Asbury ‘Story’ Revolves Around Used-Car Department
During his recent presentation at the JP Morgan Auto Conference, Scott Krenz, senior vice president and chief financial officer at Asbury Automotive Group, stressed the importance of the pre-owned department to the dealer group’s overall success. According to Krenz, “It’s not about new cars. It really is a story about used cars and parts and service.”
During the presentation, Krenz explained that this focus on used cars is what sets them apart.
“Used cars though is probably for us, one of the most exciting opportunities we have. Everybody comes to Asbury, they look at public retailer, you own car dealerships, it’s all about new cars,” Krenz said, according to a quote published in a presentation transcription of the dealer group’s by Seeking Alpha that can be found at:
This assertion comes on the heels of used-car success in the second quarter. This past quarter, actual used sales were up 22 percent year-over-year, coming in at 17,703, compared to 14,496 sold during Q2 of last year.
With total revenue increasing by 16 percent to $1.3 billion for Q2, used-vehicle retail revenue soared past 2012 levels by 25 percent with gross profit up 20 percent.
At the JP Morgan Auto Conference, Krenz stressed used-car department growth once again, noting that the company has “continually improved the number of vehicles that we sell," planning to move last 2012’s total used sales number of 57,000 up in the coming years.
“We have an internal goal of being what we call 1-to-1, which is for every new car we sell we want to sell a used car. We are making great progress towards getting that, the numbers move from about 0.6-to-1 until now, somewhere between 0.7-, 0.8-to-1,” Krenz said.
So, what sets the used-car department apart?
Of course, Krenz said, “we get a gross on the used car,” but that may not be the most influential aspect to the pre-owned department.
“The difference is that this gives you an F&I transaction to talk about here as well as this car generally has money. And when we take a used car in, we recondition that car. We will put roughly $1,000, new tires, make sure the brakes are done, whatever,” he said. “That business, that reconditioning is booked in the inventory at the full margin of that business and when we sell that car, we recapture all of that.”
And if the used-car department is contributing to healthy F&I and service department numbers, the trend was definitely evident in Q2 results.
F&I revenues were up 27 percent from 2012 levels during Q2, while parts and service gross profit was up by 14 percent.
And reaching higher than normal, same store parts and service gross margins rose to come in at 61.3 percent during the second quarter.
“So essentially it (used-car department) keeps our service stores still and about 20 percent of our fixed operations of parts and service business is related to our used car business. It’s a huge opportunity here and the one that goes beyond the confines of the manufacturer,” Krenz concluded.
Sarah Rubenoff can be reached at srubenoff@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.
