BLOOMFIELD HILLS, Mich. -

In discussing its first-quarter performance, Penske Automotive Group highlighted double-digit increases in used-vehicle retail sales while also touching on how the expected rise in off-lease vehicles may lead to even bigger opportunities in pre-owned.

Looking at the company’s retail performance in Q1, it retailed 45,500 used units during the quarter for a year-over-year increase of 14.8 percent.

“We're up 15.9 percent in premium/luxury, up 13.7 percent in volume foreign and up 3.1 percent in the Big Three,” said chairman and chief executive officer Roger Penske of the company’s category performance in a conference call held Thursday to discuss Q1 results.

These sales spikes led to a used-to-new ratio of 0.9-to-1, compared to 0.88-to-1 during Q1 of 2013.

Used-vehicle revenue rose 21.6 percent to $1.2 billion, Penske highlighted, due in part to the 5.9-percent rise in used-vehicle average transaction price during Q1.

The company ended the quarter with 35 days’ supply of used vehicles at the end of March. This was down from 38 days’ supply during the same period of 2013, but that might just be about to change.

The reason?

The influx of off-lease vehicles the industry is expecting will hit the market this year and into 2015.

When asked during the question-and-answer portion of the call what impact the increased amount of leased vehicles coming into the market will have on the company’s used performance, Penske turned to the certified pre-owned side of the business.

“A big portion of our business is used cars,” said Penske, noting that the majority of pre-owned supply is, in fact, coming from off-lease vehicles.

He went on to note that CPO accounts for 34 percent of the used vehicles the dealer group retails.

“I see the certified pre-owned driving one thing. It drives a loyal customer who knows that they have, in many cases, the same warranty that's available on the new vehicle. And in many cases, the same financing or lease terms,” he said. “So to me, that's a real opportunity, and we use that where we can.”

Interestingly, he noted the company wants to keep CPO used share to 30-35 percent — which Penske called “a sweet spot” — in order to keep reconditioning and sales costs down.

But as supply grows right along with Penske’s used department, the CEO explained the boost in pre-owned biz is contributing to the parts and service business, as well.

Margins in Penske’s parts and service branch are currently approaching 60 percent, Penske pointed out.

On top of outlining how increased supply is growing the company’s CPO department, Penske also explained how the company’s specialty in premium and luxury vehicles give them a leg up when it comes to off-lease supply.

Sixty-six percent of the company’s revenue comes from luxury vehicles. And Penske pointed out of those vehicles stemming from brands such as BMW, Audi, Lexus, and more, about 50 to 55 percent are leased.

“So the good news is, those are 30- to 36-month leases, and we see those cars coming back, and we get first choice on those,” Penske said. “So that's a nice pipeline of vehicles for us from the standpoint of opportunities. So I know there's been lots of discussion about a big surge coming back.”

“We look forward to that, specifically as we go forward to build our used car business,” he added.

When looking at off-lease supply, it’s prudent to also take a look at the different automakers’ lease trends.

“Well, the off-lease, I think you got to look at the different manufacturers and what's the penetration by the captive, and I think if you look at our peers, most of the them dealing in premium/luxury are leasing,” said Penske. “And with those leased vehicles, we get the opportunity from the captive finance company to buy those and that gives us a strong chance to grow our used-car business.”

“The rental vehicles are key for us,” he said.

Rental vehicles have always held a big role in Penske’s strategy, the CEO said, noting, “The business will generate a nice profit for the full year, and yet, we get the benefit of leased vehicles from a sales standpoint when we sell them off to the dealerships.”

Penske also pointed out the company will benefit from the 6,000 cars it has in the Rent-A-Car fleet, over half of which will turn over in the next 12 months.

“Those have been 'spec’d' at the time of purchase with sunroofs and some of the things that make those cars more desirable in the marketplace,” Penske said. “So as for used-car opportunity, I think it is there.”

Editor's Note: Portions of Seeking Alpha's transcript of the call were used in this story. The transcript can be found here.