Penske Automotive Group Inc PAG

Penske Focuses on Premium and Luxury Brands as Well as Daimler Trucks

Penske Automotive Group receives over 90% of its light-vehicle dealer revenue from import and luxury brands, led by BMW, Lexus, and Toyota. This percentage is significantly higher than many dealers and helps mitigate the cyclical nature of auto sales as these more-affluent customers won't limit their discretionary spending. Despite this wealthy customer, the firm's operating margin tends to be on the lower end of the publicly traded dealers. Penske gets less of its gross profit from higher-margin finance and insurance commissions than its peers, and selling, general, and administrative expenses as a percentage of gross profit can at times run higher than the other public dealers. Penske cannot get as much finance business—a 100% gross margin business—as its peers because more of its customers lease vehicles or pay cash. The firm leases nearly all its real estate, so when excluding rent, Penske's SG&A ratio is competitive.