Service contracts are still the hot button for franchise stores. 31 percent of the new vehicles sold and 44 percent of the pre-owned sales leave with service contracts at franchise stores. Independents do nearly as well with 39 percent of their sales including service contracts. Special Finance sales for both sides provide good opportunities for service contracts as franchise dealers and independents both have over a 40 percent penetration on service contracts.
With more and more consumers driving with negative equity in their vehicles, Guaranteed Asset Protection (GAP) coverage continues to grow in popularity among dealers. Franchise dealers report a 43 percent penetration with GAP, nearly as strong as with their service contracts. Independents are a few steps back, as they report only a 33 percent penetration level.
With the relative high cost of premiums compared to the available commissions in most states, Credit Life and Accident and Health (Disability) Insurance sales continue to wane. Franchise dealers report only an average of 10 percent penetration levels, with independents fairing even worse, at just 4 percent.
When it comes to F&I product sales, dealers report various other revenue streams for back-end gross profits. They include the VIN etch theft deterrents (with insurance policies for stolen vehicles), paint and fabric protection, rust inhibitors, pre-paid maintenance contracts, wheel and tire coverage, paintless dent removal packages, and LOJACK and other vehicle tracking coverage among others. Franchise dealers, on average, have a 29 percent penetration level with one or more of these additional products. Independents, again often limited on advances by their available finance companies, report only a 5 percent penetration level on average.
With the franchise stores enjoying significantly better penetration levels across the board with the F&I product sales, not surprisingly, their average gross profit per retailed unit is significantly higher as well. Reporting franchise dealers averaged total F&I gross profits at $794 per retail unit, with the 75th percentile being $901 per retail unit. Independents averaged over 55 percent lower than their franchise brethren. Based primarily on their service contract penetration, they averaged $511 per retail unit, with the 75th percentile being $720 per retail unit.
Vol 3, Issue 9