Good morning, ladies and gentlemen. And welcome Group 1 Automotive First Quarter 2012 Earnings Conference Call. Please be advised that this call is being recorded. I would now like to turn the call over to Mr. Pete Delongchamps, Vice President of Financial Services and Manufacturer Relations. Please go ahead, Mr. Delongchamps.

Thank you, Amy. And good morning, everyone, and welcome to today's call. Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the conference call, statements made by management of Group 1 Automotive are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks associated with pricing, volume and the conditions of markets. Those and other risks are described in the company's filings with the Securities and Exchange Commission over the past 12 months. Copies of these filings are available from both the SEC and the company. In addition, certain non-GAAP financial measures, as defined under SEC rules, may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website. Participating with me today on the call, Mr. Earl Hesterberg, our President and CEO; John Rickel, our Senior Vice President and Chief Financial Officer; and Lance Parker, our Vice President and Corp Controller. I'd now like to hand the call over to Earl.

Thank you, Pete, and good morning, everyone. At the risk of sounding repetitive, I'm pleased to announce that earlier today Group 1 reported another record-setting quarter. Diluted earnings per common share were $0.97 for the first quarter of 2012, breaking the prior first quarter record set in 2006, when the industry selling rate was 2.4 million units higher. Our earnings represented a 52% increase on a comparable basis to the first quarter of 2011. In addition, we also reported record first quarter revenues and all-time high gross profit. Given the first quarter 2012 selling rate was still at a relatively low 14.5 million units, and there were still some key model and brand inventory issues within the quarter, we're quite pleased with these results. We sold 27,930 new vehicles in the first quarter and our average sales price increased 3% to $32,674, driving a 16% increase in New Vehicle revenues and a 24% increase in New Vehicle gross profits from the prior year period. New unit sales increased 13% for the quarter. We were somewhat surprised by the strength of the used vehicle market and we are pleased that our performance in that segment. We retailed 24% more used vehicles than the first quarter of 2011, driving a 26% gross profit increase on 28% higher revenues. Gross profit expanded 2% to $1,754 per retail unit. Our F&I business also remained strong. Financing and Insurance revenues were 29% higher, with gross profit increasing $107 per unit retail to $1,175. This was the best first quarter result the company has ever reported, primarily attributed to better penetration rates of our product offerings. Parts and Service gross profit grew 8% on a 9% year-over-year revenue increase, reflecting growth in our customer-pay, Wholesale Parts and Collision businesses. We continue to be very pleased with…

Thank you, Earl, and good morning, everyone. Our net income for the first quarter of 2012 rose $7.6 million or 49.1% on a comparable basis over our 2011 results to $23.1 million, which is the best first quarter in our company's history. Earnings per diluted common share improved 52% on a comparable basis over the prior year results to $0.97, which is also the best first quarter result in our company's history. In comparison, the previous best first quarter results were achieved in the soaring environment of 16.9 million units. This result continues to highlight significant improvements we have made to our processes and cost structure and demonstrates the leverages improvements are delivering as New Vehicle sales volumes continue to increase. Compared to the same period a year ago, our operating margin improved 40 basis points over the comparable prior year results to 3.2%, and our pretax margin also improved 40 basis points to 2.2%. On a consolidated basis, we delivered record revenues in the first quarter of $1.66 billion, increasing $255.4 million or 18.1% compared to the same period a year ago. This record reflects increases in each of our business segments. New Vehicle revenues increased 16.3% to $912.6 million on 13.1% more units. Our Used Vehicle retail revenues improved 28.3% to $415 million on 24% more units and a 3.4% increase in our average Used Vehicle retail sales price per unit. Used Vehicle wholesale revenues grew 7.9% to $66.9 million, while our F&I revenues rose 29.3% to $57.2 million or $1,175 per retail unit sold, which is the company's best-ever F&I performance. And for the ninth straight quarter, we've reported year-over-year revenue growth from the core of our business, the Parts and Service segment. Revenues from our Parts and Service business improved $18.2 million or 9.3% to $213.1…

