DETROIT (AP) – With U.S. new-car sales leveling off after hitting a record last year, the nation’s largest auto dealership chain is looking for new growth by expanding into stand-alone used car dealers and selling its own brand of replacement parts.
Fort Lauderdale, Florida-based AutoNation announced the new ventures on Friday, with the CEO saying it will invest $500 million in the new businesses because of the new-car sales plateau.
CEO Mike Jackson said new-car sales cycles go in three phases – growth, plateau and decline. He wants the chance to grow no matter what the cycle. New-car retail sales run about 15 million per year, while used car sales are about 40 million, he said. Having its own used-car only stores “will allow us to grow more rapidly in the larger segment,” Jackson said in an interview.
Total new car sales, including fleet sales to rental car companies, hit 17.5 million last year. But in the past few months, sales have started to level off and may not match last year’s record. New-car prices already have started to fall, and there probably won’t be much sales growth for new-car dealers in the next few years.
So AutoNation wanted to go bigger in used cars. It’s already found 25 sites in its existing markets to set up the free-standing used car stores. The sites will compete directly with the CarMax used car chain. Five will open next year. They’ll offer an AutoNation version of certified pre-owned vehicles which will be inspected, repaired and come with warranties. Some will have two years of free maintenance.