MEDFORD, Ore. — Executives with Lithia Motors Inc. held a conference call Wednesday to share fourth-quarter results with investors and analysts. President and CEO Bryan DeBoer reported gains in sales, revenue and profitability, including spiking penetration rates for F&I products.
DeBoer also made clear the company will continue to follow the “significant acquisition cadence” that reached a crescendo with the June 2014 acquisition of DCH Auto Group. Now the nation’s fifth-largest auto retailer, Lithia counted 150 rooftops at the close of the fourth quarter.
“We remained focused on growing new-vehicle unit sales,” DeBoer said, saying the strategy has paid off in stronger factory relations and new opportunities in the pre-owned and fixed-ops segments. “While this may result in slightly compressed margins and incremental selling expense, it will reward us with greater organic and acquisition growth potential in the future.”
Lithia’s executive vice president, Christopher Holzshu, said the company employed 12,000 people at year’s end, nearly triple the workforce it had in 2010. Among the new hires in 2016 were about 400 managers.
“Our culture attracts the top managers in the industry; those who achieve high performance while striving to become more independent,” Holzshu said.
DeBoer said 60 Lithia stores achieved record profitability in the quarter, contributing to year-over-year increases in new-vehicle revenue (4%), unit sales (2%), and average selling price (2%). Used-vehicle revenue increased by 11%, with 10% attributed to more sales and the balance to higher prices.
The group set a new company record in F&I profit per vehicle retailed, averaging $1,295 per copy during the fourth quarter. That beat the year-ago mark by more than $100. DeBoer noted that penetration rates for F&I products were up across the board. In the fourth quarter, Lithia dealers arranged the financing for 73% of customers, sold a service contract to 45%, and sold lifetime oil to 26%.
Noting that the group’s margin on new and used sales had declined over time, an analyst asked DeBoer if Lithia was relying on F&I to offset lower front-end profits on the sale of used and new vehicles.
“I think the idea of front-end gross average being offset by F&I improvements is a model that we like to be able to gain market share,” DeBoer answered. “So our focus is to continue to attack margins to create more units that give us more trade-ins and create more service business for the long term.”
Originally posted on F&I and Showroom