Thanks, John. We're excited about the future of Group 1 in the automotive retailing industry. As we noted at recent auto shows, our manufacture partners are rolling out a significant number of exciting new products over the next 2 years that will help bring customers into our dealerships. Customers have been holding on to their aging vehicles, which average 10.8 years old, during the recession, and are looking for new fuel-efficient and technology-loaded vehicles being offered. Our brand mix positions us well to gain share in the markets we serve. As I mentioned, industry selling rate came in at 14.5 million units for the first quarter. Given the strength of the quarter, we are raising our full-year 2012 SAAR estimate from $14.0 million to $14.5 million New Vehicle units. To wrap up our prepared statements, we are pleased that we are delivering another record-setting quarter. We are optimistic about the opportunities to leverage our improved cost structure as Group 1 and the industry grows in the coming years. That concludes our prepared remarks. I'll now turn the call over to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] Our first question is from John Murphy with Bank of America Merrill Lynch.

This is Elizabeth on for John. When you look at your regional performance, did the Northeast have stronger year-over-year gains than the other regions due to the more favorable weather? I mean, in other words, do the regions that typically have more dramatic seasonal patterns have stronger year-over-year gains?

Well, actually, there were big regional variations and counter to what we might have thought, with the weather and so forth, our weakest area was Northeast, and in particular New England. Our strong area remained Texas and Oklahoma. And so I was somewhat surprised by that, and sales results on New Vehicles were the most uneven, by brand and geography, that I've seen in a long time. So some of that was quite surprising. Now, overall, it was good, nonetheless, but surprisingly weak in the Northeast part.

Interesting. And you mentioned the rollout of new products. When you look at the schedule for product launches coming up for the brands you represent, which vehicles do you think are going to be the most impactful and which seem like they might be kind of missing the mark?

Well I think the 2 that we look at quite carefully here are Toyota and Honda, because they represent so much of our business. And Toyota has a large number of New Vehicle launches over the next year or 2. The Camry, obviously, recently launched. I think most people in the industry are anxious to see the new Honda Accord and how the sell-down from the existing Accord goes, because that would be critical for Honda to regain some of the market share they lost. And then I believe very late in the year, early next year, they have another redesign of the Civic. So we focus quite a bit on Toyota and Honda.

Okay, great. And finally, are you seeing any pickup in incentive activity, either on the manufacturer end or the dealer end at the end of 1Q or April?

Yes, slightly. I don't think it's a major movement yet, but I believe it's been pretty well-covered that Honda got more aggressive in a sell-down program on the current model Accord to pave the way for their new model Accord. And I think we will probably see more activity as we move into the summer, particularly, as Toyota and Honda make further efforts to regain share and as their inventory situation has only recently normalized.

Our next question is from Simeon Gutman with Credit Suisse.

Do you have -- do you know what kind of share -- how share played out in the quarter? Did you take share in your market with brands? And then related to that, I think the fleet sales certainly helped some of the J3 in the first part of the year. How confident are you that the market share on the retail side, just from an overall brand side, will start to accelerate?

Yes, I mean, that's a good point. I think there was, maybe, a little bit of exuberance on the first quarter selling rate increases, being in mid- or low-double digits, but there was a lot of fleet in that. I think someone already mentioned that this morning. The real retail growth rate so far, this year, seems to be more around 8% and that's great. I mean, that type of pace is fantastic for us, 7% or 8%. Yes, I think, generally we gained share even in the Northeast where, I just mentioned a moment ago, we were a little disappointed with our New Vehicle sales. We're very powerful with Toyota there. We outperformed our region in terms of sales growth there. It just wasn't the kind of increases we got in Texas, Oklahoma and, in some cases, California. So I think that the industry sales increase, on the retail side, is still very significant and steady, but it seems to be high-single digits. And that's -- I think that bodes well for all of us in this industry.

