Driving up F&I Profits
December 2009, Auto Dealer Today - WebXclusive
Stephens, Inc. published a report on F&I income earnings per vehicle retailed for the top public automotive groups based on fourth-quarter 2008 data. The data is below.
Group F&I Income PVR
Lithia Motors $ 1,144
Auto Nation $ 1,104
Group 1 $ 1,080
Penske $ 1,050
Sonic $ 1,018
Asbury $ 979
Where does your department stack up? If your dealership is far below these numbers, you should review your F&I processes to ensure immediate improvements. As much as everyone likes to talk about the shift to product sales from reserve income, NCM benchmark data doesn’t support that theory yet. Dealers are still earning income from reserve in addition to product sales.
The product mix may vary from group to group, but the one thing that is consistent is the 300 percent rule. Regardless of who the customer is, 100 percent of the customers are given 100 percent of the options 100 percent of the time. Customers simply can’t buy what they haven’t been given an opportunity to buy.
Manufacturers are also putting enormous pressure on dealerships to maintain acceptable levels of CSI, and this has actually helped the F&I manager. To encourage a better customer experience, customers are often introduced to the F&I manager on the floor early in the sales process. This makes the customer more comfortable when they actually get to the business office. Additionally, if every customer is given the full F&I menu presentation and they select the items they want (instead of what you want to sell), the customer experience automatically improves. The best way to ensure a full presentation is to use an electronic presentation with accountability built in.
Many of the public groups have focused on products that drive the customer back to the dealership (e.g., maintenance packages). Dealerships set a cost – usually at or slightly above service retail – for all scheduled maintenance through a specified mileage limit and sell the maintenance package from the F&I office. The business office usually makes a small profit, but the residual revenue to the service department can be quite large. If customers are continuing to come to the dealership for routine maintenance, they are much more likely to bring their vehicles in for other service work. Since the maintenance is “free” in the minds of the customer, six months down the road they are less resistant to having other repairs completed when needed.
Vol. 6, Issue 11