In these days of new-vehicle margin compression, a successful used-vehicle department is critical to a dealership's financial results. The ratio of used- to new-vehicle retail sales is a closely watched metric of dealership success.
A 1-1 ratio is good, and a 1.25-1 ratio is great, Les Abrams, Cox Automotive's director of training and dealer services, wrote in the company's 2018 Used Car Market Report & Outlook.
"Used retail unit volume equaling or surpassing new retail volume is a foundational correlation of highly successful used-vehicle departments, assuming the dealership is meeting new-vehicle volume goals," he wrote. "In today's market, a key driving force is the resulting increase in profitability, which releases some pressure on the new-vehicle department for overall dealership profitability."
But in fact, it's a metric where very few dealerships excel.
Kunes Country Auto Group, of Delavan, Wis., about 50 miles southwest of Milwaukee, topped all groups on Automotive News' list of the top 100 dealership groups based in the U.S. ranked by used-vehicle sales, with a used-to-new retail sales ratio of 1.71-to-1.
Kunes Country was one of nine groups on the top 100 list with a ratio at or above the 1.25-to-1 level that Abrams called "great." And just 18 posted a used-to-new sales ratio of 1-to-1 or better. Almost the same number, 17, posted a ratio of 0.55-to-1 or below. (The metric was not applicable to CarMax Inc., which has no new-vehicle sales.)
"It's fascinating how poorly the large public groups do on that," said Jonathan Smoke, Cox Automotive chief economist.
Indeed, Penske Automotive Group Inc. was the only publicly traded dealership group to score a used-to-new sales ratio of 1-to-1 or better: 1.02-to-1. Sonic Automotive Inc., with its EchoPark brand stores devoted to used-only sales, was next among publicly traded dealership groups, with a ratio of 0.92-to-1.
Lithia Motors Inc., Asbury Automotive Group Inc., Group 1 Automotive Inc. and AutoNation Inc. all posted ratios between 0.71-to-1 and 0.78-to-1.
In 2017, the average U.S. light-vehicle franchised dealership registered a used-to-new retail sales ratio of 0.77-to-1, according to the National Automobile Dealers Association's NADA Data 2017. Still, that was up from 0.76-to-1 in 2016 and 0.74-to-1 in 2015.
Best balance
| These dealership groups had at least a 1-1 ratio of used-to-new retail vehicle sales in 2017. | |||
| Used vehilces | New vehicles | Used-new ratio | |
| Kunes Country Auto | 7,565 | 4,423 | 1.71 |
| Garber Management | 18,982 | 11,348 | 1.67 |
| Russ Darrow Group | 12,890 | 7,821 | 1.65 |
| Morrie's Automotive | 14,411 | 9,470 | 1.52 |
| Reagor Dykes Auto | 10,123 | 6,718 | 1.51 |
| Principle Auto | 6,803 | 4,586 | 1.48 |
| Green Family Stores | 10,737 | 7,383 | 1.45 |
| Mullinax Auto | 13,286 | 9,456 | 1.41 |
| Bob Moore Auto | 10,178 | 7,671 | 1.33 |
| McLarty AutomotiveŦŦ | 32,411 | 28,555 | 1.14 |
| Performance Automotive | 22,739 | 21,700 | 1.05 |
| Holler Classic Automotive | 8,697 | 8,405 | 1.03 |
| Wilde Automotive | 13,620 | 13,176 | 1.03 |
| Blaise Alexander Family Dealerships | 9,163 | 8,928 | 1.03 |
| Zeigler Auto | 15,458 | 15,090 | 1.02 |
| Penske Automotive✝ŦŦ | 252,900 | 248,800 | 1.02 |
| Walser Automotive | 18,131 | 18,179 | 1 |
| Kenwood Dealer Group | 12,775 | 12,831 | 1 |
| ✝ Publicly held | |||
| ŦŦ Includes data for dealerships outside the U.S. | |||
| Source: Automotive News Data Center | |||
Digging into the data by type of dealership, luxury-brand stores stood out but still had a ratio well below "good." The average luxury dealership posted a ratio of 0.87-to-1, up notably from 0.77-to-1 in 2016 and 0.68-to-1 in 2015. In contrast, the ratio at the average mass-market brand dealership has held steady at 0.75-to-1 each of the last three years.
Likewise, the ratio for the average domestic-brand dealership has held steady at 0.86-to-1 each of the last three years. For the average import-brand dealership, the ratio rose to 0.71-to-1 in 2017 from 0.67-to-1 in 2016 and 0.65-to-1 in 2015.