Okay. And then a question on operating leverage, maybe for John. I appreciate the color and the commitment to that, the flow-through. Granted, you'll continue to do acquisitions which will obscure the number to some degree, but if you're going through a period in which sales start to accelerate here, especially some of the brands that there was in inventory, could the core business to be north of that for a temporary period? Does that make sense?

Yes, Simeon, this is John. I guess, I mean, what we're committed to is kind of the numbers that I gave on the call and that's really looking at it over kind of the rest of the year. We're very comfortable with that view on a same-store basis, that $0.50 on the incremental gross profit dollar would flow through.

Okay. And then one more on the F&I side. It looks like the performance was good again. I think we're up 10% year-over-year. It's about close to where we were on a year-over-year basis. Once we start to cycle the pickup that began last year, how does that play out? Are there drivers to continue to push down or higher? Do we start to level off?

Hi, Simeon. it's Pete Delongchamps. I think we begin to level off. We still have this some opportunity to improve underperforming dealerships. But I think, from a modeling perspective, we are at a pretty good level right now.

And when you said underperforming dealerships, is that in either financing side or is it in selling some of the additional...

It's a combination of both. It's just focusing on specific brands and making sure that the dealerships that have opportunity were paying particular focus to those, to bring those up to the average and we use our high performers as the examples.

Our next question is from Adi Oberoi from Goldman Sachs.

My first question is your used to new ratio. It has been tracking pretty high. Can you talk a little bit about how you're thinking about that going forward and were there any specific reasons why this quarter had a great performance?

This is Earl. We do not really pay much attention to that used to new ratio because it fluctuates based on geography. We're very heavy in the Northeast compared to maybe other companies and we lack land there. Also in the state of Massachusetts they have some regulations that relate to -- we can't promote a used car for sale until you physically have possession of the title and things like that. In places like New Jersey, New York, Boston, California, we just don't have the space for big retail used car lots, in some cases. So as our geography changes, both with the acquisitions and in terms of economic strength in various regions of the country, that ratio can change a lot. We what do try to do is sell every used car we possibly can get and we had one of our better quarters, but I have to say that market was much stronger than we would have expected. And as we came out of December, December was a very big retail -- New Vehicle retail month and, what that means is, we get an increased number of trade-ins. And so we were able to start out the year, in January, with probably better used car availability than we normally have. So we set out to make sure that we retailed as many of those as possible. And by the time we got the end of the quarter, we were down to 28 days supply. So we did a very good job of retailing every vehicle we had available to us. And 9 months or so, we also tried to trade more aggressively because of the shortage of used cars in the market. So the market was stronger than we thought and we did a good job retailing what we have available to us.

Great, and that's helpful. my second question is on the P&S segment. Can you remind us when you guys were underlapping those tough comps which benefited your segment from a warranty standpoint?

Well, the best of my recollection there were actually several waves of recalls. I think the Toyota recalls were well-chronicled, well, I guess, 2 years ago, early in the calendar year, 2 years ago. But then, through last summer or fall, there were other non-Toyota brand recalls including some big Lexus recalls that were large dollar. And I think it will be third or fourth quarter this year before we cycle through that big warranty hit that we're getting now, which was almost 12.5% down in the first quarter. So we definitely have one more big quarter to fight that, if not 2 or 3. John, do you remember?

Yes, this is John. Based on what we've looked at, I think the second quarter should be the majority of it. But by that point, especially the Lexus item that Earl mentioned, is pretty well behind us, as well as some of the BMW. So I think by second half we should be in more favorable territory on a comp basis.

Great. And finally, on the F-Series inventory, we had heard for some comments that the F-Series inventory was running tight in some of the regions. Can you talk a little bit about what you're seeing currently or how are things on that front?

Yes, Adi. This is John. The F-Series, in particular, the EcoBoost option on the F-Series has been a big seller, and I know a lot of our Ford stores continued to be looking for that inventory.

