Asbury Automotive Group Inc. is joining fellow public retailer Sonic Automotive Inc. in opening stand-alone used-car stores.
Asbury said it will invest $25 million to open two used-vehicle stores under the "Q auto" brand name: the first in June in Tampa, Fla., and the second in the fall in Jacksonville, Fla. Sonic will open at least one used-vehicle store in Denver in the fourth quarter.
"The pre-owned market is huge compared to the new-vehicle market," said Asbury COO Michael Kearney. "There's this huge opportunity out there."
Asbury executives say the company has demonstrated expertise in its retail used-car business: Unit sales are up more than 55 percent, and gross profit is up nearly 35 percent the past three years. Asbury chose Tampa and Jacksonville because it does well selling used vehicles from its existing stores there.
"We know those locations, know what the stores in those areas are able to do selling used cars," Asbury CEO Craig Monaghan said. "We just put that all together, and we feel quite confident that this thing has got a real shot, and it's worth giving a try."
Asbury will lease an existing building in Tampa. In Jacksonville, Asbury will use a building it owns that currently houses a Toyota dealership, which is moving to a new building a few miles down the road. The locations for the two Q auto stores are about half the size of the 20-acre-plus used-car superstores that AutoNation Inc. operated briefly in the late 1990s, Monaghan said.
Q auto primarily will stock 2- to 5-year-old vehicles, with a mix of mass-market and luxury brands. While Q auto will be separate from Asbury's dealerships, it will have the chance to sell cars that weren't sold at the traditional stores. Asbury currently sends about 30,000 vehicles a year to auctions and will work to move at least a portion of those cars to Q auto, Kearney said.
Asbury executives declined to define a preferred price point or how the stores would differ from those of CarMax Inc., the dominant player in the used-car market.
Monaghan predicted each store will take 18 months to achieve profitability.
Asbury is No. 7 on the Automotive News list of the top 125 U.S.-based dealership groups ranked on 2013 new-vehicle retail sales units.
Sonic, No. 4 on the list, unveiled its used-only store plans last October.
At the time, Jeff Dyke, Sonic's executive vice president of operations, declined to say how many such stores the group eventually hopes to have but did say: "One hundred is the tip of the iceberg."
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