Increasing F&I Gross Profit Per Vehicle

Five of the six publicly-traded new-vehicle dealership groups increased F&I gross profit per vehicle at the beginning of this year. This is a trend the groups attribute to acquisition, product sales, and enhanced collaboration between sales teams and the F&I office.

Among those groups, Lithia Motors Inc. reached an all-time record by growing same-store F&I profit per vehicle by 4.8%. Additionally, Lithia’s penetration rates hit 46% for vehicle services contracts and 27% for lifetime oil changes, and the dealership group managed financing for 73% of its customers. The company’s recent acquisition of DCH Group and Carbone Auto Group contributed to this rise in F&I and they are looking for opportunities to push F&I growth.

Group 1 Automotive officials reported that consolidating their lender base, enhancing the availability of financing (and subprime financing), integrating compliance, and providing transparency to the customers through benchmarking helped them boost F&I per vehicle retailed.

So, beyond acquisition and focusing on enhancing the consumer experience, how can you successfully boost F&I profit in your dealership?

Shift Your Sales Focus

F&I products is a $77 billion business —with used-car dealerships at 29% of revenue, followed by used-vehicle sales at new-car dealerships (40%) and new-vehicles sales (31%).

While it is typically easier to sell F&I add-ons in used-vehicle sales than new-vehicle sales, AutoNation reports that F&I profits on used cars tends to be lower than on new cars. With the recent success of the new-vehicle dealership groups increasing F&I profit per vehicle, other dealership may want to look for opportunities to boost F&I revenue in new-vehicle sales. Focusing more on selling F&I products during new-vehicle sales can help your dealership achieve higher profits and shift the balance between used and new F&I revenue percentages.

Your dealership should also consider what F&I products are popular in the current market. According to recent data, average F&I product penetration rates in the U.S. are as follows: services contracts (40%), GAP insurance (28%), paint sealant (19%), and prepaid maintenance (12%). Knowing what the majority of customers will be attracted to gives you a good place to start.

Additionally, when making a new vehicle sale, consider the type of customer you are dealing with to know which type of F&I products to push and how (see our Car Buyer Profiles). Depending on where a customer is at in the buying cycle, they will be attracted to different add-ons, and often, if the customer feels you have made them a fair deal on the vehicle purchase, they are comfortable purchasing upgrades at full price.

Improve Collaboration Between Sales and F&I

Asbury Automotive Group reported that the majority of their boost in F&I profit was driven by the sale of ancillary products through team collaboration. Ashbury’s CEO said, “we have a great F&I team and trainers, and with that we think we’ve benefited through…products sales.”

To successfully transition a customer from the sales to the F&I department, your sales team needs to have a strong understanding of the F&I process and an ability to inform consumers about available products during the front-end of the sale. Beyond offering a variety of financing options, F&I managers should use an F&I menu that shows the consumer all their options and can be signed by the customer and added to the deal jacket.

Dealers’ sharper focus on positioning the value of F&I products, broader acceptance by consumers and a wider array of products also help promote sales. AutoNation Inc said customer acceptance of AutoNation-branded F&I products drove the F&I profit per vehicle boost. Therefore, it’s also a good idea to have value-based sales collateral about F&I products throughout the dealership that sales team and F&I managers can leverage to intrigue and educate consumers.

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