Despite that, the Ford business is one of our strongest businesses in our portfolio right now. Our Ford sales were up 22% in the quarter. So that's one where we'll probably gain quite a bit of share because I believe Ford sales were up 22% in the quarter, nationally.

Our next question is from Rick Nelson with Stephens.

You're hearing about stair step programs out there and including the Accord, which I think you mentioned earlier, do you think the targets on these stair or steps are reasonable? And where do you see that gross profit per unit? You were around $1,900 a copy in the most recent quarter.

Well, let me -- word stair step comes up, Pete has to call me down, so I'm taking a deep breaths. There are too many stair step programs out there, we didn't need any more. They tend to have a negative effect on gross margins and a negative impact on customer satisfaction. In my opinion is, that sooner or later those objectives do become unfair somewhere. And the bigger the dealership, and we tend to have big dealerships, the more the problem can be created. Now I could not tell you that we had any major negative impact in Q1 that I would attribute to stair steps, but it's just a cancer an industry that is isn't good for dealers or customers. And in particular, you get in a situation where French Metro dealers get objectives of 20 or 25 cars and then the next dealership in toward the population center has an objective of 160. And so then you get basically 2-tiered pricing between 2 dealers that may be a 10- or 15-minute drive apart. Those are the things that really bother us. But in terms of financial impact on our business at the moment, or that I would predict in the second quarter, I couldn't really attribute anything material to what I've seen.

Got you. And Earl, as you look at the 3 segments here, domestic, the midline import and luxury, where do you see the biggest growth rate is occurring? Has inventories normalized? What had come into Japan?

Well, yes. I think, Rick, definitely in the future it would be with the Japanese brands. At this moment, as we sit here, in the first quarter, I just mentioned our Ford business was up 22%, and that's about 10% of our total business, so we're not one of the bigger domestic brand retailers. And our Chrysler business, which is only 5%, was up 42%. So right now, It's still the domestics are on a -- at least those 2 companies are by far the most powerful in our portfolio. But I believe it's going to shift -- to more toward Toyota and Honda. And Nissan has carried momentum through for 1.5 year or so. I think the growth rate for the rest of this year, I would expect, to be better for the Japanese brand.

Got you. And then finally, if I could ask you about this Rosen [ph] issue, what you're hearing from the OEMs in terms of supply?

Yes. We've had some conversations with it and, obviously, everyone is very concerned. But my impression from everyone I talk to on the manufacturers side is that it's manageable. That they have identified alternative sources. There are questions about the price I had to pay from the alternative sources and the exact timing of availability, but no one, no manufacturer has advised us of any significant negative impact on production yet.

Our next question is from James Albertine with Stifel Nicolaus --

First and foremost, wanted to focus on the Parts and Service business, just to get an idea, and I apologize if you mentioned in the prepared remarks of your call and I missed it, but the traffic versus ticket breakdown, as customer-pay work has gone up here as of late?

Well, I don't have this figures in my head, but customer-pay -- we're focusing on traffic so our repair order count is definitely up. So my feel is that our growth in customer-pay, which has mitigated some of that warranty hit, is more on the side of pushing more traffic than it is any major increase in dollars per repair order. I do have a couple of my teammates here trying to flip through some pages to see if we can get you anymore quantifiable data on that. Can't come up with any precise data at the moment but we'll try to get back with you. Our focus is on generating traffic increases because we know that over time our repair order values, dollars per repair order are relatively consistent.

Sure. Understood. And you can certainly follow-up on that point. I guess, secondly, the financing part of the business, can you help me get an idea of the penetration this quarter versus prior quarters? And perhaps, any indication of an uptick in subprime?

