WEEKLY F&I REPORT: Public retailers' F&I revenues rise as service contracts carry load | Why Sonic puts a priority on service contracts | Ally says Chrysler pact's end won't affect dealers

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WEEKLY REPORT May 2, 2012 Tell a colleague about this newsletter         Contact Us            Public retailers' F&I revenues rise; service contracts still the workhorse The six large public new-car retailers saw higher F&I revenues in the first quarter than they did a year earlier. And for all the dealership groups, F&I revenues were a major contributor to gross profits overall. ...  story  Q&A Why Sonic puts a priority on service contracts When it comes to F&I products, it's tough to beat service contracts for value -- both for dealerships and their customers, says Richard O'Connor, vice president in charge of finance and insurance at Sonic Automotive Inc. ...  story  Ally: Chrysler pact's end won't affect dealers Chrysler Group dealerships likely won't feel any immediate impact from Chrysler's decision not to renew its subvented lending contract with Ally Financial next year, and they might not notice much change even then, says Ally President William Muir. ...  story  DealerTrack's Papageorge to lead F&I Week session on lending DealerTrack’s Strati Papageorge will kick off the second webinar during Automotive News F&I Week next month. Papageorge will lead a session called “Show Me the Money! Best Bets for Structuring a Deal That Will WOW the Lenders.” ...  story            F&I BY THE NUMBERS Asbury posts biggest gain in F&I revenue Among the six publicly traded new-car dealership groups, Asbury scored the biggest percentage increase in F&I revenue per vehicle in the first quarter compared with a year ago. Q1 2012 Q1 2011 Change Asbury $1,157 $1,017 14% Sonic $1,054 $952 11% Group 1 $1,175 $1,068 10% AutoNation $1,210 $1,132 7% Lithia $1,060 $1,014 5% Penske $981 $964 2% Source: Company reports   JAMIE LaREAU Get ready to pitch more cash-strapped buyers   Jamie LaReau covers auto dealers for Automotive News If I were a finance and insurance manager, I'd mentally prepare to pitch products to more customers with a low credit rating and low income. Not that there won't be more high-end folk, too. But based on what some large retail groups were saying last week, two trends are on the horizon: • There is slow but steady growth in subprime lending. • Some dealers are forgoing extras when reconditioning trade-ins to keep the price down for low-income customers. At Lithia Motors Inc., CEO Bryan DeBoer says there is plenty of opportunity to increase subprime lending. Presently, subprime lending makes up about 15 percent of the overall market, DeBoer says. The normal level should be 20 to 25 percent, he adds, noting that subprime lending was 25 percent of the overall market pre-recession. "We're seeing new banks enter the market all the time that were not present in 2008," DeBoer says. "We're seeing those banks interested in doing business with us again in 2012." At Lithia, subprime lending accounted for 15 percent of finance deals in the first quarter compared with 12 percent a year earlier. Meanwhile, Sheehy Auto Stores CEO Vince Sheehy says he is relaxing his inspection standards on some used vehicles to make them more attractive to low-income customers. For example, Sheehy says he might forgo adding new tires to a used car, thereby whacking hundreds of dollars off the price of the car. These trends mean more customers. And that means more opportunities for finance managers to make money -- if they know how to pitch to people without a lot of discretionary cash. JIM HENRY Beware the tax refund come-on   Jim Henry is a special correspondent for Automotive News A flip through online advertising confirms that some dealerships still can't resist energetic come-ons inviting consumers to put their tax refund down on a car. That could be OK for consumers who can truly afford it. But if tax-refund time is the only time all year a car shopper can afford to make a down payment, in the long run dealers and lenders who overdo it could be calling down lightning from the Consumer Financial Protection Bureau. The trouble could come as an extension of a CFPB crackdown on so-called refund anticipation loans. An RAL is a short-term, interest-bearing loan made to consumers anticipating a tax refund. The idea is that some people can't afford to wait for their refund checks. But refunds have gotten a lot faster, especially for electronic filers. The CFPB is putting a spotlight on RALs, payday loans and car-title loans. So dropping RALs could be a way to avoid possible regulation. At least one big practitioner in the RAL business has dropped out. Tax preparer H&R Block ended the loans for this year's tax season, although it offers "refund anticipation checks" instead. The company cited faster refunds due to electronic filing as a reason for dropping RALs. Most franchised new-car dealers are probably smart enough not to advertise deals based on these types of loans. But for those who haven't gotten the message, or use tax-refund come-ons at their buy-here, pay-here operations, be aware. The CFPB may try to put you under the microscope. Dealers who target consumers anticipating tax refunds may get more than they bargained for. COMMENT: DAVE GUILFORD Why does it take so long to close a deal? In the space of about six weeks this winter, my wife and I bought two new cars. The reason for this splurge was exactly what industry watchers have predicted: Old, wheezing cars eventually need to be replaced. The shopping process was pretty painless. ...  story  F&I PRESS RELEASES » Missouri Attorney General Koster reaches $60,000 settlement with vehicle extended service contract seller » Get 1.49% APR* Financing with PenFed's 'One Stop' Auto Shop Purchase Programs » Credit Write-offs Lower By 50% from 2009, and New Credit is at Highest Point Since 2008, Equifax Reports » Ally Financial Reports Preliminary First Quarter 2012 Financial Results     F&I BY THE NUMBERS As Chrysler pact winds down, a look at Ally's auto lending business Ally Financial got word from Chrysler Group last week that the automaker won't be renewing the parties' subvented retail lending contract when it expires next April. Chrysler has said it's talking with other financial institutions as well as Ally. Ally has said it still hopes "to play a significant role" with Chrysler dealers. Meanwhile, General Motors accounts for about a third of Ally's retail finance business. Ally is the former GMAC, once GM's captive finance company. Here's a look at Ally's originations at the end of the first quarter. U.S. consumer originations Q1 2012 Q1 2011 GM, new-vehicle loans Subvented 18% 16% Standard 16% 28% GM subtotal 34% 44% Chrysler, new-vehicle loans Subvented 5% 4% Standard 11% 9% Chrysler subtotal 16% 13% New loans (not GM or Chrysler) 6% 4% Leases, all brands 17% 19% Used 27% 20% Total 100% 100% Source: Ally Financial >> Unsubscribe from this newsletter                        Copyright © Automotive News                        Designed by Templatesbox.com Automotive News is located at 1155 Gratiot Ave., Detroit, Michigan, 48207