AutoNation invests in online retailer Vroom

AutoNation, the nation’s largest auto retailer, is investing in Vroom, one of the largest online retailers of used cars.

Fort Lauderdale-based AutoNation on Tuesday said it has invested $50 million in New York-based Vroom, which gives it an ownership stake of 7 percent and further extends AutoNation’s focus on preowned vehicles.

“We think it’s a good investment as a first step, and we’ll see where it leads,” CEO Mike Jackson said on CNBC’s “Squawk Box” on Tuesday.

While AutoNation also sells online, “there’s plenty of opportunity for both,” with a preowned market of about 40 million vehicles a year, Jackson said during a phone interview with the Sun Sentinel.

He also said AutoNation’s used vehicle business “was up significantly” in the third quarter that ended Sept. 30, and he expects that trend to continue as interest rates rise.

“There’s an affordability issue that’s on the table, and many customers are choosing preowned rather than new,” said Jackson, who also is chairman of the Federal Reserve Bank of Atlanta.

On Tuesday, AutoNation also announced it earned $112 million, or $1.24 a share, in its third quarter compared with $98 million, or $1 a share, in the same quarter last year.

Earnings were not affected by Hurricane Michael’s damage to AutoNation’s store in Panama City, which still has not reopened, Jackson said. Several of the store’s 90 employees lost their homes in the Category 4 storm in mid-October.

“It has been devastating to our associates,” Jackson

said. AutoNation set up a fund through its foundation to help those who lost homes, offering a company match to donations.

Same-store profits in the quarter were $838 million compared with $824 million in the year-ago period, driven by auto repair and service and financial services, AutoNation said.

Total quarterly revenue was $5.34 million compared with $5.43 million in the same period a year ago.

Domestic and luxury car

sales decreased 3 percent and 2 percent, respectively, during the quarter, while imports increased 5 percent, AutoNation said.

In 2016, AutoNation began moving to a “no haggle, one price” strategy at its dealerships nationwide and expanding its brand with new auto service centers and a focus on used vehicles.

Last year, AutoNation announced a maintenance partnership with Alphabet’s self-driving startup Waymo, and recently expanded it to offer Phoenix, Ariz., customers the use of a Waymo self-driving vehicle

while their car is serviced at an AutoNation dealership.

In September, Jackson announced a planned transition to the executive chairman position in 2019 and the company’s search for a new CEO and president.

AutoNation closed Tuesday at $40.46 a share, down $1.72 or 4.08 percent, in New York Stock Exchange trading. The stock’s 52-week range is $37.64 to $62.02 a share.