HOUSTON, Texas -

After slimmer gross profits per unit on the used-car side in the third quarter, Group 1 Automotive is forecasting relative stability in its used-vehicle margins going forward.

Though this is an area in which the retailer said it would like to improve, management did offer one projection that may prove beneficial in coming months: stronger lease returns.

Starting with the actual figures, gross profit per use vehicle retailed in the U.S. was $1,618 in the third quarter, down 2.4 percent year-over-year.

When including results of U.S. and international operations, it was at $1,592, down from $1,682 in the third quarter of 2012.

As for same-store results, gross profits per unit were at $1,628 per used vehicle retailed, down 4.3 percent year-over-year.

In the U.S., the gross margin percentage for used retail sales was 8.1 percent in the third quarter, down from 8.3 percent in Q3 of 2012.  Including U.S. and international operations, used retail gross margin percentage was at 7.7 percent, down from 8.2 percent a year earlier.

During the company’s third-quarter earnings conference call, executives from Group 1 were answering a question from an analyst about the impact of lower used-car prices in the U.S. 

The analyst asked whether lower prices would lead to an opportunity to boost used gross profit per unit or simply result in stronger sales, with margins remaining stable.

“I expect the used margins will remain somewhat stable. I would like to see us do a little better than we did in the quarter. I think we were moving some units out at retail at lower margins. So, we didn't need the wholesale,” said Earl Hesterberg, according to a transcript of the call from Seeking Alpha, which can be found here:  http://seekingalpha.com/article/1771142-group-1-automotive-management-discusses-q3-2013-results-earnings-call-transcript.

 “But I think we can do a little better than that,” he added. “But I expect it to be stable.”

Hesterberg would point out the projections for a 1.5-percent overall used price decline in coming months, noting that it is “fairly typical, due to seasonality.”

John Rickel — the company’s chief financial officer, chief accounting officer and senior vice president  — then pointed out that what “potentially helps us going into next year” is that a stronger crop of off-lease units beginning to flow in.

“And those tend to be good, used car pieces for us; they’re low-mileage, later-model, great for the CPO business. So, I think there is some potential going into the next year that we get some benefit from that.”
 

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