The publics have been announcing their second quarter results in this last week. One thing I noticed is the growing importance of used car sales to the bottom line. Sonic Automotive saw sales at its stand-alone pre-owned car sales Echo Park stores surge 80 percent. Sonic plans to expand the Echo Park network. Meanwhile, Penske Auto Group saw used car sales rise 25 percent and AutoNation announced it is launching a stand-alone used car network named AutoNation USA.
As new car sales slow, dealerships are going to have to lean more heavily on other sources of income, including used cars. But keeping margins high in the pre-owned segment may be difficult as the supply is flooded by cars coming off lease. At least a lot of U.S. drivers are tooling around in really old cars – the average age of cars on the road is close to 12 years. Lightly-used pre-owned models are starting to look really sexy to consumers.
(As an aside, second-hand cars are also a growing topic of interest in China, another market I follow closely. As in the U.S., new car sales are slowing so dealers are looking for other sources of income. The market there is far from mature, however. They can use some expert advice, I’ll wager.)
This week we have a profile of Family Motors, a group in California’s Central Valley. Jose Arredondo, the owner, says “it’s not about the money” now, and that he is more focused on serving his community. But I think he is still having just as much fun doing deals.
Also this week, Ken Rosenfield gives you some nuts-and-bolts advice about how to take a potential acquisition that has some flaws and turn it into a winner.
Then there’s Transaction News.
Enjoy!
