AutoNation posts a 15% increase in total profits in the third quarter of 2012

Article by Christian Andrei, on October 26, 2012

AutoNation Inc. experienced a 15% increase in total profits in the third quarter as higher volumes and record finance-and-insurance income offset a declining new-vehicle margin. AutoNation, the largest retailer in the U.S., posted a net income of $81.6 million in the third quarter. This is higher than the $70.7 million reported during the same period last year.

The operating income increased by 14% to $163.7 million. The revenue increased by 12% to $3.9 billion, mostly driven by a 21% increase in AutoNation’s retail new-vehicle unit sales. CEO Mike Jackson said that its profitability rose in all four of AutoNation’s business sectors, which include new vehicles, used vehicles, parts and service and F&I. AutoNation also posted a remarkably strong 21% climb in finance-and-insurance gross profit.

In a statement, Jackson said that auto industry sales in the third quarter improved considerably as consumers faced more options, had a strong credit environment, and as the supply recovered.

One year ago, prices increased due to shortages in supply as a result of the tsunami in Japan as well as by the new-vehicle profits for AutoNation and other retailers. After import-brand inventory levels returned to normal levels, prices and profits fell in the third quarter this year as expected.

The gross profit for each new vehicle retailed fell by 14% to $2,117. But due to the higher volumes, total gross profits from new vehicles climbed by 5% to $144.7 million. There was a 3% increase in the used-vehicle retail unit sales while the gross profits from retail used vehicles rose by 8% to $72.5 million.

The gross profit per used vehicle rose 4% to $1,589. Meanwhile, the parts-and-service gross profits increased by 4% to $251.2 million. F&I gains provided over half of AutoNation’s increase in total gross profits. F&I gross profits amounted to $147 million, standing for a 20% increase.

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