Group 1’s U.S. F&I Operations Achieves Record PVR Average
HOUSTON — Group 1 Automotive posted record earnings in the first quarter, driven by record first-quarter revenues of $2.4 billion — a $172 million increase. The international retailer’s U.S.-based F&I operations also posted an all-time quarterly record in F&I profit per vehicle retailed (PVR), with the group’s top F&I exec attributing the feat to training and execution.
Including its U.S., U.K. and Brazilian operations, F&I revenue increased 13.1% from a year ago to $94.6 million, with U.S. F&I revenues rising 13.3% to $87 million. On a consolidated basis, the group’s per-copy average rose by $72 from a year ago to $1,366. As for the group’s U.S. F&I operations, the group’s F&I PVR increased $80 to a record $1,538.
As for product sales, service contracts lead the way in the United States with a 42% acceptance rate, followed by GAP at 28% and paint sealant at 19%. Prepaid maintenance penetrated at a 10% clip.
“We think that where we are today is a comfortable position for the company,” said Peter DeLongchamps, vice president of financial services and manufacturer relations, during the group’s April 29 first quarter earnings call. “About a third of [our F&I PVR average] is related to lending activities and the remainder is product, which we have increased our penetration rates over the past few years.
“But at the end of the day, it has been training and execution …, the compliance that we have and audit procedures that we have in place help grow the business,” he added. “But there has been a lot of hard work and executive and good team work with our lenders and vendor partner.”
First quarter consolidated net income for the group totaled $35.8 million, with earnings per share climbing 23.5% from a year ago to a record $1.47 per diluted share. The group retailed nearly 40,000 vehicles on a consolidated basis, with U.S. sales accounting for 80.1% of that total. The group’s U.S. operations also accounted for 86.6% of total gross profit.
Revenues in the U.S. market totaled $2 billion, an 8.9% increase from a year ago. The revenue growth was driven by 5% and 10.6% increases in new- and used-vehicle sales, respectively, according to officials, as well as a 5.5% and 13.3% increases in revenues from parts and service, and F&I, respectively.
Asked about any updates regarding the Consumer Financial Protection Bureau’s impact on the F&I business, DeLongchamps said, “I guess the short answer is ‘No.’” He did note that the group rolled out the National Automobile Dealers Association’s fair credit compliance policy and program in the second quarter 2014. The compliance solution allows dealers to document reasons for discounting rate markups.
“We’re continuing work with our lending partners to ensure that we’re as compliant as possible in all of our dealerships,” he said. “So I don’t think there is any new development since the last time we talked.”
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