http://www.autonews.com/apps/pbcsi.dll/storyimage/CA/20160601/FINANCE_AND_INSURANCE/306019988/AR/0/AR-306019988.jpg
Many dealerships made a substantial portion of their F&I profit from dealer reserve at one time. Photo credit: DAVID PHILLIPS
The evidence is anecdotal, but F&I managers are making their peace with a reduced role for dealer reserve.
When the Consumer Financial Protection Bureau began its attacks on dealer reserve, many dealerships dug in for a fight.
But talk to F&I managers today, and many will shrug. Whether it’s because of the CFPB or other factors, the new normal is for F&I offices to look elsewhere for the bulk of their revenues.
At one time, many dealerships made a substantial portion of their F&I profit from dealer reserve. But that has changed.
At Schaller Auto World, “35 percent or less is our goal” for dealer reserve’s share of F&I revenue, says dealer principal Art Schaller Jr. He adds: “I bet it was probably 50 percent five years ago.”
Schaller Auto World sells new Honda, Acura, Subaru and Mitsubishi vehicles at stores in New Britain, Middletown and Manchester, Conn.
In April, the latest month for which Schaller had data, dealer reserve accounted for 31 percent of F&I revenue at his Honda dealership, 32 percent at his Mitsubishi store, and 37 percent at his Subaru dealership.
At Sonic Automotive Inc.’s Mountain States Toyota/Scion, in Denver, about 40 percent of F&I income is from flats — usually a flat dollar amount — rather than from dealer reserve, says Finance Director Robert Grzeca.
In fact, “I’d rather get a flat than a rate markup,” he says, because a markup “leads to refinancing.”
Years of change
The change has been coming for awhile.
“We’ve been de-emphasizing dealer reserve for several years,” Tyler Corder, CFO of Findlay Automotive Group in Henderson, Nev., told Automotive News in 2013. “My guess has been that it would be more highly regulated, and now it looks like that’s going to happen.”
But the change has taken root at an increasing number of dealerships.
Consider the Sullivan Automotive Group of Santa Monica, Calif. Its Roseville Toyota Scion store bills itself as the largest-volume Toyota dealership in northern California. The group ranks No. 54 on Automotive News’ list of the top 150 dealership groups based in the U.S., with retail sales of 17,398 new vehicles in 2015. In F&I growth per vehicle, though, it ranks tops on the list, boosting F&I revenue per new and used vehicle retailed last year 51 percent to $1,420, vs. $943 in 2014.
“Less and less of my business is reserve,” says Melissa Cole, finance director for the Sullivan Automotive Group. She and her general managers see the figures on revenue from reserve, but those aren’t shared with the rest of the F&I staff because that’s not the department’s focus. “Nobody gets paid on it at my store at all. It’s all product.”
Is it possible that dealer reserve will go away in favor of some form of flats? Says Cole: “It’s going to happen.”
Making peace with a reduced role for dealer reserve
No comments:
Post a Comment