It's Pete Delongchamps. The penetration was up slightly this past quarter, and subprime certainly is becoming a bigger part of the business. But also, what's changed along with that, and a lot of it has to do with what happened with recession in people's -- our customers scores becoming a little bit lower based on financial situation. But the banks have also become more active in that arena. We have one particular bank that we've -- we usually send them 500 beacons and above. So it's a different landscape than what we've seen even 3 years ago but it's definitely becoming a bigger part of the business. It's definitely regional.

That's very helpful. And then lastly, if I can just ask kind of a bigger picture question in terms of M&A environment. Are you seeing any sort of discernible trends in terms of the quality of the targets that are out there? Or is it pretty much sort of par for the course and when you get to a point where you can negotiate a viable takeout valuation, is a similar sort of ramp rate in terms of getting up to the average EBIT of your existing stores?

The number of potential sellers and quality of the sellers has been pretty significant for last 12 to 18 months. So I haven't seen any recent change in that. The issue still relate to finding acquisition targets that meet our strategic need, in terms of brand and geography, also a price that represents a good return on investment for us, and more and more are real estate issues because the current value of commercial real estate is pretty far below where it was 4 or 5 years ago and that's an impediment some of the sellers and some of the transactions. But each acquisition is so incredibly different based on geography and brand that it's very hard to weave a common thread through them. And so it's hard for me to give you an intelligent answer on the question of integration.

James, this is John Rickel. Back to your question, customer-pay repair orders were up 2% in the quarter and dollars per repair order were up 5%.

Your next question is from Ravi Shanker from Morgan Stanley.

This is Yejay for Ravi. if we could jump back to used sales for a second, you mentioned that strong retail sales in 4Q and, of course, spawning increase in trade-ins may have helped your performance in that segment this quarter, as New Vehicle sales ramp up through the rest of the year and, ostensibly, trade-ins continue to improve, would you expect there to be some upside to used? Can we see this level of performance continue?

I don't know that we would expect something like 15% to 18% increase, these are sorts of things that we saw in many of our dealerships in the first quarter. But yes, I think, there's still excellent growth room in the used vehicle retail business in the U.S. market. The more trade-ins we get, that will -- I think we can be more competitive and have more attractive merchandise, and it should also give us a chance to do a little better on the margins and so yes, I believe that we would expect a strong used car market this year in addition to a strong new car market.

Got it. And sort of along the same lines, used retail pricing remains, for you guys, at near-record levels. But it looked like used wholesale pricing was down a couple of points. Could you comment a bit on that divergence? Are we may be seeing signs that used pricing will be in the normalized a bit going forward?

Well, most of the things that go to auction now, at least from our company, are really junk. I mean, and I think that's probably not just true of our company. I mean, we are trying to hold for retail every unit we are selling probably lower dollar value retail units and older model year retail units, higher mileage retail units than we have in our history. And its worked out pretty well for us so far, and we've upped margins on them and so forth. So I think you can assume that, if we are sending it to auction, it's not a very nice car.

All right. And considering on that same line, one final question. Despite sending what you would call the junkiest cars to auction, looks like your Used Vehicle wholesale gross margins were pretty good in the quarter, although it seems like, in recent years, it's been a trend that in the first quarter you guys are producing around the 4% level. Could you -- can you just help me understand what's going on there?

This is John Rickel. I think you know it is a factor. There is some seasonality to it. And it has been a pretty robust auction environment, so even stuff that we're sending that's not all of that desirable, we're still making small profits, though our main goal, as Earl indicated, is to try to retail as many of those as we can. So we made money at the auctions, we are obviously happy with that, but we're happier when we can keep them and retail them ourselves.

Well, if we're short of used car inventory, the entire used car industry, and all types of used car retailers, are short on inventory. So even those people attending auctions who are non-franchise, local, independent used car retailers, they're very aggressively looking for vehicles also.

If you look at it for a dollars per unit sold, we're basically flat with same period a year ago. We did 275 in 2011 first quarter, we did 270 this quarter, so that's pretty consistent from first quarter to first quarter.

Our next question is from Matt Nemer with Wells Fargo.

