Vehicle retailer AutoNation is feeling the pinch from inflation and bracing for next week’s Federal Reserve decision to boost interest rates as much as a full point, according to its 2022 second-quarter earnings report released Thursday (July 21).
The company’s revenue dipped 2% year over year from the same period in 2021 to $6.9 billion, while new vehicle revenue took a 14% tumble from 2021. That drop was partially offset by 13% growth in used vehicle sales during the three-month period, driven by a revised vehicle sourcing strategy by AutoNation, the report stated.
Still, CEO Mike Manley remained optimistic about AutoNation’s position in the market today and its future, particularly after its planned acquisition of auto financing company CIG Financial, its next step in enhancing the customer buying experience and expanding its capabilities.
“AutoNation associates delivered outstanding performance across all of our business sectors, leveraging our customer focus, digital capabilities, cost discipline, and capital allocation to produce record results,” Manley said in the report. “I am particularly pleased with our after-sales penetration with gross profit increasing 11% compared to last year. This is a key profit driver that has been a particular area of focus since my arrival and that has been structurally embedded in the organization.”
AutoNation is planning to open its 12th U.S. location in Kennesaw, Georgia, in the third quarter of the year, and the company is targeting more than 130 outposts across the country by the end of 2026, the report stated.
Perhaps AutoNation’s dip in new car sales is no surprise, with more than 12% of consumers financing a car with more than $1,000 in monthly payments, up from 7.3% in June 2021.
Read more: New Car Payments Exceed $1,000 for 12% of Buyers Amid Supply Chain Snarls
“Although there appears to be a steady stream of affluent consumers willing to commit to car payments that look more like mortgage payments, for most consumers, the new car market is growing increasingly out of reach,” said Jessica Caldwell, executive director of insights at car shopping guide Edmunds, adding that carmakers are cutting back on the lower end of the price range.
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