Mike Jackson, AutoNation CEO Photo credit: AUTOMOTIVE NEWS ILLUSTRATION
AutoNation Inc.'s finance and insurance profit per unit reached an all-time high in the fourth quarter, lifted by the dealership group's branded product sales and a training approach that boosts weaker stores' F&I results.
AutoNation improved average F&I gross profit per new vehicle retailed 11 percent to $1,732 in the quarter, becoming the first among the six public new-car dealership groups to break $1,700.
For all of 2017, AutoNation's average F&I gross profit per new unit rose 4.6 percent to $1,680.
CEO Mike Jackson credits the company's branded F&I products for the growth.
Customers "like the value proposition of the products, and our adoption rate is steadily going up. That's what's increasing the overall number," he told Automotive News.
The AutoNation-branded, 12- product F&I suite, launched in 2016, is the company's most mature branded initiative.
"It was the success that we have achieved with these products that gave us the confidence to then move into [other] items: parts, accessories, etc.," Jackson told analysts during the company's earnings call this month.
Focus on 'bottom half'
AutoNation has a new F&I product in development but has not released the details.
The company evaluates the price and value propositions of its F&I products consistently, CFO Cheryl Miller said. However, "the way we try to drive value to the customer" isn't "just through pricing but through general service delivery," she said. "There is a more favorable deductible if you service at AutoNation stores under our product."
AutoNation, of Fort Lauderdale, Fla., ranks No. 1 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 337,622 new vehicles in 2016.
The dealership group, like some of its peers, applies the best practices of its top-performing stores to its weakest performers. "It's the bottom half of our stores that improves every year," Jackson said.
The weaker stores mostly learn about effective processes from the top performers. "There are defined, disciplined approaches," Jackson said. "If you do it that way every time, it will lead to a high adoption rate by customers. If you're lazy and take shortcuts, your performance will be much less."
Similar approach
Asbury Automotive Group Inc. employs a similar tactic. "If we can improve the bottom half of our business, the number comes up as a whole," said CEO David Hult. "We'll stay focused on that."
Asbury increased its average F&I profit per new unit retailed 10 percent to $1,662 in the fourth quarter and 7.9 percent to $1,562 in full-year 2017.
Asbury's F&I mix is about 70 percent F&I product sales and 30 percent finance reserve, Hult said.
"On average, we tend to run about 100 basis points on a loan [in finance reserve], so [the growth is] really coming from product sales, and we're very happy about that," Hult said.
Asbury, of Duluth, Ga., ranks No. 7 on Automotive News' list of the top 150 dealership groups based in the U.S., with new-vehicle retail sales of 102,360 in 2016.