...June 3, 2026 This report does not constitute a rating action. We forecast gross profit and margins will decline slightly over the next couple years. Despite lower new vehicle gross profit per unit (GPU) in 2025, AutoNation's gross margins remained flat due to the strength of margins in its parts and service business. Our economists project U.S. light vehicle sales will decline 3% in 2026 amid an expected rise in the unemployment rate and a lack of the pre-buying ahead of the implementation of tariffs that boosted sales in 2025. This will likely further pressure AutoNation's new vehicle GPU. However, we anticipate the company will benefit from continued strength in its parts and service segment. In addition, we expect used vehicle profitability to improve over the next couple of years due to increasing off-lease volumes. We now project S&P Global Ratings-adjusted EBITDA margins of about 5.2%-5.3% in 2026-2028, down slightly from 5.5% in 2025 as the company invests at a slightly higher level...
