Tag Archive | "F&I Profit"

Group 1’s F&I Per-Copy Average Jumps $65 in the U.S. Market

HOUSTON — Group 1 Automotive, an international dealer group with outlets in the United States, the United Kingdom and Brazil, raised its consolidated F&I profit per-copy average by $27 to $1,352. The group’s U.S.-based F&I operations continued to live $1,500 per copy.

In the United States, the group’s F&I operations averaged $1,515 in F&I per vehicle retailed (PVR), a $65 improvement over last year. Its consolidated average was held down by the $54 and $238 PVR drops in the United Kingdom and Brazil, where the average stood at $693 and $399, respectively.

For the first nine months of the year, the group’s per-copy average for its U.S.-based F&I operations was $1,529, up $79 from the first nine months of 2014.

The PVR increase in Group 1’s U.S. market was driven, in part, by an increase in penetration rates for most of the group’s F&I product offerings. Officials also listed consolidation of its lender base, the availability of consumer financing, including improved subprime financing, and integrating compliance, training and benchmarking to create a transparent customer experience as other drivers.

“We are very pleased with where we are and we work every day to improve the underperforming stores and increase our product penetrations,” said Peter DeLongchamps, vice president of financial services and manufacturer relations. “So that’s just been a lot of hard work by my team and we are delighted with the results.”

Product acceptance rates varied in the group’s three markets, with service contracts leading the way in every one. In the United States, service contracts penetrated at a rate of 40%, while GAP, prepaid maintenance and the group’s paint sealant product posting acceptance rates of 28%, 12% and 19%, respectively.

The group posted a 10.8% increase in U.S. same-store F&I gross profit, which totaled $97 million, while total F&I revenue grew by 12% from a year ago.

For the quarter, the group posted record earnings and revenue. Total revenue increased 6.6% to an all-time quarterly record of $2.8 billion, while total gross profit grew 6.3% to an all-time quarter record of $398.4 million. The group also reported record adjusted net income of $46 million, a 15.7% increase from a year ago.

All three of the group’s markets sold a combined 47,126 new vehicles and 32,491 used vehicles on a same-store basis during the third quarter. Its U.S. operations accounted for 37,132 of the new vehicles sold and 26,756 of the used vehicles sold. All three markets experienced double-digit increase in used-vehicle sales, the U.K. market realizing the largest increase during the period compared to a year ago.

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AutoNation’s PVR Average Surpasses $1,500

FORT LAUDERDALE, Fla. — For the first time, AutoNation reported F&I gross profit per vehicle retailed (PVR) of more than $1,500, an all-time high for the public dealer group.

The group saw an average gross PVR of $1,515 during the first quarter 2015, up $114, or 8.1%, from a year ago. Approximately two-thirds of that profit was related to the sale of F&I products, while the other third was related to finance, officials said during a conference call on Wednesday.

Chairman, President and CEO Mike Jackson attributed the increase to the dealer group’s technology and training initiatives in its stores. He added that AutoNation intends to focus on product sales going forward.

“All of that growth has been on the product side and we intend to take a big step launching a pilot in the third quarter where … we will now offer our own maintenance contracts under the AutoNation brand name,” the executive explained. “And we feel this will be another growth opportunity that has potential to be very beneficial in 2016 as we get through the pilot study.”

Another new initiative currently underway at AutoNation is its Express process, which gives customers the ability to conduct the car-buying process largely online. Now with 120 days of operation under its belt, Express is helping the dealer group realize its goal of cutting down on third-party lead providers.

“So we’ve significantly outgrown and had a crossover as far as our dependence upon third-party sites,” COO Bill Berman told callers. “As far as its transactional capability under the flag AutoNation Express, it’s now active in 84 of our stores. It’s been very well accepted by our customers and by the stores.”

Express will be rolled out to the rest of AutoNation’s storefronts over the course of 2015.

Officials also reported a first quarter net income from continuing operations of $112 million, or $0.97 per share — a 29% improvement on a per-share basis over the same period in 2014. First quarter 2015 revenue totaled $4.9 billion, an increase of 13%, driven by stronger performance in all business sectors — new vehicles, used vehicles, parts and service, and F&I. New-vehicle unit sales increased 10% overall and 9% on a same-store basis, while retail used-vehicle unit sales increased 12% overall and 11% on a same-store basis.

Also during the conference call, Jackson touched on the Consumer Financial Protection Bureau’s crackdown on dealer markup. The executive said he doesn’t sense any impending moves by the banking industry toward flat fees to appease the CFPB. In order to cull discrimination against minority buyers, the regulator has suggested that finance sources eliminate the ability of dealers to mark up an interest rate on retail installment sale transactions in exchange for services rendered.

