Fixed Ops Boosts F&I Profits as Car Profits Dip

The bottom isn’t dropping out of new-vehicle price tags – far from it – but dealer are groups grateful for parts and service business to offset softer pricing, based on first-quarter results from two of the nation’s largest new-vehicle dealership chains.

“PVRs continue to moderate as expected, as inventories increase,” says CEO Mike Manley of Fort Lauderdale, FL-based Auto Nation, referring to gross profit per vehicle retailed.

For AutoNation, the average gross profit per new vehicle was $5,211 in the first quarter on a same-store basis, down 15% vs. the same quarter a year ago, the company reports.

At the same time, AutoNation parts and service revenue increased 7.6% in the first quarter vs. a year ago, to $1.1 billion on a same-store basis.

Lithia & Driveway Motors, Medford, OR, reports its average gross profit per new vehicle retailed was $4,968 for the quarter, down 19.7% vs. a year ago, on a same-store basis.

“Coming out of Q4, we had some inventory issues,” says Lithia COO Chris Holzshu. He says 26% of Lithia’s inventory was over 60 days old at year-end, but that’s down to around 12%.

Meanwhile, Lithia’s revenue for service, body and parts was $669.9 million for the first quarter, up 9.4% vs. a year ago. That’s also on a same-store basis.

Holzshu says customer-pay work represents the majority of the company’s after-sales business. Customer pay was up 9% for the quarter vs. a year ago, while warranty work was up 15% for the quarter.

Holzshu says the trend of drivers keeping their cars and trucks longer on average and fixing them up continues to benefit the service and parts business.

“With the continued aging units in operation, which is now over 13 years in North America and the increasing complexity of vehicles, our certified, factory-trained technicians are well positioned to continue to meet the customers’ after-sales needs,” he says.

Lithia’s F&I products also encourage service loyalty, Holzshu says. Those offerings include lifetime oil changes and prepaid maintenance.

At AutoNation, CFO Joe Lower says customer pay, warranty and collision work all increased in the first quarter vs. a year ago. He says parts and service helped offset lower retail unit volume for new and used vehicles.