David Smith; Chairman of the Board, Chief Executive Officer; Sonic Automotive Inc
Heath Byrd; Chief Financial Officer, Executive Vice President; Sonic Automotive Inc
Good morning, and welcome to the Sonic Automotive third-quarter 2024 earnings conference call. This conference call is being recorded today, Thursday, October 24, 2024. The presentation materials, which accompany management's discussion on the conference call, can be accessed at the company's website at ir.sonicautomotive.com.
At this time, I would like to refer to the Safe Harbor statement under the Private Securities and Litigation Reform Act of 1995. During this conference call, management may discuss financial projections, information or expectations about the company's products or market or otherwise make statements about the future. Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission.
In addition, management may discuss certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Please refer to the non-GAAP reconciliation tables in the company's current report on Form 8-K filed with the Securities and Exchange Commission earlier today.
I would now like to introduce Mr. David Smith, Chairman and Chief Executive Officer of Sonic Automotive. Mr. Smith, you may begin your conference.
Thank you very much and good morning, everyone, and welcome to Sonic Automotive's third-quarter 2024 earnings call. Again, I'm Dave Smith, the company's Chairman and CEO. Joining me on the call today is our President, Jeff Dyke; our CFO, Heath Byrd; our Echopark Chief Operating Officer, Tim Keen; our Vice President of Investor Relations, Danny Wieland.
We would like to open the call by sincerely thanking our amazing teammates for continuing to deliver a world-class guest experience for our customers. Our EchoPark automotive teammates have once again earned the top spot as the number one pre-owned automotive dealer and guest satisfaction ranked by Reputation.com and our Sonic Automotive franchise teammates continue to achieve among the highest customer satisfaction scores in our company's history.
Our teammates are truly living our Sonic purpose to deliver an experience for our guests and our teammates that fulfills dreams, enriches lives, and delivers happiness. We believe our strong relationships with our teammates, our manufacture and lending partners, and guests are key to our future success. And as always, I would like to thank them all for their support and loyalty to Sonic Automotive team.
Our company remains focused on our ability to adapt to changing market dynamics in the near term, while positioning Sonic to achieve our long-term strategic goals. I'm pleased to report that we continued to make great progress in our EchoPark segment performance in the third quarter, reporting an all-time record quarterly gross profit, segment income, and adjusted EBITDA.
Overall, the Sonic Automotive team continued to execute at a high level despite operational disruptions related to the functionality of certain CDK customer lead and inventory management applications as well as manufacturers stop-sale orders in certain key brands amid the continuing normalization of new vehicle margins and increased vehicle production. Third-quarter GAAP EPS was $2.13 per share. And excluding the effect of certain items, as detailed in our press release this morning, our adjusted EPS was $1.26 per share, a 38% decrease year over year, due primarily to the continued normalization of new vehicle GPU and the carryover effects of the CDK outage in July.
Our reported results for the quarter included a $31 million tax benefit associated with an out-of-period adjustment, correcting an error recorded in connection with the impairment of franchise assets in a prior period. In addition, as a result of the business disruption caused by the CDK outage, we estimate that our third-quarter GAAP income before taxes was negatively impacted by approximately $17.2 million, or $0.36 in diluted earnings per share, which includes approximately $1.8 million or $0.04 in EPS related to excess compensation paid to our teammates who had reduced income potential due to the CDK outage.
Turning now to third-quarter franchise dealership trends, we saw stability in average new vehicle inventory levels, ending the third quarter with 57-day supply of inventory, in line with the day supply at the end of the second quarter after accounting for the CDK-related sales disruption at the end of Q2. Third-quarter same-store new vehicle GPU was $3,049 per unit, down $540 per unit from the second quarter.
The rate of new vehicle GPU decline accelerated somewhat in the third quarter due primarily to larger GPU headwinds from electric vehicle sales compared to the second quarter and the effects of stop-sale orders on certain high-margin models. However, we are affirming our guidance to exit the fourth quarter in the low $3,000 range due to the seasonal benefits of our luxury weighted portfolio in the fourth quarter.
Looking beyond 2024, we continue to believe that the new normal level of new vehicle GPU will remain structurally higher than it was pre-pandemic, normalizing in the $2,500 to $3,000 per unit range in 2025. Additionally, our teams continue to work closely with our manufacturer partners to manage their vehicle inventory levels and better align powertrain options with evolving consumer demand, which should benefit inventory day supply, floor plan interest costs, and new vehicle GPU.