My first question is on the New Vehicle gross profit per unit. Had a little bit of an abnormal move down from the fourth quarter. It seems like the 2 quarters tend to be a little closer to each other. How do you think the trend plays out for the rest of the year? Does it hold it 1,900-ish or do you think we could go a little lower, as the mix shifts back to midline imports?

Matt, I think that the margin should stay within a reasonably tight band. I think it's fair to say that volume brand, volume increases that we might expect, Toyota, Honda, which we talked about, might put a little pressure down on the margin but also, I don't think any retailers in the U.S. had very many luxury vehicles to sell in the first quarter. BMW, Mercedes, Lexus -- so I would hope that there'll be a better availability as we move through the remainder of the year on those things. BMW, 3-Series, X3, X5, there are several Mercedes models that have been short. So I would hope that would be a tailwind that will help any headwind in the margins that we get from volume brands.

Is that something that you can see in your upcoming allocations or deliveries?

In terms of better availability?

Correct.

Yes, but I don't think we have enough visibility upfront to say that we know when we're going to be able to meet demand on a lot of those luxury models. And quite frankly, we don't get too upset about being a little bit short on luxury models, because that supply and demand relationship on these luxury brands has been pretty good. But it -- after December, there was a huge push by the luxury brands in December and, of course, Lexus still hasn't caught up. So we still aren't -- and I think dealers across the country still aren't anywhere near where they want to be on luxury brand inventory.

Okay, that's very helpful. And then turning to F&I performance. It looks like a lot of the strength, or the change in penetration was on the service contract side, if I'm reading your chart correctly? What's driving that, the growth in extended service contracts?

Hey, Matt. It's Pete. I think it comes down to training process. It's a menu-driven approach. We've really worked on making sure that the presentations are consistent across the company. I think the approach that the regional finance directors have worked with our general managers is paying dividends for us. So it's just been some good hard work in training and process.

Okay. And then lastly, on the SG&A expense side. There was some good leverage. One of the lines that did not leverage was personnel. I was just wondering if you could talk to that and if there had been any changes in com plans or anything else that may have been a temporary headwind.

Matt, this is John. The one thing that gets into you, especially in first quarter, is the payroll taxes. By fourth quarter, you basically, the higher compensated people, you kicked out most of your FICO obligations. That always resumes in first quarter. So that's one of the things that distorts first quarter numbers.

Our next question is from Craig Bernstein [ph] with McCallum Capital [ph].

Obviously there's a lot of reasons to feel good about the overall car market and Q2 remains to be seen. But thinking about Q1 in your unit comps, your new unit comp, maybe you can help us tie that back a little bit to inventory, particularly, at Toyota, Honda and BMW. And these are obviously something around the order of 40% of your business. And maybe you can help directionally helps understand how much was inventory down in those brands in the first quarter and how quickly would you expect that to ramp in Q2?

Well Toyota, in particular, if we look at our absolute inventory numbers for Toyota through the quarter, you wouldn't see anything that looked particularly low. But within that, particularly in January and February, there were some key model shortages. Prius got particularly popular with some new model introduction and higher fuel prices, SUVs and some trucks and things like that. But by the end of the quarter, we were starting to be probably in the best shape on Toyota that we've been since before the tsunami and so forth. Honda, obviously the new CRV is hot. There has been no shortage on Accords. But even some of the key Civic trim series were short as late as early March. And again, I think, with the exception of CRV which will probably remain sold out or near sold out for the foreseeable future, Honda inventories are likely to be pretty good in the second quarter. They caught up the latest. And BMW had such a strong close to last year in December, that I really don't know when the X3 was sold out almost since the new model launched, whenever that was. X5 has never really caught up and now with the launch of the new 3-Series, those are going out about as quickly as they come in. So I don't have a very good view as to the future when that would catch up there but I think the BMWs likely to run short much longer than Honda and Toyota, which appeared to be in pretty, pretty good shape at the moment.

