F&I profits tumble in Q2 across public dealer groups

Per-vehicle finance and insurance (F&I) gross profits fell from last year for all public dealership groups in the second quarter due to challenges both widespread and unique to each brand.

Driving the news: Normalization continues to affect dealerships across the U.S., slowly dragging performance back to pre-pandemic averages. But while every franchise is experiencing some form of declining earnings, the degree of impact continues to vary between brands.

• At $2,563, AutoNation scored the highest per-unit profit out of the six public dealer groups in Q2. However, that represents a decline of 9% from 2023, the second biggest drop this year passed only by Asbury Automotive.

• Group 1 Automotive saw the least change in F&I performance, shedding only 0.7% or $14-worth of per-unit profit ($2,063).

• Penske Automotive earned the least F&I profit of all its industry peers, generating only $1,810 for each vehicle it sold. However, that includes numbers from outside the U.S.

Zooming in: While dealership executives expressed hope that F&I profits would remain well above pre-pandemic norms, several factors made Q2 particularly challenging.

• The most obvious was the CDK Global cyberattack, which disrupted dealership management systems across the U.S. Both Asbury and AutoNation attributed their weaker F&I performance in part to the resulting outage.

• Interest rates and overall affordability challenges made it difficult to keep F&I profits the same year-over-year. That being said, the Federal Reserve has advertised the possibility of cutting rates in the near future, potentially boosting earnings in the coming quarters.

• Both AutoNation and Asbury are turning to in-house F&I offerings to drive long-term profits. However, the shift away from third-party loans seems to be taking a bite out of their short-term earnings.

Bottom line: While overall earnings have been weaker this year, F&I profits are still relatively strong and could grow even stronger should economic conditions improve. Lithia CEO Bryan DeBoer estimates that this total gross profit per vehicle (including F&I and other income sources) should stabilize somewhere between $4,200 and $4,500 in the coming months, roughly $500 to $1,000 more than before the pandemic.

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