By on October 28, 2016

AutoNation CEO Mike Jackson

The used car market? Saturated. The battle? About to begin.

America’s largest new-car retailer knows there’s money in them there pre-owned vehicles and has hatched a half-billion-dollar plan to take on the country’s largest used-car retailer.

According to Automotive News, AutoNation Inc. will greatly expand its retailing footprint by building standalone used-vehicle stores.

The first five stores, one targeting Houston, should be open by the end of 2017. Another 20 are reportedly in the works. By the time the expansion strategy is complete, up to 100 standalone used vehicle stores carrying the AutoNation banner could tap into the massive glut of pre-owned vehicles flooding the country’s car lots.

That’s the physical presence of the retailer’s new plan. At the customer level, no-haggle pricing will extend to all used vehicles sold at AutoNation USA stores and through its franchised dealer network. In addition to the creation of new service centers for each new dealership, renovations are coming for the existing service network. Four new auto auctions will open within the next two years, along with 18 new collision centers.

It’s a big roll-out for a big market.

“It’s a 40 million (units) a year marketplace,” AutoNation CEO Mike Jackson told Automotive News. “The consumer is still dying for a better experience in pre-owned.”

The retailer’s used-vehicle gambit goes beyond cars. As part of the expansion, a line of AutoNation-branded accessories and replacement parts will be made available through the dealerships. The first component — a battery — is already on sale.

Overall, the plan is to beat CarMax at its own game. AutoNation wants to draw owners with out-of-warranty vehicles to its repair shops for scheduled maintenance, while CarMax customers only see their vehicle in the shop if they’ve purchased the MaxCare plan. That service plan allows customers to use independent repair shops, but it comes at a cost — CarMax charges a higher deductible for that work.

Under the new plan, all stores will switch to the AutoNation Express in-store platform, where transactions are expected to take place within an hour. Buyers walk away with two years of free routine maintenance.

For its part, CarMax is fighting back by making the buying experience easier. According to the Charlotte Business Journal, the retailer recently launched a pilot project in Charlotte, North Carolina, that allows customers to select, finance and purchase a vehicle without leaving their home. Test drive vehicles will roll up to would-be buyers’ front doors.

If successful, the retailer could implement the program in other markets.

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22 Comments on “Pre-owned Prize Fight: AutoNation Wants to Out-CarMax CarMax...”

  • avatar

    If they really want to up the ante they need a financing arm that will do used car leases. Like I said before people shop on payments these days… especially in the used market. Combine a lease with a warranty and people would jump. They’d just have to make sure the cars they choose don’t kill them with warranty work.

    More competition is good though.

  • avatar

    “Massive glut of pre-owned cars?” Really? I thought prices were high because there weren’t enough good used cars to go around?

    I guess the part I don’t understand is how this will work with their existing dealerships? Won’t they be competing against themselves or are they targeting cities where they don’t yet have a new-car foothold?

    Personally, I’d never buy a used car from a dealership (higher prices and no way to know who owned it before me) unless it was a CPO, but there are a lot of people who do.

    • 0 avatar

      Well, if “AutoNation Ford of Big City, USA” already exists (for example), I would imagine they would keep their used lots and handle mostly used Ford products or trade ins.

      Not a lot of people go there for an ex-rental Altima with five to choose from, all silver, anyway. That would be what you would find on the exclusively-used store’s lot across town.

      This is just an educated guess, but I’m thinking this is the most logical way for it to be done. They could share inventory as well. What isn’t selling at one store may do better at the other.

      This is how the dealer group I worked for did it, in a way. Our dealership had a used lot mostly full of pre-owned Lincolns, Mercurys and higher-end Fords, nearly all loaded to the gills (I remember one Plymouth Breeze 5spd, a Pontiac Grand AM with cloth, 2 year old Explorer with cloth and a mint low mileage 95 Taurus wagon as our lower end cars). Our used lot down the road had plenty of ZX2s and 1-5 year old lower-trim Tauruses and Explorers, and lower end trades we got but didn’t fit on our lot (literally or price wise). It was where the credit-poor got approved for the Mercury Mountaineer with 180k of their dreams. But, they didn’t specialize in that the way say, Mitsubishi, does. It was just there to help those who needed it, but they mostly sold average commuter and family cars to Boeing employees.

    • 0 avatar

      I recall reading similar stories about how used inventories have never rebounded from cash for clunkers. I’m not totally sure this is true as a walk on a local big-name used lot had the place freakin’ packed to the rafters. I asked about a car tucked into the back row and the sales guy just sighed and told me to forget about it. I can’t say that used prices are down in my sampling but I typically hunt high-depreciation models anyway. Taking a break from the norm, I’d been chasing down a deal on a 12 Civic Si, but those things are a terrible value. I can find V6 Accords for the same money all day long. You’re getting into used Focus ST money for an older Civic.

    • 0 avatar

      The independent mechanic we’ve used for the last 40 years regards CPO as nothing more than an extended warranty. In principle, a competent mechanic is supposed to inspect the vehicle and repair anything that is even marginal. CPO should mean that you are getting a car verified to be in excellent condition. In practice, they aren’t that thorough which makes it just another used car.

