AutoNation to Cut Spending on Third-Party Lead Providers
FORT LAUDERDALE, Fla. — AutoNation reported record F&I gross profit per vehicle retailed, with the dealer group’s F&I operations now averaging $1,401 per copy. The gain in back-end profitability, along with strong performances in used- and new-vehicles sales as well as parts and service, drove a 10% increase in third-quarter revenue from last year.
AutoNation President and COO Mike Maroone told callers during a quarterly earnings conference call Tuesday that the increase in F&I profit — up $51 from a year ago — is “almost totally driven by product penetration.”
“Our finance reserve is less than $500 of the $1,400,” he said, noting that the group has narrowed down its F&I product lineup. “And we continue to make really good progress in really presenting customers with value-added products.”
Mike Jackson, AutoNation’s chairman and CEO, also commented on the attention the Consumer Financial Protection Bureau is paying to subprime auto financing. Over the summer, about the time major newspapers like The New York Times raised concerns about a possible subprime auto bubble, the bureau began issuing subpoenas to finance sources, requesting documents related to subprime auto loans.
“People are paying off their car loans at record levels of reliability,” he said, noting that there isn’t overdependence for subprime financing in the new-car market. “Even though the average loan is 63 months, they’re being paid off in less than 40 months. So the car payment remains their first payment made in the household.”
He added that the group has not received any updates on the CFPB’s plans going forward, noting, “We’re also just as diligent on the compliance side because we want to make sure it’s done right and are really pleased with our total efforts in customer financial services.”
The executive also offered an update on its digital drive, saying that AutoNation will launch Smart Choice pricing starting in the South Florida market in December. “That will be very close to a no-haggle pricing as you can get very little negotiation in,” he explained.
Back in April, the group put third-party lead providers on notice; officials saying during the group’s first-quarter investor call that they were considering shifting AutoNation’s digital marketing investments away from third-party lead providers and toward its own website.
“We think that’s where you need to be in the marketplace,” Jackson said on Tuesday. “And we think we have a tremendous advantage over the [third-party sites] like Edmunds in that they attract traffic to their sites … then they sell that customer to multiple dealers which then results in quite a bit of negotiation in haggling.”
He added that the group would also enjoy a better handoff between its site and stores. AutoNation plans to cut spending on third-party lead providers each quarter in order to invest in the company’s own online presence.
Maroone added: “… We’re really trying to gage results measuring everything we do and are very pleased thus far.”
Also during the call, the dealer group reported a third quarter net income from continuing operations of $107 million, or $0.90 per share — a record 20% improvement on a per-share basis over the same quarter last year. Revenue totaled $4.9 billion, up from $4.5 billion in the year-ago period, while retail new-vehicle unit sales increased 9% overall and 7% on a same store basis. As for used vehicles, sales increased 7% overall and 6% on a same store basis.
Additionally, AutoNation completed its acquisition of Seattle’s Mercedes Benz of Belleview, Barrier, Audi, Barrier Porsche and Barrier Volvo during the quarter. The group will also open a new Porsche franchise in Orange County, Calif., which is expected to open in 2016. Expected revenues for the new store are expected to be approximately $100 million.
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