But Carl Spielvogel, the former adman who's chairman-CEO of United Auto Group, doesn't seem concerned.
"The key in the used-car business doesn't depend on how many locations you have," he says. "The key is how much money you make."
United Auto is looking to sell not just cars but other auto-related features such as service, parts, warranties and finance. Its wholly owned subsidiary, Atlantic Finance, makes car loans to credit-worthy buyers.
Company founder Marshall Cogan, who later this month will succeed the resigning Mr. Spielvogel as chairman, says all United Auto's used-car stores offer a 132-point car inspection and a "security blanket" guarantee that lets customers return vehicles in 15 days for exchanges.
Unlike its main competitors, United will negotiate on used-car prices.
United Auto opened its first used-car outlets in early 1996, ahead of key competitor Republic's AutoNation USA but behind Circuit City Stores' CarMax. As of early March the New York-based company had eight free-standing used-car superstores in four states and 51 new car dealerships, with used-car areas, in 11 states.
The new-car dealerships feed the used-car system. United Auto's used-car stores sell mostly 2- or 3-year-old, off-lease vehicles, and manufacturers only invite the retail chain's new-car dealers to their off-lease car auctions. But United is experimenting with older cars and trucks retailing for $5,000 or under at its Jersey City, N.J., used outlet.
Geographically, the company's stores are clustered. United Auto has four used-car stores in Arkansas, two in Georgia, and one in both New Jersey and Connecticut.
"We have five to six [new] dealerships per hub," Mr. Cogan says.
The system provides economic benefits for advertising and operations, says Mr. Cogan, who describes the new-car stores as the "backbone of our used operations."
He says the company plans to continue growing via acquisitions, mostly on new-car dealerships.
Unlike other superstore chains, United Auto prefers to lease rather than own their facilities because of cost advantages and the riskiness of real estate.
When United Auto wanted to open a free-standing used-car store in Little Rock, Ark., it leased a shuttered restaurant that already had a paved, lighted parking lot. Mr. Spielvogel, who will be a consultant with United Auto through 2000, says the company spent $86,000 setting up the lot and turned a $65,000 profit the first month with about $180,000 in operating costs.
United Auto's 1996 pro forma revenues totaled $1.6 billion last year and are expected to hit $4 billion by 2000. Used-car sales are expected to account for 45% of total sales by 2000, up from 27% in 1995.
The company continues to use the names of the various, well-known dealerships it has acquired because the local dealers have high consumer recognition. There's no national United Auto advertising tagline, but all communications carry the company's name. Mr. Cogan says.
To address each market's nuances, the company uses local ad agencies that report