“… I can certainly speak for our portfolio. There is no sign of disparate impact, let alone discrimination,” Jackson said.

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Lithia’s Drop in New-Vehicle Gross Per Unit Offset by Q1 F&I Performance

MEDFORD, Ore. — Lithia Motors’ F&I operations realized a $52 increase in F&I profit per vehicle retailed, which settled in at $1,233 in the first quarter of 2015.

The group’s F&I performance, coupled with the $97 increase in used-vehicle gross profit per vehicle retailed ($2,602), helped the 130-store dealer group offset lower new-vehicle gross profit per unit, which fell $90 to $2,160.

“In the first quarter, the blended overall gross profit per unit was $3,646 compared to $3,599 last year, or an increase of $57 …,” said Bryan Deboer, Lithia’s president and CEO, during the group’s quarterly investor call on Tuesday. “While we continue to see lower new-vehicle gross profit per unit, this was more than offset by improvement in used-vehicle gross profit per unit and F&I per vehicle.”

Lithia Motors not only posted its best quarterly results since 2006, it also realized its highest first quarter adjusted net income in company history, which rose from $27.1 million in the year-ago period to $36.9 million. On per-share basis, earnings increased 35% from a year ago to $1.38 per share.

Revenue increased 66% from a year ago to approximately $1.8 million, with the group realizing double-digit increases in all of its four business lines on a same-store basis.

Total sales increased 11%, while new-vehicle revenues increased 11.3% on a same-store basis to $639,501. The average selling price increased 3%, while unit sales increased 8.5% from a year ago to 18,567 units.

Used-vehicle revenues increased 11.1% to $333,300, while the average selling price increased 4%. The dealer group also retailed 6% more used vehicles than a year ago, with the group selling 0.9 used vehicles for every new-vehicle sold.

Revenue from service, body and parts increased 11.1% from a year ago to $1.2 million, with revenues from customer pay and warranty-related work increasing 19% and 31%, respectively. Wholesale parts revenues also increased 5%, while body shop revenues showed a slight decrease of 3%.

“We delivered the best first quarter earnings in our company’s history, and the second best quarterly earnings ever,” Deboer noted. “For the fourth consecutive quarter, we achieved double-digit growth in same-store sales in all business lines. We remain focused on capturing additional market share, improving existing store results, and the continued success, integration and growth of DCH and actively seeking accretive acquisitions.”

Last June, Lithia agreed to buy DCH Auto Group, a 27-store operation with stores in California, New York and New Jersey. The acquisition made Lithia the fifth largest dealer group by store count.

“We believe that the integration of DCH has gone very smoothly,” Deboer said on Tuesday, noting that the group continues to explore other acquisitions.

“We are not solely looking at $500 million or $1 billion acquisition,” he added. “We’re still looking at our typical strategies where we buy $50 million to $70 million store size. And there is a pretty active market in that arena both in our exclusive markets and now in the metropolitan market.”

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Group 1 Records All-Time High for Gross Profit in Q1

HOUSTON – Group 1 Automotive Inc. set new records for total gross profit, as well as first-quarter revenue and F&I gross profit per vehicle sold.

First-quarter net income stood at $23.1 million, a 49.1 percent increase. Total revenue rose 18 percent to $1.66 billion, a new first-quarter record and a second best all-time high in the company’s history, according to F&I and Showroom magazine.

Total gross margin came in at 15.6 percent, as gross profit grew 17.4 percent from a year ago to an all-time record of $260.4 million. Additionally, new-vehicle gross profit increased 23.5 percent on 16.3 percent higher revenues, as the company retailed 13.1 percent more units. The average selling price also expanded 2.9 percent to $32,674.

Used-vehicle sales for the group surged 24 percent, while the average selling price increased 3.4 percent to $20,000, driving gross profit growth of 25.9 percent on 28.3 percent higher revenues.

F&I gross profit per retail unit came in at $1,175, a record first-quarter result. Parts and service revenues increased 9.3 percent from the prior year, which company officials attributed to growth in customer-pay, wholesale parts and collision businesses.

“Group 1’s strong, first-quarter operating and financial results included record-setting revenues, gross profit and earnings for our shareholders,” said Earl J. Hesterberg, Group 1’s president and chief executive officer. “Based on the first-quarter results, we now expect new vehicle industry sales of 14.5 million units in 2012.”

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F&I and New-Vehicle Profitability Drive Profit Gains for AutoNation

FORT LAUDERDALE – AutoNation Inc. reported increased profitability in each of its business sectors for the first quarter, with revenue up 10 percent and gross profit up 6 percent. Officials attributed the healthy profit gains to F&I performance and new-vehicle sales.

