AutoNation is buying a captive finance company for its AutoNation USA standalone, used-car operation, said chief executive officer Michael Manley during the company’s second quarter earnings call on July 21.

Once the acquisition is complete, CIG Financial of Irvine, Calif., will aid with the expansion of AutoNation USA and improve the used-car operation’s financial performance, all with modest upfront investment and little risk, Manley said.

Group 1 Automotive, which held its second quarter earnings call on July 27, reported record quarterly results supported by strong margins and growth in its parts and service and its finance and insurance businesses in the United States, its CEO Earl Hesterberg said. Group 1 has dealerships in the U.S and the United Kingdom. On July 5, Group 1 said it had closed on the sale of its dealerships in Brazil.

AutoNation announced the $85 million acquisition of CIG Financial the same day it held its earnings call for its second quarter that ended June 30.

AutoNation also said it will open its 12th AutoNation USA store in Kennesaw, Ga., in the third quarter. AutoNation has not deviated from its goal to have 130 AutoNation USA stores open by the end of 2026, Manley said.

CIG: capabilities and management team

CIG Financial will service AutoNation USA business and there is no intent for the new company to displace or replace existing captive financing with OEM partners, Manley added.

“This acquisition provides capabilities, footprint, technology and most importantly, a proven motivated team with great leadership,” Manley said.

Also making CIG Financial an attractive acquisition is that it has a strong and proven record in underwriting and servicing, added AutoNation chief financial officer Joe Lower.

CIG Financial’s book of existing business includes loan receivables of about $325 million, of which, $300 million is already securitized, Lower said.

Lower said CIG Financial has an existing network of primarily independent dealerships and the intent is to continue servicing them.

Q2 revenue dips, gross profit rises

AutoNation’s total revenue dipped 1.6% in the quarter to $6.86 billion, and its revenue in the first half of the year grew 5.7% to $13.6 billion.

The company’ total gross profit in the second quarter rose 2.7% to $1.36 billion and total gross profit in the first half of the year increased 13.2% to $2.67 billion.

AutoNation reported net income from continuing operations in the quarter of $376.5 million, down from $384.9 million in the year-ago quarter. Its net income from continuing operations in the first six months of the year was $738.6 million up from $624.4 million in the same period last year.

AutoNation’s new unit retail sales dropped 25% in the quarter to 57,890 when compared to the same period last year, but its margins rose 47% in the quarter, a direct result of continued constrained new-vehicle supply, and “an indication that demand for new vehicles remained strong,” Manley said. New-vehicle retail sales fell 22% to 114,332 in the first half of the year.

Used unit retail sales in the quarter dropped 4.4% to 77,080, but rose 2.9% to 156,843 in the first six months of this year.

On a same-store basis, new unit retail sales in the quarter dropped 27.5% to 55,889 and for the first six months dropped 24.5% to 110,428. Used unit retail sales on a same-store basis dropped 18.0% to 73,211 in the quarter and dipped 1.9% for the first half of the year to 149,152.

Group 1: weak vehicle supply, strong margins

Group 1 reported total revenues of $4.14 billion for its combined operations in the U.S. and the U.K. which represents a 14.3% increase in the quarter that ended June 30. For the six-month period that ended June 30, Group 1’s revenues for its combined U.S. and U.K. operations increased 21.4% to $7.98 billion.

Net income from continuing operations in the quarter for the U.S and U.K. combined was $199.3 million and for the first six months of this year the combined net income from continuing operations was $400.4 million.

Helping drive record U.S. earnings in the quarter that ended June 30 at Group 1  was a 34.0% revenue increase in its parts and service business and a 20.3% revenue increase in finance and insurance business, said Hesterberg, the company’s CEO.

For the first six months of this year, Group 1’s U.S. parts and service business rose 35.8% to $854.0 million and its F&I business was up 26.6% to $327.9 million

“Continued double-digit same store growth in our aftersales business, impressive cost control measures and significant contributions from our recent acquisitions” also helped support the company’s financial results, Hesterberg said.

US same-store sales

For the U.S. only, Group 1 revenues rose 17.5% to $3.43 billion in the quarter and was up 22.5% to $6.52 billion in the first six months of this year.

Group 1’s U.S. same-store new unit retail sales in the quarter dropped 26.3% to 24,684 and U.S. same-store new unit retail sales for the first six months of the year were down 22.2% to 48,453.

But its U.S. same-store new-vehicle retail sales gross margins in the quarter were 11.7%, up 2.3% when compared to the second quarter of last year. The company reported U.S. retail gross margins of 11.8% for the first six months of this year, an increase of 3.7% when compared to the same period last year.

Its U.S. same-store used unit retail sales slid 4.2% to 32,071 units in the quarter and slipped 4% to 60,972 in the first six months of the year.