Presented by:
Hey everyone,
Quick reminder! The poll at the bottom of every newsletter helps shape what we cover, how we cover it, and where we spend more time digging in.
So if something hit, missed, felt too long, too short, or sparked a thought…let us know.
— CDG
First time reading a CDG Newsletter?
Welcome to the Market Pulse—your cheatsheet to auto retail, built to help dealers price right, stock smart, and stay ahead.
Front-end gross is recovering, just not fast enough: Q1 marked the first three straight months of gains since 2021, but year-over-year it's still running well below last year's pace.
F&I income is filling the gap front-end gross isn't: Per-vehicle retail income finished Q1 ahead of last year, making it the primary profit buffer for dealers.
Dealers are restructuring F&I comp and process to keep that income reliable: This includes enforcing full menu presentations on every deal and tying pay directly to what managers actually produce.
(Source: JM&A / Daily Dealer Live)
F&I income is becoming the primary stabilizer of dealership profitability.
Looking at Q1 2026, F&I income per vehicle finished ahead of last year, despite a slow January, according to a recent JM&A report drawn from 1,700+ dealerships nationwide.
February and March recovered, though, with PVR climbing back above Q1 2025 levels.
Adding to the wins: Front-end margins improved month-over-month all three months in a row (Jan +107.1%, Feb +7.3%, Mar +8.0%), the first time that's happened in any three consecutive months since 2021.
That said, three good months are just that. Good months. Looking at the year-over-year gap, front-end PVR is still running well below its Q1 2025 level.
Put another way: As long as tariffs, higher vehicle prices, and record monthly payments keep squeezing buyers, running a clean, fast F&I experience will remain a huge part of what staying profitable looks like right now.
NOTE TO DEALERS:
F&I PVR is expected to remain relatively stable through the rest of 2026, but that stability will require an intentional effort to capture demand out there.
Try starting here:
Audit your menu presentation rate before anything else. Who is being shown the menu? How often? Why/why not?
Then establish how frequently that % should be reviewed.
Everything that comes after that can't be tackled without 100% alignment on this first.
Protection product penetration is rising as loan terms continue to lengthen.
All three major protection categories (GAP, VSC, and products per deal) finished Q1 ahead of or on par with last year's pace, according to JM&A's Q1 data.
One reason why: Loans past 84 months now make up 22.9% of all financed new-vehicle purchases. Average monthly payments hit a record $773 this quarter.
Longer loans, bigger payments, more exposure.
Still, demand being there doesn't mean it converts itself. What varies store to store is whether the F&I team is having a real ownership-cost conversation or just reciting the menu without tying it to the real-world context.
WHY IT MATTERS:
Dealers leading with specifics, such as what a transmission replacement actually costs today and what happens when a car gets totaled while the customer is still underwater, are converting more consistently than those leading with product names and monthly costs.
A quick word from our partner
Smarter data drives smarter growth.
In today’s hyper-competitive auto market, precision is everything.
Experian Automotive’s Marketing solutions help dealers, OEMs, agencies, and aftermarket brands pinpoint in-market and near-market shoppers, strengthen owner loyalty, increase service revenue, and outmaneuver competitors.
Activate over 1,000 syndicated automotive audiences across over 30 platforms — and enrich them with over 3,500 vertical, demographic, lifestyle & interest, and behavioral audiences.
When I got to thinking about F&I tactics we've heard of here at CDG, Scott Pharr, COO of Leo Auto Group (formerly P4 Automotive Group), came to mind almost immediately, given that he was on Daily Dealer Live just the other day.
Here are his dos and don'ts from the ground right now:
Pharr said deals were being quietly screened out of the F&I process before a menu was ever presented, which didn’t sit right with him.
His POV: "If you're presenting a service contract to every single customer that comes through the box, regardless of the salesperson that says they're not going to buy anything or the desk that says 'just spin the deal and get them out'—if you do a full menu presentation on every deal, you're just going to sell more products."
Scott Pharr
Since implementing: The percentage of buyers who purchased a vehicle service contract climbed from 40% to 58.4% across the group, and F&I income per vehicle retailed jumped from $1,764 to $2,539.
Do: Build the pay plan so F&I managers earn the majority of their income from what they actually produce.
Before Pharr changed the structure, Leo Auto Group's F&I managers were paid a high flat percentage of total F&I gross, meaning their paycheck came in regardless of which products they sold or how hard they worked to present them. The only bonus on top was tied to overall product volume, with no specific focus.
"My target is 70% of the manager's comp comes from what they kill in finance,” he said, later adding, “We were just blunt — this is what we're doing, and this is the new direction. This is going to help us move our volume."
As a result, F&I managers who previously struggled to consistently earn above their guaranteed draw are now taking home larger paychecks than before simply because the volume and penetration increases more than offset the lower base percentage.
Don’t: Let front-end and back-end gross drift in opposite directions without actively managing both.
With an increased focus on F&I income, Pharr said some stores started seeing their front-end gross go sideways because managers were holding firm on F&I but giving away too much on the deal to get to the box.
"Would I take a $250 lower front-end gross to have a $700 or $800 higher back end and run that risk of the guaranteed gross versus padding pay plans? I will. I'm willing to do that."
His broader point: Letting front gross erode indefinitely creates s a gap that compounds over time, especially when F&I income fluctuates with lender conditions or product penetration dips. That’s why he believes the goal should be to grow both, not trade one for the other permanently.
Buyer demand for protection products is there. The data makes that clear.
The only question is whether your team is set up to capture it, because with front-end gross not bouncing back meaningfully, being on the wrong side of that question is an expensive place to be.
The latest updates to the CDG Buy/Sell Tracker.
