Though used supply has expanded greatly since post-recession lows, dealer groups were still dealing with tight pre-owned supply as 2014 got underway — perhaps stemming from developments on the new-car side of the business.

During AutoNation’s conference call late last week to discuss Q1 results, president and chief operating officer Michael Maroone explained despite positive used-vehicle sales results during the first quarter, the company was challenged by scarce used supply.

“We had a challenge with tight used vehicle inventory in the quarter, when the new market froze, as a result, our intention turned to maximizing margin, and we are very pleased with the results,” said Maroone during the call, according to a transcript from Seeking Alpha.

At the end of Q1, AutoNation’s used vehicle base supply was 31 days.

He reported that supply challenges, due in part to a slowing of industry new-car sales, increased the need to look for alterative routs for sourcing used vehicles.

“Supply challenge emphasized the need to accelerate initiatives that expand our alternatives for sourcing used vehicles in a strategic manner that consistently drives the right product and the right price at the right time. It is not entirely linked to the new vehicle market,” Maroone said.

These external sourcing initiatives included a “centralized buying team, partnerships with various third parties, and a 'We Buy Your Car' guarantee to offer pilot program that we will launch this summer,” Maroone said.

On the internal side, the company is working on increasing appraisals, winning more trades, reducing third-party wholesale and equity monitoring in the service lane.

Company results showed same store retail used vehicle revenue of $932 million increased $32 million or 4 percent on 51,100 used vehicles retailed, up 600 units or 1 percent with unit volume increases in the premium luxury and domestic segments

Maroone explained this growth offset a volume decline in the import segment.

During the question and answer portion of the call, a participant touched on a similar topic: the used-to-new ratio and whether supply constraints stemming from the new-vehicle cycle would push used volume down in the future.

“I really think that we are going to continue to work hard to source vehicles, so that we are not totally dependent on that new vehicle cycle. I think there is almost unlimited opportunity on the used side, and I don't think we have to give up a ton of margin to get there,” said Maroone.

“It's very different than the new-vehicle business. Every single used vehicle is different, and if we acquire it properly, recondition it to our AutoNation standards and deliver the right experience, I think that we have big time opportunity. So we don't feel constrained and don't want to be constrained from new-vehicle trade, availability and want to supplement that with the things that we talked about earlier,” he continued.

Another key topic in used supply discussion: how much these units are costing.

Maroone was met with another question regarding the outlook for used inventory acquisition costs.

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In answering, Maroone touched on the quantity of off-lease vehicles expected to hit the market in the coming months.

“There are a lot of vehicles coming off lease,” Maroone said.

And many of these off-lease vehicles are in the 3- to 4-year-old range, which Maroone called “a real sweet spot,” for used inventory.

He also explained these vehicles will be a welcome change from some of the high mileage vehicles coming in as trade-ins, as people continue to recover from the 2008 economic downturn and replace their older vehicles. With the average age of vehicles on the road in the U.S. reaching over 11 years, many of today’s trade-ins come with “extraordinarily high mileage,” said Maroone.

 “It’s (off-lease vehicles) a nice complement to what we have,” Maroone said.

He also touched on the fact that CPO business is growing quickly, as well.

“But certified pre-owned business is really growing quickly. For us, certified pre-owned was up 12 percent in the quarter, is up to 32 percent of our sales … The off-leased vehicles had opportunity, and they are coming in pretty good quantity, and we still have the high miles, cheaper inventory that is still in very high demand, and turns very quickly,” he explained.