      • 0 avatar

        Kendahl, that’s true… I wouldn’t put an added value on a CPO for any more than I’d value the extended warranty.

        Frankly, I’ve bought a lot of cars and the only ones I’ve ever had issues with were those I bought from dealers and had been assured of a thorough inspection. When I shop from a private party I get an idea what the owner was like, I get to see maintenance records, and I can arrange for an independent inspection if I want to. If I get a bad feeling about any of these things I walk away and my gut has served me well.

        I understand a lot of people are intimidated by the process and don’t want to shop this way (or need financing through a dealer). They just don’t add much, if any, value for me.

      • 0 avatar
        Kyree S. Williams

        Your mechanic is right. A lot of manufacturer-CPO cars are not inspected to the level that you’d think they would be.

        And some CPO warranties aren’t worth the paper they’re written on. My 2011 X5 that I bought in August of 2015 had a year and some months left of an original CPO warranty (which means I was actually the third owner).

        It did not cover any of the thirty-odd electrical faults that car experienced in four months. It did not cover the sporadic power lift-gate. It did not cover the key that the car decided to stop accepting. It did not cover the time the entire iDrive / nav unit failed…or the time the power tilt-telescoping steering column dropped to its lowest setting and refused to move…or the broken blower motor for the rear-seat HVAC, which made the interior like there was a running weed-eater.

        Fortunately, I had the MaxCare warranty (actually underwritten by a company called The Warranty Group, in my case), which did cover all of that. There are plenty of warranties just as good as MaxCare, but the point is that the BMW CPO program was useless in my case. It seemed designed to keep the car’s basic mechanical functions in order, but modern luxury cars have so many other things that can go wrong and render a vehicle inoperable.

  • avatar
    Mike N.

    AutoNation tried this before and lost (to Carmax)

    • 0 avatar
      87 Morgan

      They also tried to the One price no haggle buying and ditched it. Doesn’t mean they can’t make it work the second time around.

      I am sure they will do fine.

  • avatar

    I’d never buy a car from these folks (way too much markup) but they are useful if you want to try a wide variety of stuff before zeroing in on a specific type.
    Hit them on a weekday morning, the reps are bored to tears, and almost happy to walk you around the lot to pick out samples to test drive.

    • 0 avatar
      Kyree S. Williams

      AutoNation Volkswagen in Park Cities offered me a pretty competitive price when I bought a new 2014 VW Jetta SportWagen TDI w/ DSG and Pano Sunroof from them in July of 2014. Of course, that car isn’t all that popular in Dallas, where the dealership was / is.

      And since I live in Oklahoma City, which is three hours away, the saleswoman arranged everything over the phone. All I had to do was come in and sign some papers, get them to fix the misaligned sunroof deflector (not their fault), and then drive off.

      • 0 avatar

        @Kyree, I was referring to CarMax used prices being high and (potential) competitor AutoNation assuming they’d be similar.
        I think their business model is that some folks are willing to pay more for a used vehicle that has a national brand store behind to it, and they do provide a more professional (and higher overhead) image than most any other strictly used car operation.

        On the new side, haven’t had experience with AN.

      • 0 avatar

        Would you recommend them? I’m in the market for a new car, and am considering VW as an alternative (my default is Honda). I actually live in the Park Cities area.

  • avatar

    I wonder how existing Auto Nation dealers are taking this?

  • avatar

    I worked at the Irvine, California AutoNation Superstore in 1999. The company’s work ethics were outstanding, the pay scale was wonderful and Mike Rich, the GSM, was the coolest and most articulate manager I have ever encountered. One day in December 1999 I went out for lunch. When I returned, the store had been SHUT DOWN. I was not even allowed to enter and get my house keys from my desk. The CEO, Michael J. Jackson, had determined that used car superstores were not the wave of the future. And all this happened just in time for the second Bush Recession!
    The company issued severance checks in enormous amounts as they did not announce the closure publicly within the required 90-day period.
    If they come back I’ll be first in line to work there as a Resale Logistics Manager!

  • avatar

    AutoNation Shuts 23 Used-Car Stores and Lays Off 1,800
    Car sales: The country’s largest auto retailer cites sagging profit and tough competition.
    December 14, 1999|JOHN O’DELL | TIMES STAFF WRITER

    Been there, done that…

    those that dont remember history, etc etc….?

    oh, that lot in long beach is now a sams club gas station and walmart, and has been for many years

  • avatar

    Am I going nuts or didn’t Autonation start life as a mega used car dealer, owned by Wayne Huizenga, anmd then switched over to buying every new car dealer they could get their hands on?

  • avatar
    Big Al From 'Murica

    Typically these no haggle used car places have among the highest prices one can pay for a given model. I suppose not playing the game is appealing to some and worth the cost. Honestly I have never gotten some of the crazy low prices some trumpet on here with my bargaining skills, but I have never paid close to a carmax price either.

  • avatar

    Between AutoNation, CarMax, Sonic Automotive, and the like, eventually all new and used cars will be no-haggle. If you really get off on that sort of thing, there’s always private-party.

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