Those factors mean the nation’s biggest dealer groups, particularly those with lots of import stores, are not suffering like the Big 3.
Except for AutoNation, the large dealer groups reporting last week all had higher third-quarter profits than the year-ago period. They all were in the black.
Lithia Motors Inc., in Medford, Ore., reported record sales and earnings for the quarter. So did Group 1 Automotive Inc. in Houston and Detroit-based UnitedAuto Group Inc.
Incentives help Lithia
Lithia Chairman Sid DeBoer and other big dealers said the incentives hurting Big 3 profits were an indispensable boost to their business.
“Support from the manufacturers is almost unequaled in any other industry. That’s one reason why our earnings have held up so well,” he said.
Lithia had net income of $7.7 million, up 2.7 percent compared with the year-ago quarter, an improvement, since Lithia earnings were down 16.6 percent year to date. UnitedAuto had a profit of $13.5 million, up 20.5 percent. Group 1 Automotive earned $16 million, up 37.9 percent. But for No. 1 AutoNation, net income fell 14.9 percent to $79.2 million. One reason for that is, because of its size, AutoNation is not adding dealerships as fast as the smaller chains. Also, AutoNation President Mike Maroone pointed out, AutoNation got 61.6 percent of its revenues from domestic brands for the quarter.
In contrast, UnitedAuto got 66 percent of its revenues from import brands in the quarter, Chairman Roger Penske said. Penske said October sales were “gangbusters,” with traffic generated by advertising for 0 percent interest loans. “We’re seeing it (traffic), even in brands where 0 interest is not available,” he said.
Executives for the big dealer groups said last week 0 percent interest loans, introduced in the second half of September, eliminate the dealers’ share of the interest-rate profit on auto loans.
‘Thrilled with zero’
But dealers are making up for it by selling more extended service contracts and by selling finance and insurance products to would-be cash customers who are taking loans through the dealer instead.
Lithia said it had the highest F&I revenue per unit sold of any public chain, at $934, up 9.6 percent. “You never lose volume pushing F&I,” DeBoer said.
AutoNation said its F&I revenues per vehicle increased to $723, compared with $579 a year ago.
“We’re thrilled with what zero has brought to the table,” Maroone at AutoNation said.
He said that even on a 0 interest contract, captive finance companies are paying dealers a fee of $100 to $175 per contract, which lessens the effect.