The finance and insurance departments at America’s largest dealership groups have emerged as powerhouse profit centers, collectively generating over $1 billion in revenue for the first time. This milestone underscores a fundamental shift in how dealerships make money in an evolving automotive retail landscape.
According to Automotive News‘ latest analysis of the top 100 dealership groups, F&I operations contributed a staggering $1.09 billion to their bottom lines in 2023, representing approximately 30% of total dealership profits. This marks a 7.8% increase from the previous year, continuing a steady upward trajectory despite challenging market conditions.
“F&I has become the critical profit center for modern dealerships,” explains Jessica Morgan, automotive retail analyst at Morgan Stanley. “While new vehicle margins have compressed in recent months, finance products consistently deliver high returns with minimal overhead costs.”
The average F&I revenue per vehicle sold across these top dealerships reached $2,436, up from $2,258 in 2022. This growth comes despite overall vehicle sales volume remaining relatively flat year-over-year, highlighting improved per-transaction performance.
AutoNation leads the pack with $132.4 million in F&I revenue, followed by Lithia Motors at $118.7 million and Sonic Automotive at $89.3 million. These top performers have implemented sophisticated digital sales processes that seamlessly integrate F&I products into the customer journey.
The surge in F&I profitability stems from several converging factors. Rising vehicle prices have increased loan amounts, creating opportunities for higher-margin protection products. Additionally, persistent vehicle shortages have shifted consumer mindsets toward protecting their investments with extended warranties and maintenance plans.
“Consumers are holding onto vehicles longer and financing larger amounts,” notes Federal Reserve economist Thomas Williams. “This creates natural demand for products that mitigate long-term ownership risks.”
Technology has played a pivotal role in this transformation. Advanced menu-selling systems now use customer data to tailor F&I offerings, while digital platforms allow for smoother product presentations. The J.D. Power Dealer Financing Satisfaction Study found that 72% of consumers prefer interactive digital explanations of F&I products compared to traditional paper-based approaches.
However, this profit center faces mounting regulatory scrutiny. The Consumer Financial Protection Bureau has intensified investigations into dealer markup practices, while the Federal Trade Commission recently implemented stricter disclosure requirements for add-on products.
“Dealerships must balance profit maximization with regulatory compliance,” warns consumer advocate Elizabeth Chen of the National Consumer Law Center. “The most successful groups are investing heavily in compliance training and transparency initiatives.”
The industry is also witnessing a shift in product mix. GAP insurance and vehicle service contracts remain staples, but newer offerings like appearance protection packages and subscription-based maintenance plans are gaining traction, especially among younger buyers.
Data from Reynolds and Reynolds shows that dealers achieving the highest F&I penetration rates have embraced value-based selling approaches rather than high-pressure tactics. These dealers report customer satisfaction scores 18% higher than those using traditional methods.
Looking ahead, industry experts project continued growth in F&I revenue, albeit at a more moderate pace. “We anticipate 4-5% annual growth through 2026,” predicts automotive economist Michael Harrington from the Center for Automotive Research. “However, dealerships will need to adapt to emerging challenges, including rising interest rates and potential regulatory changes.”
The rise of electric vehicles presents both challenges and opportunities for F&I departments. Traditional profit centers like extended powertrain warranties become less relevant with EVs’ simpler drivetrains, but new products addressing battery performance and charging infrastructure are emerging.
“EVs require a complete rethinking of the F&I product suite,” explains Jennifer Prescott, F&I director at Lithia Motors. “We’re developing specialized offerings that address unique EV ownership concerns, particularly around battery longevity and charging infrastructure access.”
For consumers, the emphasis on F&I products translates to more persistent sales pitches in the finance office. Consumer Reports surveys indicate that 64% of recent car buyers felt pressured to purchase add-on products they didn’t initially want.
“The key for consumers is preparation,” advises Thomas Richards, automotive finance specialist at Consumer Reports. “Understanding which F&I products provide genuine value for your specific situation before entering the dealership can save thousands.”
As dealerships continue refining their F&I operations, the balance between profitability and consumer experience remains delicate. The most forward-thinking groups are investing in transparency initiatives, including upfront pricing and digital product explanations accessible before the dealership visit.
“The future of F&I isn’t just about selling more products—it’s about creating genuine value propositions that resonate with today’s sophisticated consumers,” concludes Morgan. “Dealerships that master this approach will continue seeing F&I growth even as the automotive retail landscape evolves.”
