MEGADEALERS PLAN TO BOOST F&I SALES

It's a cushion against forecasted auto industry downturn inance & insurance and fixed operations are drawing greater interest from publicly owned consolidators. Some see it as a cushion for predicted lower vehicle sales this year.

Senior executives of Sonic Automotive, Group 1 Automotive and Lithia Motors highlighted F&I and fixed operations growth in their third-quarter financial reports - and set the stage for a shootout in 2001 on which would fare the best in F&I revenues per vehicle.

"Our F&I revenue for the first nine months of 2000 increased 23% to $753 from $614 per unit in 1999," reports Sonic's chief financial officer, Theodore M. Wright, "and we're expecting to reach $790 per unit in the fourth quarter.

"As our 106-dealership group's highest contributor of profits per unit, we're setting (an F&I) goal of $800 per unit in 2001 and want to seek leadership over any megadealer group, public or private."

Adds Jeff Rachor, Sonic's auto retail group chief, "We are concentrating on improving F&I revenues per vehicle and regard $600 PNUR (per new unit retailed) as underperforming."

Group 1 Chairman, President and CEO B.B. Hollingsworth, Jr., says F&I grosses rose to $750 per unit from $550 the year before. He predicts continued growth in the F&I and fixed areas this year.

Lithia Motors says its 51 dealerships averaged $852 per unit in F&I revenues in the first three quarters of the year, surpassing a $700 target.

Lithia Chairman and CEO Sidney B. DeBoer says F&I penetration had reached 83% of vehicle sales. Lithia appointed a full-time F&I sales trainer to cover all its Northwest and Upper Midwest stores.

The consolidators' emphasis on F&I and fixed revenues come at a time when vehicle sales are beginning to soften for the first time since the wave of publicly owned consolidators emerged in 1997.

While girding their F&I and fixed operations departments for forecasted declining volumes in 2001, the executives of the public megadealerships still report record revenues for the third quarter and a sprinkling of new franchise acquisitions.

Growing number of subprime lenders try new things Major subprime loan providers have reported continued growth - and one of them has teamed up with a prime lender in a unique initiative designed to service dealers better.

The new alliance between Ameri-Credit Corp. and Chase Automotive Finance has enrolled more than 2,800 dealers who generated about $103 million in incremental loan volume in the second quarter of 2000, according to Michael R. Barrington, AmeriCredit CEO, vice chairman and president.

The joint venture furnishes "one-stop shopping" capabilities to dealers, says Mr. Barrington, with AmeriCredit underwriting nonprime loans and Chase serving the prime category.

Record net earnings were reported by AmeriCredit for its fiscal year, ending June 30, and by WFS Financial Inc. for the first three quarters of calendar 2000.

Based in Fort Worth, TX, AmeriCredit says its net profit reached $114.5 million for fiscal 2000, up 65% from $74.8 million in fiscal 1999.

The company raised its dealership portfolio to 14,076 in the U.S. and Canada and opened 20 new offices, increasing its total to 196.

WFS Financial, headquartered in Irvine, CA, says nine-month net earnings of $48.2 million increased from $36.4 million for the sale period a year earlier.

Auto loan originations at AmeriCredit grew to $4.4 billion for fiscal 2000 from $2.8 billion the prior year, and for WFS in the three-quarter period to $3.2 billion from $2.5 billion.

At WFS, Chairman and CEO Joy Schaefer says third-quarter loan contract volume shot up 29% to $1.2 billion in line with the subprime segment's continuing expansion.

Credit Acceptance Corp. says new income advanced to $19.1 million for the first half of 2000, up from $11.8 million in the same 1999 period, although total revenues declined to $59.8 million from $60.6 million.

Chairman and CEO Donald A. Foss says CAC is attempting to increase loan origination volumes by boosting advances to dealers and pioneering in subprime leasing. Revenue from leasing reached $5 million in the first half on originations valued at $22.7 million, Mr. Foss reports.

CAC, based in Southfield, MI, also has begun a pilot program of providing exclusive subprime financing for DaimlerChrysler dealers.

AmeriCredit also introduced an Internet strategy last spring. It will provide dealers and consumers online self-service capabilities related to their AmeriCredit accounts.

In another rollout, the Texas-based lender offers pre-approved loans and is testing a direct-mail program for pre-approvals to target consumers.

Give 'em their money back if they don't use extended service contract Here's one suggestion to boost service contract sales: An accepted fact of F&I life is that extended service-contract sales need a shot in the arm.

How to accomplish that is something else, considering the improved quality of vehicles and the difficulty in selling service agreements for leased vehicles. Extended service contract penetration was 21% last year, down from a high of 35% in 1986.

But Dan Thompson, CPA with the Boyer & Ritter firm, of Camp Hill, PA, has a novel idea. He says several of his dealer clients are thinking of implementing it.

On the surface, it may appear over the edge. It's this:

Offer buyers of a 60-month or 72-month contract a full premium refund if the customer does not use the contract during the agreement's term.

He says it's highly likely that a claim will be incurred over five or six years, so that decreases the risk that the premium will have to be refunded.

Another risk-reducer: the guarantee should be non-transferable.

Selling the highest gross-profits contracts on the full refund basis is a powerful closing tool without any significant risk, says Mr. Thompson.

But if one is requested, check with the vendor to make sure no claims have been paid out, he says.

Mr. Thompson also advises that contract providers regularly furnish dealers with a count of contracts in force qualifying for potential refunds.

Boyer & Ritter is a member of the AutoCPA Group. The firm has about 150 dealer clients.

The F&I industry will be represented at the NADA Las Vegas Exposition next month by a slightly reduced group of exhibitors than before.

Thirty-four providers of F&I products and services, including 12 specializing in the subprime area, will display their wares at the Las Vegas Convention Center Feb. 3-6.

At the Orlando show a year ago, 37 F&I providers were on hand, of which 12 were strictly in special financing for higher-risk consumers.

Western Diversified, an F&I exhibitor at NADA expositions for more than 20 years, will be absent this year, having sold its assets to Lyndon Insurance Co.

Another absentee will be debis Financial Services, a division of DaimlerChrysler Financial Services. But DaimlerChrysler Financial Services will be there.