Penske Automotive Group has ramped up its supply of “young, used vehicles.”

During a conference call Thursday to discuss the company’s second-quarter earnings results, chief executive officer Roger Penske noted that in an effort to provide service customers on the premium luxury side with loaner cars, the auto group has grown its loaner car fleet to several thousand, which has increased supply of low mileage, late-model units.

“These are very good cars if you get them out with low mileage,” Penske said. “We’ve tried to accelerate that and try to have cars that are anywhere from 3,000 to 4,000 miles max and pull those out. And these are not cars we can’t sell; we just put them into loaner. These are good cars and we know they’ll come out and have good value.”

These cars then become a good way to move a customer that maybe doesn’t want to reach for a new car, Penske said.

“We’ve seen that quite rapid in growth from the standpoint of unit sales in the last quarter, and we expect that to be our offense to the end of the year.

“With the OEMs wanting us to take more of these vehicles, it gives us the opportunity to be able to put them into loaner, and I think that these lease returns also that we’ll get — for example, BMW we have 10,000 coming back just in 2016 — this is the fuel that runs the engine for us on the used-car side,” he said. 

The auto group retailed 52,936 used units in the second quarter (U.S. and international combined), a 6.8-percent increase from the same period last year.

Gross profit per used vehicle came in at $1,697, down from $1,782 a year ago.

Used retail gross margin was 6.1 percent, down from 6.4 percent in the year-ago period. 

More on Q2 performance 

A conference call participant asked if perhaps Penske was driving incremental customers into the dealership as used supply improves.

“At some point, I might be cannibalizing a little bit on my new customer,” Penske responded. “It’s an opportunistic buy for the customer. The good news is, I take that customer, I put him into an almost-new vehicle. I’m going to get that parts and service, and if it’s a lease I’m going to get the opportunity to get that car back.”

Takata impact

Penske noted that about $57 million of the group's U.S inventory right now is on a stop-sale related to the ongoing Takara airbag recall situation. A conference call listener asked if replacement airbags are expected to arrive in large numbers anytime soon (i.e., third or fourth quarter) to give a bump in used-vehicle sales.

 “We have to focus on customer cars and then we would focus on cars in inventory. … The good news is, some of the vehicles we have on stop-sale are very good used cars, and I think that’s had some downward impact in our used-car business, at least in BMW here at least in the last 60 days, but I see that flowing out,” Penske said.

“The only risk that I think we have is if everyone decides to wholesale these cars into the market instead of retailing them, there may be some value deterioration,” he said.

He pointed out that company is looking at a 0.85 to 1 used-to-new ratio

“Look at BMW: I’m over 1-to-1 used-to-new," Penske said. “So we see that as an opportunity not as a risk.”

Overall, the company recorded a record quarter with retail unit sales, revenue, income from continuing operations and earnings per share among the milestones.