AutoNation prefers acquisition to create captive finance company

AutoNation CEO Mike Manley says the public retailer would rather create a captive finance company out of an institution it acquires.

"If there is the right target in the marketplace, that would be by far my preferred route to do it," Manley said during an April 21 earnings call.

But he said that while "interesting" opportunities existed, AutoNation wouldn't rush a decision.

"You will absolutely hear more on this subject as the year develops," he said.

Manley described his thoughts as "certainly solidified" regarding launching a captive, a topic he had mentioned in the previous earnings call in February.

"I view it as an important piece of the business for us going forward for our AutoNation USA stores," he said.

Manley, the former Stellantis Americas head, said AutoNation's franchised dealerships had "vitally important" relationships with automakers. But he said the growing used vehicle-only AutoNation USA needed the flexibility of an internal captive finance company.

Such a captive wouldn't try to absorb the entire book of used business itself, Manley said.

AutoNation would continue to work with lenders who supported its prior growth, Manley said.

"I expect that to happen going forward," he said.

For now, Lithia Motors is the only one of the six major public dealership groups to own a captive — Driveway Finance Corp.

Lithia on April 20 said Driveway Finance became its No. 1 lender during the first quarter, with a 6.2 percent penetration rate, and it expected to report a penetration in the mid-7 percent range for the year.

Lithia also projected the captive would for the full year have a $1.7 billion loan portfolio and serve a mix of about 70 percent used vehicles and 30 percent new vehicles.