Net income from continuing operations rose almost 6 percent to $74 million for the quarter compared to the year-ago period. Revenue rose from $3.3 billion last year to 3.7 billion, with new-vehicle unit sales increasing 8 percent on a same-store basis and 10 percent overall, according to F&I and Showroom magazine.

Driven by increases in F&I and new-vehicle gross profits, overall gross profit for the dealer group increased 6 percent from the year-ago period to $603 million in the first quarter. F&I gross profit increased 7.2 percent per vehicle retailed to $1,213.

Officials also attributed the company’s gross profit gains to the $4.6 million, or $82 on a per new-vehicle retailed basis, related to additional incentives on premium luxury vehicles previously sold.

“The renaissance in auto retail is well underway, reflected in a seasonally adjusted U.S. industry annual selling rate of 14.5 million units for the first quarter of 2012,” said Mike Jackson, Chairman and Chief Executive Officer. “We have increased our 2012 U.S. industry new-vehicle sales forecast to mid-14 million units, as we see continued momentum in U.S. auto sales.”

During the first quarter of 2012, AutoNation repurchased 11.7 million shares of common stock, or 9 percent of the shares outstanding as of Dec. 31, 2011, for an aggregate purchase price of $405.4 million. From April 1 through April 24, 2012, the company also repurchased 2.1 million shares for an aggregate purchase price of $70.8 million. As of April 24, 2012, there were approximately 122 million shares outstanding.

By segment, AutoNation’s domestic-brand stores experienced a 16 percent increase in new-vehicle unit sales, with income ($50 million) up $7 million from the year-ago period. The group’s import stores, which income of $62 million, also increased new-vehicle unit sales by 6 percent. New-vehicle unit sales for the group’s premium luxury stores were up 14 percent. Net income for those stores increase by $1 million to $59 million.

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10 More Ways To Help Your Dealers Sell More Products!

“He that is good for making excuses is seldom good for anything else.” – Benjamin Franklin

There are three types of F&I managers: those who make good, those who make trouble, and those who make excuses. When asked, most F&I managers can provide you with a laundry list of excuses why they’re not doing better. In reality, excuses are the tools of the lazy that are used to build a monument to mediocrity.

For many F&I managers, a good excuse is actually better than good performance. Because no matter how great their performance is this month, it leaves them having to prove themselves again next month, and the month after that. Whereas, one good excuse can last for years.

In a previous article, we discussed 13.3 Ways To Help Your Dealers Sell More Products. Here are 10 more ways you can help your dealers and F&I managers turn obstacles and excuses into more product sales.

1. Don’t Buy In
As an agent, you hear lots of excuses. You have to listen. You need to show empathy. But you can’t buy in. Any agent who accepts an F&I manager’s excuses is investing in, and guaranteeing, poor performance. Top performers don’t make excuses, they make it happen. The fact is, performance only improves when the pressure to get it done exceeds the pain of actually doing it. As an independent agent, your focus must be on removing obstacles and eliminating excuses for your F&I managers. Your agency must be perceived by your dealers as having the resources, expertise, and commitment necessary to help them improvise, adapt, and overcome those countless excuses and endless obstacles in order to maximize F&I income, month in and month out.

2. Remember, Happiness Is A Good Deal
Utilize odd prices for every F&I product… $2,832 for that service contract, not $2,795. Odd prices add credibility and legitimacy to F&I product pricing, and reduce the customer’s perception that they need to negotiate the price of those products. Help your F&I managers establish a set price for each product, and then encourage them to stick to it. Any reduction in price must always require reciprocity- a reduction in coverage. The first time they ask a customer “If I could, would you…” their credibility goes in the toilet. They might as well go to work at the carnival. The same holds true for interest rates. Whenever possible, use odd interest rates– 5.41%, not 5.25%. Everyone needs to feel like they got a good deal!

3. What’s Old Is New
Obtain an old Owner’s Manual from the late 80’s or early 90’s for the brand of vehicle the dealership sells, and have the F&I manager keep it on the customer’s side of the desk. Chances are they have a box of old Owner’s Manuals in their storeroom, or get one on eBay for $10-$15. If it’s a Ford dealer, get one from a Ford Galaxie or an F150. If it’s a Nissan dealer, get one from a Datsun B210. Back then, the entire manual was maybe 3/8” of an inch thick. Today, with the radio and navigation system, they’re 4 inches thick, and printed on tissue paper. Keeping one on the F&I desk is a great way to engage the customer, and clearly illustrates in a very tangible way how much more technology there is in today’s vehicles, and why a vehicle service contract is more important than ever.

4. Reorganize Their Desk
In many dealerships today, there is a trend toward having the sales desk assume a number of the duties that historically have been the responsibility of the F&I department. Taking credit applications, pulling credit bureaus, submitting deals to lenders, and quoting payments and interest rates are often done before the F&I department is even involved in the sale. Every dealership, and every department in that dealership, needs a check and balance system.

