Asbury Automotive exits its used-only operations

Asbury Automotive Group is leaving the stand-alone used-car store business.

The auto retailer was unable to earn a return on its investment in Q auto and is closing its last two used-only stores. It will now focus its investments on "alternative routes to market" that will deliver higher profits, Asbury COO David Hult said during the company's second-quarter conference call.

But, Hult said, Asbury is still committed to aggressively growing used-vehicle sales at its franchised dealerships.

An Asbury spokeswoman confirmed the company began closing its last two Q auto stores, both in Florida, on Monday. Those stores were Q auto Brandon and Q auto Tampa. The properties will likely be sold and the inventory will be distributed to other Asbury locations, she said. Asbury will try to move employees elsewhere within the company, the spokeswoman said.

Asbury's move comes as its peers expand into used-only dealerships. Penske Automotive Group has bought two used-only platforms, CarSense in the U.S. and CarShop in the U.K., AutoNation Inc. plans to open several AutoNation USA used-only stores this year, including one already open in Houston, and Sonic Automotive Inc. operates six EchoPark stores in Colorado. It plans to build about two dozen more in Texas and the Carolinas this year. It bought AutoMatch USA, which has four used-only stores in Georgia and Florida, that it plans to convert to EchoPark stores by the end of 2017.

Asbury closed its largest Q auto store, in Jacksonville, Fla., last year because it was losing money. At that time, CEO Craig Monaghan told Automotive News that 2016 was the year the Q auto used-vehicle venture must prove itself.

In its second-quarter earnings call Tuesday, Monaghan said the financial impact of shuttering the stores was "immaterial" to Asbury's results, and it will have a minimum impact on future results. He characterized the venture as an experiment.

"We made an investment in an initiative to see if we could attract additional income and it was unsuccessful," said Monaghan.

But, he said, Q auto did offer some lessons.

"It's all about where you source your inventory," Monaghan said. "If you're going to an auction to buy a car, you're the last one with your hand up. That's not a situation we wanted to be in," Monaghan said.

Asbury can move its trade-in vehicles to its stores more efficiently than shuffling them to off-site locations, he said.

The second lesson was that many used-car buyers were subprime borrowers, so without a captive lender, Q auto was at a disadvantage and it did not want to lend money to used-car buyers.

Asbury launched Q auto in mid-2014 to go after used-car sales in a targeted way. Its first store opened in June 2014 in Brandon.

Q auto stores used product specialists to handle sales from beginning to end to make for quick, no-hassle experiences. Customers scanned a code on the car with an electric device to get the car's features and price. Prices were monitored and changed based on market conditions.

Asbury, of Duluth, Ga., ranks No. 7 on the Automotive News list of the top 150 U.S. dealership groups with new-vehicle retail sales of 102,360 in 2016.