $1,000 per vehicle.

It shows F&I's strength as a profit center, particularly when it helps counteract lower revenues from soft vehicle sales.

Regaining the group's lead in per-unit sales by a $5 margin, Lithia Motors came within a fiver of reaching the $1,000 mark.

Lithia moved up from $945 during last year's second quarter and $954 in 2002's first quarter to reach an all-time segment high of $995. Its dealerships in western states retailed a record 11,861 new and 16,731 used vehicles in April-June.

Falling to runner-up was Group 1 Automotive. Its dealerships edged up to $990 per unit from F&I in this year's second quarter, up from $878 during the same time last year and $987 in this year's first quarter. Like other consolidators, Group 1 says its F&I, parts and services revenues advanced more rapidly in the quarter than vehicle income.

A surprise in F&I performance is Sonic Automotive. The second largest auto retailer, next only to AutoNation Inc., chalked up a per-unit F&I yield of $954 in the second quarter, up from $903 a year ago and $767 in the first quarter.

The spurt by Sonic was attributed to the roll-in of financials from the 16 Don Massey stores it bought in February. Those are largely Cadillac and Honda points with strong F&I penetrations.

While three of the six major dealership groups were clustered in the $900-$1,000 per unit category, the other three were between $700 and $800. Each of them, however, reported increases in per-unit averages and total revenues from the first quarter and the year-ago period. They say emphasis on F&I results remains a top priority for their stores.

AutoNation raised its second quarter per-unit F&I yield to $763, compared to $735 in the first quarter and $692 in April-June period of 2001; UnitedAuto Group to $745 from $721 and $708, and Asbury Automotive to $726 from $709 and $665.

“Our outlook is to stay strong for the rest of 2002,” says AutoNation CEO Michael Jackson.

On the revenue side, all consolidators except Sonic found their F&I departments generating more income than they did a year ago.

AutoNation's 278 dealers, handling 374 franchises in 17 states, brought in 9.2% more F&I income as the quarter's revenues of $113.4 million accounted for 2.7% of total revenues of $5 billion.

Ford Credit and other lending firms cutting back on subventions, particularly in leasing, has slowed F&I gross income growth, says B. Scott Smith, president and COO of the Charlotte, NC-headquartered Sonic.

That's prompting the No. 2 consolidator to spur F&I sales per unit, says Smith.

The 130 Sonic dealerships' total income in the second quarter compared to year-ago declined from $53 million to $48.7 million, although F&I sales-per-unit number advanced. Sonic's total revenues for April-June were $1.9 billion.

Detroit-based UnitedAuto weighed in with a 23% boost in its F&I revenues to $46.5 million, which amounted to 2.4% of total income of $1.6 billion. UAG has 124 franchises and 84 dealerships in the U.S.

At Asbury Automotive, based in Stamford, CT, F&I income advanced 13.8% in the second quarter from a year earlier to $29.5 million out of total revenues of $1.1 billion from its 91 dealerships and 127 franchises.

In a rare statement for consolidator executives, who normally sound as deferential to their manufacturer vehicle suppliers as possible, Asbury CEO Kenneth Gilman says, “We continue to believe that automotive retailers, particularly those with a great brand mix such as Asbury, are not prone to the same economic pressures the manufacturers face.”

Group 1 Automotive's 72 dealerships and 109 franchises accounted for $39.2 million in F&I revenue in April-June, up from $35 million during the same period last year.

The leader in F&I sales per unit, Lithia Motors, reported a 25% revenue increase to $22.8 million from $17.8 million as income overall jumped 26% to $584.3 million. Lithia has 68 stores and 130 franchises in 10 western states.