ABG
#<UNK>, this is <UNK>.
Naturally we would like to keep the customer on the shortest cycle we can to see them back again purchasing other cars.
WIth the low interest rates and the simple interest loans, most people are okay.
And even though the loans are longer in length you still have a trade cycle where people are not far off what it has been in the past.
I think you are talking about the number we call total deal.
Essentially which is, for everybody who is not familiar with it, it's the gross that we make on new, used and F&I.
That number ---+ we had some pressure this quarter, that number was down.
But it has been, I would say, relatively stable, if not improving, like you said, over the last 10 years.
What we've done ---+ as an industry, not just us ---+ we've been able to generate incremental F&I PVR to offset some of the long-term pressure that we've seen on both new and used margins.
And it is roughly $3,000 a car.
That seems like a number that the industry depends on in order to generate the returns it needs on the capital that's tied up in these car stores.
And I would expect, as an industry, that's the kind of a number that we will continue to see as we go forward.
Fundamentally, that's what justifies the investment in the dirt and the stores that make this whole thing work.
<UNK>, I will start and then I think <UNK> <UNK> might have more to add.
I think there's a broader issue that's happening here.
If we were to got back 12 to 24 months a lot of these premium luxury vehicles were difficult for us to get.
A lot of production was down to China and some of the other developing countries.
You don't have go back very far.
We were being scrutinized as an industry to make sure that inventory from the United States wasn't leaking out and ending up in China.
The world has changed.
There are very few inventory shortages now in the premium luxury side.
Vehicles that we had a difficult time getting supply for are now readily available, not only in our store but in the stores of our competitors, and that has pressured margins.
I think that may have more to do with the margin pressure than anything else.
<UNK> might have different view.
<UNK>.
The only thing I would add is, the only thing that's changed over the years is the luxury brands have brought a lot more entry vehicles into the market, which skews their overall margin because these are lower-end margin vehicles and they're more in volume.
Those will certainly play a role in it.
And, naturally, there's the repressing.
The E-Class is coming out.
We are in a society where we are refreshing cars faster than we ever have.
The consumers demand it.
I just think it is the balance of the new models and the timing.
I think we need to see where we are with Q auto.
I can tell you that one of the things we have learned at Q auto is we do a fair amount ---+ the majority of the vehicles that we are selling in Q auto are subprime.
If that came under tremendous pressure we would have to see exactly what it did to those stores.
Like I said earlier, it is very intriguing.
What we're doing with some of our digital advertising at Q is really having some interesting impacts.
We don't have a lot of capital tied up, so especially in the two, if you would, smaller format stores, it makes it easier for us to get to the point where we can get a decent ROI.
I would put it this way, we are not going to walk way from it if we think we are close to hitting that magic breakeven point.
And I think it is going to boil down to our ability to get an incremental or 25 or 50 cars sold in a given store.
And that's what we are very much focused on.
We have not seen any issues whatsoever.
Texas represents about 10% to 15% of our business, and we are starting to see some headwinds in Texas.
It is minimal at this point.
<UNK>, I would just add that we only have one store in Houston so this impact that <UNK> is talking about is an impact that we are seeing in Dallas.
But, like <UNK> said, there's some impact.
It is undeniable.
We will just have to see where it goes
You're most welcome.
That concludes today's discussions.
We appreciate all the questions.
We think these are great questions.
We're glad we had an opportunity to talk to you about the business, where we've been, where we are going.
And we look forward to talking to you again at the end of the quarter.
Take care.