In the used vehicle market, wholesale auction prices for three year old vehicles increased nearly 1% during the third quarter, while our franchise dealerships' average retail used pricing decreased 1% compared to the second quarter, driving a sequential decrease in used GPU to $1,386 per unit on a same-store basis. Elevated used retail prices remain a challenge for consumers, contributing to affordability concerns amid the current interest rate environment. However, the return to normal seasonal trends in used vehicle wholesale pricing are positive for our business outlook, and, when combined with potential further interest rate cuts, should begin to benefit affordability and used vehicle sales volume in 2025.
In the meantime, our team remains focused on driving incremental used inventory acquisition and retail sales opportunities, driving upside in this line of the business alongside the expected normalization of used car pricing and volume over time. Our F&I performance continues to be a strength despite elevated consumer interest rates, with strengths to our franchised F&I GPU of $2,339 in the third quarter, down 3% year over year, but well above historical levels.
The continued stability of F&I in this level supports our view that F&I per unit will remain structurally higher than pre-pandemic levels, even in a challenging consumer affordability environment. Our parts and service or fixed operations business remains very strong, with an 8% increase in same-store fixed ops gross profit in the third quarter We're very proud of the success our team has had in this area, and we believe there are remaining opportunities to grow our fixed ops business as we finish 2024 and looking ahead to 2025.
As we have previously discussed, in March, we launched an initiative to increase our technician headcount by a net 300 techs in 2024, which we expect will contribute an additional $100 million in annualized fixed ops gross profit. To date, we have increased our technician headcount by a net 216 techs and [paste], adding 15 net techs per week in the last few weeks, positioning us to achieve this goal as we approach the end of 2024.
Turning now to the EchoPark segment, we're very excited to report all-time record quarterly EchoPark segment adjusted EBITDA of $8.9 million, consistent with our previous guidance for a seasonally strong third quarter. For the third quarter, we reported EchoPark revenues of $545 million, down 13% from the prior year, and all-time record quarterly EchoPark gross profit of $55 million, up 5% from the prior year. Echopark segment retail unit sales volume for the quarter was approximately 17,800 units, down 7% year over year, but up 7% sequentially from second quarter, outpacing the industry growth rate of 2% sequentially from the second quarter.
On a same market basis, which excludes closed stores, EchoPark retail unit sales volume was up 2% year over year, revenue was down 3%, and gross profit was up 21%. EchoPark segment total gross profit per unit was $3,111 per unit, up $344 per units year over year and up $33 per unit from the second quarter despite marginal increases in used wholesale market pricing as a result of improving inventory sales velocity and higher F&I gross profit per unit. EchoPark used vehicle day supply finished the third quarter at 33 days compared to 38 days at the end of the second quarter, which was faster inventory turns benefiting GPU.
As discussed on our previous earnings calls, the reductions to our store footprint since the first quarter of 2023 allowed us to better allocate inventory across the platform, driving higher unit sales volume per rooftop, better total variable GPU, and improved overall profitability. Our unwavering confidence in EchoPark's long-term potential has allowed us to weather the challenges in the used vehicle market in recent years, and we believe our performance in the third quarter demonstrates a tremendous opportunity for this brand.
A third consecutive quarter of positive segment adjusted EBITDA for EchoPark validates the strategic adjustments we made over the past few quarters, and we look forward to resuming disciplined long-term growth for EchoPark as used vehicle market conditions continue to improve over the next several quarters.
Turning now to our powersports segment. For the third quarter, we generated revenues of $59.4 million, gross profit of $17.7 million, and segment adjusted EBITDA of $5.8 million. As expected, the powersports selling season accelerated in the third quarter, and this year's Sturgis Rally was an overwhelming success, benefiting from the new processes and technology we recently began to integrate into the segment.
We continue to focus on identifying operational synergies within our current powersports network while fine tuning our operating playbooks. In the near term, we look forward to finalizing the implementation of our refined F&I sales strategy, centralized marketing and inventory management, and the recent roll out of sonicpowersports.com. While we are taking a disciplined approach to expansion in this segment, we remain optimistic about the future growth opportunities in this adjacent retail sector when the time is right.
Finally, turning to our balance sheet, we ended the third quarter with $834 million in available liquidity, excluding unencumbered real estate, and $418 million in combined cash and floorplan deposits on hand. We continue to maintain a conservative balance sheet approach, with the ability to deploy capital strategically as the market evolves. Additionally, I'm pleased to report today that our Board of Directors approved a 17% increase to the quarterly cash dividend to $0.35 per share, payable on January 15, 2025, to all stockholders of record on December 13, 2024.