It is absolutely essential that an F&I manager interview the customer prior to submitting the deal to a lender. He or she has to confirm the information is correct, as well as learn the details and circumstances surrounding any adverse information, to provide a paper buyer with sufficient reasons to justify an approval. Properly used in the customer interview, the credit application and credit bureau report can significantly increase the chance of obtaining an approval. More importantly, it provides the foundation for a needs-based product presentation in the F&I office.

5. Get Real!
Recording and reviewing actual F&I presentations is one of the best ways to see what’s really happening behind closed doors. Want to see an immediate improvement in F&I performance, profits and product sales at one of your dealerships? Start recording actual F&I transactions.

The camera doesn’t lie. How many needs discovery questions did the F&I manager ask? How many visual aids did she use? Did he use the information he learned about the customer as the reason they needed the product? Did she engage the customer in the process? How many times did he ask the customer to buy before giving up? If you want performance to improve, you have to hold your F&I managers accountable to following a proven process, and then use actual game film to help them improve their skills.

6. Discover, Recognize And Share!
Every F&I manager at every one of your dealerships has come up with a better way to do something. Whether it’s a visual aid, a way to engage the customer, or a new response to a problematic objection, the best ideas come from the people in the trenches. You have to discover, recognize and share those creative solutions to problems, with all your other F&I managers.

Successful agents are continuously on the lookout for new ideas, processes, and sales techniques. They also recognize the efforts of their F&I managers, and make them feel important. Whether it’s a simple weekly email, a monthly or quarterly newsletter, or $100 for the “Best Idea of the Month,” you have to continuously seek to discover new ideas and processes, recognize and reward those individuals who have come up with better ways to do something, and then share it with your other dealers.

7. Become Indispensable
I can always tell when an agent is indispensable. People are constantly wanting their input and expertise, because their primary goal in every interaction is to help the other person, not just themselves. As an agent, the more people you’re able to help on a daily basis, the more indispensable you become!

Obviously, you increase your value when you help your dealers make more money. But you become indispensable when you are perceived as a true partner in their success, not just a product provider. You have to become your dealers’ “go to” guy. One way to do that is to always get a prompt answer to their question, provide them with accurate information, and do the research they don’t have time to do. You become indispensable when you help your dealers find the right product provider, the right personnel, the best training, and help protect them by being AFIP Certified so you’re familiar with the laws and regulations their people have to comply with on a daily basis.

8. Practice Reality F&I
Not only do you need to ensure your managers set goals each month, you need to get them to show you how they’re going to achieve that goal. It’s easy to set a goal of $1200 per retail unit, but it’s virtually impossible to get there when you’re only averaging $500 profit per service contract and 25 percent penetration. You can’t possibly reach $1200PRU when you’re only averaging $125PRU in service contract income. It’s amazing how many F&I managers don’t establish written goals each month. And those that do set goals have no game plan of how they’re going to achieve their goals each month. As an agent, you have to help your F&I managers set realistic goals, help them see what it will take to achieve them, and monitor their performance vs. their objective.

9. If You Build It, They Will Come
Whether you call it “MultiShield,” “Titanium Protection,” or the “Pot Metal Plan,” grouping individual F&I products into a package, and then offering a discounted package price, increases the sale of all F&I products. There is nothing illegal, immoral or deceptive about incentivizing customers to buy multiple products. Package pricing makes it easier for a customer to decide on a group of products as opposed to evaluating each product separately. Too many choices, requires too many decisions, which results in too many “No’s.” You can’t possibly sell one customer seven products, but a customer can buy seven products, if they’re grouped properly, and you give them an incentive to buy a package.

10. Let’s Party!
As an agent, you have to continuously motivate F&I managers to sell your products. On a regular basis, you should have a contest, bring in a guest speaker, or have an annual golf outing for your F&I people. You need to build a team of F&I professionals who feel part of something bigger than themselves. If you create loyalty to you and your agency, those F&I managers will strive to sell more of your products. At least once a year, have an event that gets your F&I people out of the dealership to build camaraderie, allows them to interact with their peers, and recognizes them for their hard work. A guest speaker in the morning, followed by a golf outing in the afternoon, is a great way to combine business with pleasure. Or have a contest where the winner gets an all-expense paid trip for two to the F&I Conference in Las Vegas. They’ll have a good time, get some great training, and sell more of your products!

As an agent, you can’t buy-in to your F&I managers’ excuses. You have to help them get real, become indispensable to your dealers, and train and equip your F&I people for success. And more importantly, you have to continuously motivate them to succeed. Only by helping your dealers and F&I managers sell more products, will your agency sell more products.

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