AutoNation Exiting Loan Business; Sees Better 4th Quarter
Megadealer AutoNation Inc. said on Dec. 21 it was in position to exceed fourth quarter earnings estimates, but also said it would take a $52 million charge to shut down its auto financing business.
AutoNation CEO Mike Jackson said in a statement that the company was "on track" to exceed earnings estimates of 19 cents a share excluding charges, according to Thomson Financial/First Call.
AutoNation's financing arm has achieved finance penetration of less than 5 percent of the giant retailer's new- and used-vehicle sales, according to Jackson.
The $52 million charge will cover an increase in reserves for bad loans and the costs of closing the business.
According to Jackson, the move will not affect the company's ability to finance vehicle purchases. Automakers' captive finance arms have been taking a larger share of the financing business, especially since the advent of zero percent interest loan offers in the wake of the Sept. 11 terrorist attacks.
Industry analysts are predicting that December U.S. auto sales will remain stronger than expected, even as automakers get ready to wind down their zero percent interest loan incentives.
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