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Jackson: “We expect to be able to continue to grow that business.” Photo credit: ED GARSTEN
For the top U.S. dealership group, it’s all about the brand.
AutoNation has consistently increased its F&I gross profit per vehicle, leading all five of its publicly held new-car dealership group rivals since the second quarter of 2015.
CEO Mike Jackson credits AutoNation’s F&I profit gains to its branded product line. AutoNation began selling private-label F&I products at its stores at the end of last year and online in the first quarter of 2016.
Ninety percent of AutoNation customers choose AutoNation branded F&I products, Jackson told Automotive News on Tuesday.
In the third quarter, AutoNation’s average F&I gross profit per vehicle rose 3.9 percent to $1,617, but only one component of F&I sparked the increase: add-on sales.
“The finance piece is unchanged,” Jackson said. “It’s about $600 a car. It’s not really grown.”
It’s F&I product penetration, made up mostly of the branded products, that drives the growth.
“The customers like the products. We go out to vendors and suppliers. We know exactly what the customers want,” Jackson said. “We value-price it because of our purchasing power when we branded AutoNation. It has a very high acceptance rate with the consumers. We expect to be able to continue to grow that business.”
AutoNation dealerships sell the branded products first, which is another reason for the positive reception. Steve Strader, AutoNation’s senior vice president of customer financial, told Automotive News last year that the retailer will sell a Ford-branded extended service contract, for example, if the customer requests it, but dealers strive to sell AutoNation’s plan first. And since there is no third-party, AutoNation receives 100 percent of the profit margin.
Jackson expects F&I gross profit to continue to rise at AutoNation, propelled only by F&I product sales.
“I don’t see the finance piece moving, and as the [interest] rates go up. We’ll just keep that same [percentage of] markup, if you will, moving along with higher rates,” he said.
AutoNation ranks No. 1 on Automotive News’ list of the top 125 dealership groups in the U.S., with retail sales of 339,080 new vehicles in 2015.
AutoNation's move into branded F&I products brings profit payoff
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