As you can see in the investor presentation we released this morning, we have updated certain limited financial guidance for 2024 following our third-quarter results. We continue to believe that our lower franchise dealership segment earnings can be at least partially offset by significant improvements in EchoPark's segment results, returning to positive EchoPark segment adjusted EBITDA for the year, and setting the stage for continued growth in 2025 and beyond. In closing, our team remains focused on near-term execution and adapting to ongoing changes in the automotive retail environment and macroeconomic backdrop while making strategic decisions to maximize long-term returns.
Furthermore, we continue to believe our diversified business model provides significant earnings growth opportunities in our EchoPark and powersports segments that may help to offset any in any industry driven margin headwinds we may face in the franchise business, minimizing the earnings downside to our consolidated Sonic results over time. We remain confident that we have the right strategy, the right people, and the right culture to continue to grow our business and create long-term value for our stakeholders.
This concludes our opening remarks, and we look forward to answering any questions you may have. Thank you.
Operator
(Operator Instructions) John Murphy, Bank of America.
John Murphy
It's a couple, but just a very simple one, and I apologize there's a lot of earnings and noise today. So just trying to understand. When you think about the adjusted EPS on an operating basis that you want folks to focus on ex-CDK storms and stop-sale, what do you think is the correct number? Because I think there's some questions about comparability to what the consensus number was, and we may have had this off so I just want to get clear on this.
Heath Byrd
Real quickly on the CDK impact, we are estimating it's around $17 million, so $0.33 impact by the CDK and BMW is $2.6 million impact for this quarter, and that's $0.05 of EPS. So a total between the two is [$0.38].
John Murphy
Okay. That's incredibly helpful. I think you're being a little -- I mean, was there any storm impact? I mean, what was sort of the net of the storms? I know that's always hard to tease out, but is there something you could give us on storms, Heath? Or do you think that's not big enough?
David Smith
I first like to say that we were very, very fortunate none of our teammates were hurt, and we did have some damage. But I think Jeff Dyke has color on that for you.
Jeff Dyke
Yes, John, we were prepared. And unfortunately, David says off that we're getting really good at this unfortunately. And so we're really prepared. We didn't lose any inventory. We had one air-conditioning unit on top of a store that had an issue. But overall, it did not really slow us down, either of the storm.
John Murphy
That's that's good to hear from a people and property perspective. Just quickly on the GPUs, you highlighted that EVs -- stop-sale is a weight, but EVs are certainly a weight. Can you give us a breakdown of EV versus ICE new GPU, if you can? I'm [not] sure you'll want to disclose quite that level of detail, but we'd love to hear it.
Heath Byrd
Yes, I've got a couple of numbers of the headwinds related to EVs. In Q1, it was a $400 headwind to the funding GPU. Q2 is $170 headwind to new GPU, and Q3 was $440.
John Murphy
And that difference in the second quarter of the incentives were much higher, in particular on the West Coast with certain luxury brands that helped the GPU and the headwinds there. Those incentives lessened in the third quarter, and therefore you saw kind of a return to normal that we saw in the first quarter.
Heath Byrd
If you look at the difference sequentially, I think it's $530, $540. About half of that is related to the EV, the incremental. So $270 was EV, the other $270 was from normal price.
Danny Wieland
And John, this is Danny. If you look at slide 8 in our deck, we've got the relative GPU broken out between EV hybrid and ICE by our luxury import and domestic. And you can see that hybrid is equal to or better than ICE across that platform. And EV is still significantly underperforming. And there's no structural reason why in the same price point in EV, a hybrid or an ice vehicle should make a different GPU.
It's all about the imbalance of supply and demand. And so while we've seen some improvement in days supply of EV relative to demand, we still had a 15% of our inventory with EV while only 10% of our sales. So we're still relatively oversupplied. And I think the OEMs are moving in the right direction. We've just got some work to do.
John Murphy
And do you think they're going to step back in with those kind of (inaudible) that they actually had in the second quarter? Or is it still head in the sand kind of stuff?
Jeff Dyke
There are some aggressive incentives out there. BMW is really aggressive right now. That's a lot just to do with the inventory buildup because the stock sale in the third quarter. Mercedes continues to be decently aggressive on EVs. So I expect the fourth quarter, in particular, with the stock sale and BMW -- I mean you look at October for us, our BMW business on fire, were up plus 20%. And I expect that to continue on into the November and December time frame as well. So it should be a great fourth quarter.
