Like the tide that lifts boats, menu selling may be the wave that lifts F&I yields. It sure seems that way as the six major publicly-owned megadealers all upped their F&I revenues and yields per vehicles retailed (PVR).
The “Big Six” boosted their F&I revenues 11% in 2002 to a record $1.21 billion, or about $1 out of every $30 the group reported in revenues. Their F&I PVR averaged $806, up 9.1%.
Nearly one million new cars and trucks were sold through the publicly-owned dealership chains. The actual total, 979,259, increased from 946,656 the year before. Used-unit sales rose to 570,375 from 525,238.
Top-volume mega-network AutoNation, Inc. and third-ranked Sonic Automotive had virtually the same answer when asked how they managed to raise their F&I numbers to record levels in the fourth quarter and year to date:
“It was our quality menu-selling process,” says AutoNation President Mike Maroone. “The process has been implemented in nearly all of our 280 dealerships, and we reached a record PVR of $771 in the December quarter and $757 for the year to date.”
“Hundred percent menu selling,” responds Jeffrey C. Rachor, Sonic's executive vice-president of retail operations. “We have replaced the old step-selling system with carefully presented menus at each of our 136 dealerships, and there's no question that the gains we made last year in F&I results are because of that.”
Reflecting nearly a full year's operation of the big Don Massey Cadillac network it bought in 2002, Sonic boosted its F&I yield per vehicle retailed to $866 in the quarter and $874 for the full year. Only Lithia Motors surpassed Sonic, retaining the segment's F&I leadership with $886 PVR for the year and a record $960 in the final quarter.
Although Sonic lost its long-held runner-up auto consolidator position overall to UnitedAuto Group (UAG) in terms of revenues and new units sold, Sonic topped UAG in F&I revenues, $201 million to $177 million.
AutoNation brought in $496 million from its F&I departments, up from $485 million in 2001. Group 1 Automotive reported $141 million; Asbury Automotive, $117 million; and Lithia, $81 million.
UAG Chairman Roger S. Penske reports a 24% boost in F&I revenues in the fourth quarter as its per-vehicle yield rose $71 to $766. UAG is focusing on sending many of its F&I staffers to Resource Training menu-selling courses.
In menu selling, F&I customers are shown “packages” of product options, presented clearly and openly. The method is considered more customer-friendly than some F&I selling strategies of the past.
Lithia's chairman Sid DeBoer notes that Lithia's stock price was trading “well below book value” — like all members of the consolidator club — despite record revenue, profits and F&I showings in 2002.
“Our business models are resilient in good sales periods and bad, what with service, pre-owned and F&I to lean on when new-unit sales decline,” says DeBoer.