Right. So shorter than maybe what demand might be. But you would still expect your inventories in those kind of key shortage -- where you're seeing shortages, you expect your inventory to be up year-over-year -- well, up sequentially relative to the first quarter. In other words, you have more inventory year-over-year in Q2 than you do in Q1? Than you did in Q1?

Yes. That's absolutely correct.

Our next question is from Brett Hoselton with KeyBanc.

I want to start off with just acquisitions and your thoughts on the remainder of the year. I know that you don't necessarily want to forecast or predict acquisitions and so forth, but you had about $150 million of revenue in the first quarter and I guess what I'm wondering is, is there any reason to believe that, that trend is going to materially increase or decrease going forward, in your mind? Or is that just kind of what the environment will bear at this point in time, in your mind?

Yes, it's just impossible to predict when you can get together with the seller. But clearly our top priority for our cash and investment is in acquisitions. So we would hope that number would be higher by the end of the year. And we've been in this mode for 18 months or longer since the recovery started. So our goal would be to add more than $150 million in annualized revenue this year, which is pretty much what we've already secured. That's really about all I can say. We're trying.

I'm really impressed with the Used Vehicle unit sales increase. I mean, just really nice job there. What is it -- I know that you're selling more value vehicle and various other things along those lines, but it just -- the number is quite impressive. And I'm wondering is it simply digging deeper into the value lines that is really driving that, trying to sell everything that you're getting over the curb? It also sounded -- and I kind of came into the call a little later on that you felt like your availability was a little better, given the amount of trade-in that you got into the first quarter and so forth. I mean, are these all the factors that are driving that or is there something else that's incrementally driving the very strong performance in terms of used unit sales?

Well, I think there's a factor on the market side that we can't take credit for. And then there's factor that our team does pretty well. And over the last 4 years, we've learned to use our technology a lot better and be more much more data driven and objective about how we move used cars around, how we acquire them and how we market them and so forth. But I also think, in this type of market, which still has a lot of unemployment and kind of recessionary pressure, even though it's not a recession, people are coming in to the markets from pent-up demand and because they need a car, and some of them buy new cars but there's still an awful lot of people who are looking at relative value propositions and are just a little conservative and say, well, maybe I'll just say 2- or 3-year-old used car, because they have the certified cars have a nice warranty or I can buy a service contract. So I just think the used part of the market is capturing a lot of pent-up demand. And I think over the years, we've gotten to be better and more efficient used vehicle retailers. So I think there's a -- our team side and a market site to that.

Yes, Brett. This is John. I would add to that, if it was really all about value vehicles, we wouldn't be able to continue to increase our average selling prices. We were up $657 on a year-over-year basis, which tells me it's not all about value. I think it's more along the lines of what Earl has described, and I think you probably underplayed a little bit the great job the guys have done on processes and really using the technology to do a good job driving our used retail sales.

Good point. And then retail financing availability. Generally over the past couple of years, seen some steady improvement there, even kind of down into the lower FICO scores and so forth. But my question is, going forward, do you anticipate that retail financing availability is going to continue kind of a steady increase we've seen over the past year or 2? Or is this a reason to believe that we may see some sort of an inflection point over the next month, 2 months, 6 months, that might cause maybe subprime to improve significantly?

I just have to admit that I haven't seen financing as a hindrance to retailing new or used vehicles in many, many months now. So I think there's a lot of aggressive parties supporting auto finance in the market now, not just the captives who generally do a super job, but the large commercial banks and all the way down through credit unions. So I don't think there should be any significant change up or down. I think financing is a real big part of the resurgence of the market. But I think it's been in place to a very competitive degree for quite a while now, back into last year. So I wouldn't see any big movements in the future.

We don't accept financing as an excuse from our people anymore that they didn't sell a vehicle.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Hesterberg for any closing remarks.

Thanks everyone for joining us today. We'll look forward to updating you on our second quarter earnings results in July. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.