With Penske’s release this morning, all seven publicly traded dealership groups (CarMax, AutoNation, Penske, Sonic, Group1, Asbury, and Lithia) have posted third quarter results.*
As expected, same-store retail used unit volumes rose for the 25th consecutive quarter.
But, also as expected, the average gross margin earned on those sales continued to narrow.
Increased operating efficiencies, higher throughput, and solid F&I income enabled dealers to continue to make record profits despite the lower margins. View the narrower used vehicle margins as a sign of a competitive industry passing on some of its efficiency gains to consumers.
More troubling is the decline in new vehicle margins, which started at a lower level and have fallen even faster. Remember, unsustainably low new vehicle margins are generally a precursor to increased manufacturer incentive activity, which, in turn, negatively impacts dealership used vehicle operations.
* Note: CarMax’s fiscal year reporting is shifted forward one month for this analysis.