It's a cushion against forecasted auto industry downturn

Finance & insurance and fixed operations are drawing greater interest from publicly owned consolidators. Some see it as a cushion for predicted lower vehicle sales this year.

Senior executives of Sonic Automotive, Group 1 Automotive and Lithia Motors highlighted F&I and fixed operations growth in their third-quarter financial reports -- and set the stage for a shootout in 2001 on which would fare the best in F&I revenues per vehicle.

"Our F&I revenue for the first nine months of 2000 increased 23% to $753 from $614 per unit in 1999," reports Sonic's chief financial officer, Theodore M. Wright, "and we're expecting to reach $790 per unit in the fourth quarter.

"As our 106-dealership group's highest contributor of profits per unit, we're setting (an F&I) goal of $800 per unit in 2001 and want to seek leadership over any megadealer group, public or private."

Adds Jeff Rachor, Sonic's auto retail group chief, "We are concentrating on improving F&I revenues per vehicle and regard $600 PNUR (per new unit retailed) as underperforming."

Group 1 Chairman, President and CEO B.B. Hollingsworth, Jr., says F&I grosses rose to $750 per unit from $550 the year before. He predicts continued growth in the F&I and fixed areas this year.

Lithia Motors says its 51 dealerships averaged $852 per unit in F&I revenues in the first three quarters of the year, surpassing a $700 target.

Lithia Chairman and CEO Sidney B. DeBoer says F&I penetration had reached 83% of vehicle sales. Lithia appointed a full-time F&I sales trainer to cover all its Northwest and Upper Midwest stores.

The consolidators' emphasis on F&I and fixed revenues come at a time when vehicle sales are beginning to soften for the first time since the wave of publicly owned consolidators emerged in 1997.

While girding their F&I and fixed operations departments for forecasted declining volumes in 2001, the executives of the public megadealerships still report record revenues for the third quarter and a sprinkling of new franchise acquisitions.