Lithia’s leadership has been long touting a goal to average 75 used-vehicle sales per store per month. At the end of the first quarter this year, the group was sitting at roughly 57 units per store.
By the end of September, Lithia’s monthly average has seen a solid gain.
“On a 12-month rolling average, we sold 61 used vehicles per store, up from 55 units in the comparable period last year,” said Bryan DeBoer, the company’s president and chief executive officer. “Our goal to retail 75 used units per store still provides considerable upside in the future.”
Aside from the company’s industrious acquisition strategy, DeBoer says the group is also focusing on strengthening internally.
“We continue to grow used-vehicle sales as inventory resupply increases in the marketplace,” DeBoer said. “Additionally our stores continue to recruit and develop used-vehicle managers with the ability to source, recondition and merchandize used inventories.”
According to the company, several used-vehicle metrics jumped in the third quarter. Here’s a brief breakdown of Q3 same-store results from DeBoer that weren’t specified in the company’s released results:
- Certified unit sales increased 19 percent
- “Core” unit (aged 3-5 years) sales increased 8 percent
- “Value Auto” unit (mileage over 80,000 miles, any age) sales increased 5 percent
With its used-vehicle sales leading the way in revenue stream increases in Q3, DeBoer also mentioned that the company’s used-to-new sales ratio was brought up to 0.83:1.
So how will the seasonal trend of increased supply affect Lithia’s pricing scheme?
“If we look at residual values and we look at what we believe will be future trends, what we're starting to see initially is that there’s starting to be increase supplies in used vehicles,” DeBoer said. “So off-leased vehicles are becoming more prevalent, which would give indication that values may soften a little bit as supply begins to loosen. And I think those trends may continue as the SAAR rates continue to climb as well.”
Sidney DeBoer, the company’s founder and executive chairman, agreed on the pricing situation and clarified his outlook.
“This is kind of a stable position that we’re in now,” he said. “There are no extremes.”
Speaking of lease returns and the large contingency of them anticipated to hit the market, an analyst asked if that would affect the number of used inventory units that Lithia will hold on to.
“Personally, I don’t think so,” Bryan DeBoer said. “I think that helps you grow your business but I don’t think you’re going to reduce your overall inventories because of that because we’re still trying to grow core and valued autos, as well. And remember, core is over half of our business. So even as those off-lease cars grow, I really believe no, it’s not going to affect the inventories.”
DCH integrating well
Lithia’s purchase of one of the largest dealer groups in the country, DCH Auto Group, closed a little over a year ago, representing one of the largest dealership acquisitions in recent history. Using a baseball metaphor this week, DeBoer says it may very well be one of the most painless purchases Lithia has ever made.
“In terms of what inning we’re in, in terms of integration, I would say that we’re in the middle innings. I believe they know who they are and what they want to become,” DeBoer said. “They have a wonderful culture. They are humbly confident, much like we had talked about.
“And I can say this: I think it was the smoothest integration that we may have ever had on an acquisition, including the small ones that were $30 million. This, at $2.4 billion, was really pleasing to see that our two organizations, who if you recall knew each other historically but never were really together at this level, we’re proud to have them as our teammates and companions.”
Want to read more on Lithia’s ongoing acquisition strategy? Check out our story here.