Penske Automotive Group Inc. reported record profits in the second quarter and said it will expand its online sales pilot program, known as "Preferred Purchase," to more stores in the third quarter.
Penske launched Preferred Purchase in March on the websites of five Florida stores and six Washington, D.C.-area stores. Penske has 244 dealerships.
Penske is rolling out Preferred Purchase to nine stores in Texas and will add it to its five stores in Atlanta later in August.
Preferred Purchase enables customers to handle most of a transaction online, which trims the time spent in a store. It also improves pricing transparency, Penske says, by allowing a customer to research vehicles, start a purchase or complete most of the purchase from home.
The closing ratio at the 11 Preferred Purchase stores is now 20 percent, or "two-and-a-half times more than what we had on our normal Internet leads," Chairman Roger Penske told Automotive News.
"Transactions are significantly shorter in timeframe, and it's streamlined the sales [research] process to below one hour. So it's achieving the impact we want."
Penske, the second-largest U.S.-based dealership group, reported that second-quarter net income rose 29 percent driven largely by a high volume of vehicle sales and a solid performance in all business segments. Revenue increased 12 percent to $4.90 billion.
But the gains hid dips in per-vehicle gross profit, offset by higher volume.
Retail sales volume rose 7.5 percent to 108,277 units. The company retailed 58,758 new vehicles, up 6.3 percent, and 49,519 used vehicles, up 8.8 percent.
On a same-store basis, retail revenue increased 6 percent to $4.5 billion. But gross profit per new vehicle dropped 4.3 percent to $2,992. Gross profit per used vehicle fell 10 percent to $1,780.
Penske's same-store retail sales of new units rose 5.7 percent, to 58,191, beating the 3.3 percent gain in U.S. industrywide light-vehicle sales for the quarter.
About 72 percent of the products Penske sells are luxury vehicles. Penske said per-vehicle margins suffered because of limited inventory for some of those brands. In contrast, he said, there was more availability in the high-volume import brands.
"The average premium luxury gross profit is twice what it is on a volume brand. So I can sell half the number of cars in premium and generate what you have to do two times on the volume side," Penske said.
"That's obviously going to have some impact because of availabi-lity."
He said good margins on Land Rover and Porsche sales help stave off a bigger margin decline.
"I take my hat off to my management team as they managed through, maintaining growth," said Penske.
"It's market-to-market and mix that make a big difference."
Penske Automotive ranks No. 2 on the Automotive News list of the top 150 U.S.-based dealership groups, with retail sales of 216,462 new vehicles in 2014.