When Penske Automotive Group hosted its third-quarter earnings call this week, chairman Roger Penske had some pleasing news.

Used gross profit per unit in the U.S. was up by $179, he said — “and that’s across all brands.”

When asked during the Q&A portion of the call what was driving that kind of performance, especially compared to what other public dealer groups have reported, Penske cited the company’s “second channel”: young used cars.

“We have decided that because of CSI requirements, we probably have it at one of our premium brands, maybe almost 3,000 loaner cars. But we have decided to turn those quicker and we get benefits for putting them in a loaner,” Penske said. “We get the discount, then we depreciate those for two or three months. And we have got a vehicle that we can lease to a customer for $60 or $70 less than a new one. They get all the warranties and everything else with it.

“So we found that to be quite good for us from an offense perspective, and we have seen that be very successful in the premium side.”

Penske’s certified pre-owned business is up, too, he said, with sales of certified pre-owned representing about 40 percent of used unit sales in the U.S. during Q3.

Penske also touched on some of the benefits of off-lease.

“We are seeing a lot of cars coming off lease,” Penske said. “That’s going to grow slightly next year. We think that’s good because the manufacturers have to take these to market. There will be some hit that they will take, because as you have seen the shift from cars to SUVs, the cars have probably taken a bigger hit on residual value. So when they wrote those leases 27 months or 36 months previously, they probably had to take some impact.

“But they are going to provide us with very good used cars. They give us the ability to certify those,” Penske said, adding that it’s allowed them to grow their used-to-new ratio.

“So to me, the benefit we have is that we have already started to receive these vehicles during the last, I would say, 12 months. And our teams are committed to grow the used-car business,” he said. 

Penske talked about the benefit of used units that the company has sold and leased in the past.

“They are offered to us first before they go to auction. So typically, we know these cars. We have the service records in-house,” he said. “It will give us a chance to be able to take those and certify them and put them into the used market.

“So overall, I think it’s important to know that the leasing is done mostly through the captives, which makes a big difference. So we get them to give us those vehicles back, and now they have some leasing programs even on the cars that they have leased and we re-leased to our used-car customer.”