AN
#Well, so a very interesting question.
If indeed that's how it goes about, exactly as you described it, each manufacturer proportionally will have to divide that up over what they're selling and they will have to put it in their pricing.
That will lead to higher new car pricing.
Now whether they get a regulatory relief on the fuel economy standards that can offset that is unknown.
But the fuel economy standards are also quite onerous, and could change under this administration.
So that remains to be seen.
But I think if you put that level of price increase without a transition plan suddenly into the marketplace, it would impact overall industry volume.
I'll be thrilled to be even bigger into the used car business at that moment.
Because that would certainly have stabilization, if not lift used car prices or create a significant volume in used cars.
As far as our front-end gross margins, it's hard to describe the competitive intensity that we're contending with at the moment.
And I don't see that putting further pressure greater than what we already have on front-end margins.
Front-end margins, it's very tough, it's very competitive.
There's a combination of high inventory and high incentives.
So we would still have in that scenario high inventories and high incentives and maybe falling volume, and we would still be trying to find this optimal line between price and volume.
Yes, and the reason for the range is because ---+ (multiple speakers).
The Republican bill says deductibility of interest will be excluded, and we don't know whether that's just on debt or whether that's also includes the floor plan.
Exactly.
So that's ---+ if you lose all deductibility it's $0.50, if you can keep the deductibility of inventories which seems reasonable to me as a genuine business expense, then we're around $1.00.
No.
We're as American pie as you get.
All our employees live and work in America.
They're all US citizens, or at least on a green card, and everything we buy is US sourced.
Or the entities we buy from.
No, I couldn't tell you.
That's just margin improvement.
<UNK>, have you seen anything.
It's been minimal.
If you have a 1% increase in interest rates, over the average loan that's less than $15 month.
So you've got a lot of ability to absorb certain rate increases without that creating a lot of pressure within the CFS space.
I would say that first we still offer all the OEM parts, and we still use all the OEM parts for all warranty repairs or for any of the certified pre-owned programs.
So we meet all the requirements, of course.
What I've said to the manufacturers is, if I go back 10 years ago, we had very nice front-end gross margins on new vehicles and my costs were significantly less.
And I actually made money selling a new car.
Now, today, I've got a front-end gross margin of around 5%, I've got costs of around 5%.
I'm not making anything selling a new car, and I really don't think it's the transparency of the digital world at all.
I really think it's the structure of the incentive programs and the push from the manufacturers who have gotten us here.
So I say to them, I said, look, you have changed the basic contract between us.
Which is I build an exclusive facility for you, and I can make money selling your cars and doing some other things too.
I've got to make all my money elsewhere than in selling new cars.
And there's a certain understanding that that's what the industry has come to, and I'm not going to sit here naively and think that new vehicle front-end margins are going to recover.
I can improve used vehicle front-end margins, but the new vehicle, this thing is bigger than me.
And therefore, I need a strategy to deal with this new place that the automotive retail industry finds itself in, hence AutoNation brand extension.
So there's a certain understanding on the other side that I didn't change the world.
You changed the world.
I have to react to it.
<UNK> can give you the numbers.
And if we take our part that's been marketplace the longest, the AutoNation lifetime guaranteed battery, <UNK>, why don't you talk about customer acceptance of that.
Sure.
<UNK>, by and large right currently or prior to our brand extensions, all of our parts were sourced primarily through the manufacturers.
Currently, we've rolled out the AutoNation battery.
It's been extremely well received, and we had an exit rate, excluding warranty, of nearly 60% coming out of December.
<UNK>.
Sure.
Well, first off, I'm pretty sure we're an industry leading CFS PBR, so we're already very high on that metric.
Our brand extensions on our service contracts have been performing well.
Now we really have to focus on extending out those different products, as well as focusing on our lower performing stores, but we're running out of room.
<UNK>, I was not able to hear that.
Were you.
Yes, I was.
I'll take it.
<UNK>, primarily due to our recall policy that we had last year, it put a drag on our internal reconditioning.
So that's why we didn't have quite the growth out of customer care.
Going forward, it will grow back to what it was pre-recall.
It will go up into the mid single digits.
Thanks, everyone for joining us on the call today.
Appreciate the time.
Thank you, everyone.
