CLEVELAND — While also gauging availability of credit for subprime
buyers, a total of 69 percent of the respondents who participated in the Monthly
Dealer Survey orchestrated by KeyBanc Capital Markets saw an increase of $50 or
more in F&I gross profit per unit during the second quarter.

Two reasons sparked that climb on a year-over-year basis.
Respondents pointed toward increasing credit approval rates and higher product
penetration rates, which continued to drive increases in F&I gross profit
per unit in line with KeyBanc's expectations.

Another 19 percent of respondents told KeyBanc that F&I
gross profit came in relatively flat year-over-year in the second quarter. The
remaining 12 percent sustained a decline of more than $50.

The survey conducted in June also showed 60 percent of
respondents believe availability of financing for subprime purchasers would
continue to loosen. None of the participants expected financing companies to
tighten conditions, while the remaining 40 percent thought the market would
remain unchanged.

KeyBanc noted it has been nearly a year since any portion of
the survey participants projected a tightening of subprime financing. During 13
of the past 14 months, dealers and other industry observers told KeyBanc that credit
would be loosening with the amount of survey respondents believing that
sentiment rising as high as 92 percent.

With financing readily available, the success for used-vehicle
sales also came in strong, according to KeyBanc's latest survey.

The company's survey determined that stable consumer demand
driven by improving job market coupled with slightly lower used vehicles prices
which lower the cost of used vehicle inventory made the market ripe for used-vehicle
sales and gross profit per unit.

The majority of KeyBanc's dealer survey respondents (45
percent to be exact) enjoyed a used-sales volume increase in the range up to 5
percent during the second quarter. Meanwhile, another 25 percent of respondents
indicated an increase in the range between 5 percent and 10 percent.

KeyBanc mentioned that 7 percent reported an increase of
more than 10 percent, and the remaining 23 percent indicated various degrees of
year-over-year decline in Q2.

The company also highlighted that the majority of survey
respondents (54 percent) reported a year-over-year improvement in gross profit
per unit of more than $50 during the second quarter.

Another 29 percent of respondents reported to KeyBanc a
relatively flat environment, and the remaining minority (18 percent) noticed a year-over-year
decline.  

On the new-vehicle side, KeyBanc said, "Gross profit per
unit survey results remained mixed as expected, but we continue to see signs
the overall industry is undergoing stabilization in new-vehicle gross profit
per unit as more respondents are indicating relatively flat year-over-year results;
dealer stair-step programs remain consistent year-over-year and inventory
levels remain well managed by OEMs."

When turning new models during the second quarter, 39 of survey
respondents indicated new vehicle gross profit per unit declined by more than $50
year-over-year, while 38 of participants indicated relatively flat results and the
remaining 23 percent enjoyed an increase of more than $50.

Finally, KeyBanc's survey touched on how dealerships are
doing in parts and service.

"Consistent efforts to increase customer-pay revenue,
increasing units in operation, and an inflection point in warranty revenue
continue to drive parts and service sales while allowing dealers to preserve
gross profit margins," KeyBanc said.

The majority of survey respondents (28 percent) posted a parts
and service sales increase of more than 10 percent during the second quarter
while another 27 percent generated a rise between 5 percent and 10 percent
while another 22 percent of stores posted an uptick of 5 percent or less. The
remaining 23 percent indicated a decline up 10 percent in parts and service
sales.

Despite that general rise in parts and service sales, 65
percent of KeyBanc respondents indicated relatively flat gross profit margin results.
A total of 22 percent of participants reported an improvement of more than 100
basis points, and remaining minority (14 percent) reported a year-over-year
decline of more than 100 basis points.

To wrap up the analysis, KeyBanc said, "Following our June
monthly channel check of auto dealers and industry contacts, we remain bullish
on the outlook for automotive retailers."

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