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Penske Posts Most Profitable Year Behind Strong Q4 Performance

February 12, 2015

BLOOMFIELD HILL, Mich. — Penske Automotive Group posted a strong fourth quarter, with revenue growing 16% and adjusted income from continuing operations growing 14%.

Speaking during the group’s fourth-quarter earnings call on Wednesday, officials said the organization achieved its best year on record. Chairman and CEO Roger Penske attributed the strong results to the performances of its retail and U.S.-based commercial vehicle dealerships.

“Ninety-four percent of our revenue was generated through our retail automotive dealerships, while the remaining 6% came from our commercial vehicle businesses, which includes … the U.S., Australia and New Zealand operations,” he said.

Penske Automotive realized total revenue of $4.4 billion, which was driven by a 10.5% increase in total retail unit sales, including a 6.8% increase on a same-store basis. Gross profit improved 15.4% to $659 million, while operating income increased 11.6% to $119 million.  

On a same-store basis, new-vehicle retail sales increased 8% and revenue increased 13% to $2.2 billion. Average selling prices improved 1% to $40,600, while the average used-vehicle transaction price jumped 1.5% to $27,035.

“The retail automotive service and parts had another very solid quarter, with revenue improving 9%, including a 6.2% increase on a same-store basis,” Penske noted. “Our customer pay was up 7%, warranty up 14%, our body shops up 15% and our PDI up 16%. Service and parts gross margin improved also 90 basis points to 59.7%.”

Average gross profit per vehicle retailed was on the decline, however, down by $58 for new units and $92 for used. F&I revenue increased 14%, while F&I profit per retail unit improved $29 to $1,070 — with F&I earnings per unit at $1,056 in the U.S. and $1,100 in Penske’s international markets.

Penske noted that 40% of the group’s per-copy average came from reserve, while product sales accounted for 60%. Penske said that with the Consumer Financial Protection Bureau (CFPB) scrutinizing rate markups on retail installment sales transactions, the group has begun piloting the National Automobile Dealer Association (NADA)’s Fair Credit Compliance policy and program.

“… One of the things that we are doing, we are looking at a model and really a pilot from NADA. So we are trying to see what impact that might have on us at four stores,” Penske said. “… We have initial standard rate markups for all the customers, and if there is a deviation, obviously, we have to put that in writing and document that. So it’s a pretty straight forward transaction.

“So we are testing the water on that potential option for the future, if that would become something that the government would seem to be necessary to explore with the retail auto network.”

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