John Murphy
Great. And then just one last one on 300 techs, I mean the run rate sounds like it's pretty awesome and 15 a week, and that's pure gravy. I mean, it's not pure gravy, but it's a lot of gravy there. As you think about the potential beyond those 300 techs, could you keep going? Do you think there's any reason that you couldn't keep going in that 15 per week or some pretty hot pace? And is there any issue with actual stall capacity and adding folks at this point?
Jeff Dyke
Yes, it does become an issue over time, but we'll add more stock capacity. It's the best capacity -- the best thing we can do at a dealer (inaudible) to add install capacity, right? And so yes, once we change the culture in the stores and got everybody to leaving that we needed more techs, that's one of the big things, not so much you can't go out and get a technician. You got to get the culture in the store to want more technicians because technicians are working in the stores, they'll want you to hire more technicians, right? There's more food to the storms.
Once we got that changed in the stores, that's made a big difference for us. And now we're beginning to see the -- really the doors open and things unlock for us. So, sure, that could continue on in the first quarter. We'll probably get the 300 techs hired in this calendar year, take a little breather do a much better job of retaining our technicians than we've done in the past and really kind of shift our focus there. And then we can grow from there.
But the fixed operations business is just fantastic. And of course, warranty probably be to grow in all that with BMW. But customer pays there, too. And so '25 should be fantastic. The fourth quarter is going to be great from a fixed ops perspective, and we'll see how things go from there.
Operator
Rajat Gupta, JPMorgan.
Rajat Gupta
I just wanted to follow up on John's question there. BMW, I think you mentioned just $2.5 million impact? I mean, that seems much lower than what we would have thought given the stop sales. Is that net of like any recovery you might have seen on the recall side? Or were you just able to get more out the door?
And just curious like what happened if you could dissect that a little more? And then just on CDK, are you able to give us what kind of unit impact it had with new and used for the quarter or maybe just in July, that would be helpful. And I have one or two quick follow-ups.
Jeff Dyke
Yes. The BMW impact, it's 500, 550 cars somewhere in there during the quarter, from a new car perspective, and obviously, preowned business as well. Our team did an outstanding job selling what we could sell, getting the vehicles that were on stop-sale sold, but waiting for the part to come in. And that's why we're seeing the huge increases that we're seeing, and we will see for October and November.
I also tip my hat to BMW. I mean they were faced with a very difficult situation. They did an amazing job communicating with us. And really, we're on top of this. So all the way around, we just executed at a really high level.
We're getting good at this kind of stuff. And we've got a great (inaudible) BMW team, and those 15 stores really did just an amazing job getting us through that time. So we expect it to be a little bit tougher, too, to be honest with you, but our team raised up and did their job, and we got a lot of cars sold during the period. Again, it really cost us about 500, 550 units. That's not the end of the world, and we're certainly going to make all that up in the month of October.
Do you want to --
Heath Byrd
This is Heath. On new units, we calculated that the impact was [$482 million] on new units, GPU was down about [$370] on new, and used units was [$920], with it impacting our (inaudible) GPU $153. We also obviously -- our F&I as well because trying to do deals very quickly, and that was around $124 on the side for GPU.
Rajat Gupta
Understood. And then just on BMW, for the fourth quarter, you obviously -- you talked about the October sales. Is there going to be like a big pickup on the service side as well, moving forward?
Jeff Dyke
Yes. We still have about 25% or so of the inventory that needs to be corrected. The warranty business will continue to grow, and then we'll make up what we couldn't get done from a CP perspective. So it's going to be a really good BMW quarter, and it should be a great quarter overall. The business is there.
And now with no recalls really going on in CDK and whatever else was thrown at us during the last couple of quarters, we're able to operate without any of those distractions. And so we'll see what we can do in the fourth quarter.
Rajat Gupta
Understood. And just like on SG&A to gross for the fourth quarter, you obviously have a full year guidance that's been pretty consistent through the course of the year. The year-to-date numbers look better than expected, you typically see a seasonal drop in the fourth quarter always just given how the comp structure works. Curious anything to keep in mind here, specifically given like all the changes around BMW that are happening? How should we think about changing to growth in the fourth quarter (inaudible)?
Heath Byrd
I think we always have like a better SG&A to growth in the fourth quarter because we're very -- over 50% luxury and the fourth quarter is always big for us. So you should continue to see that kind of drop. But our guidance would be the same in the low 70s for the franchise. And of course, EchoPark. You may note that we changed our guidance there, we're guiding in the 80s and now we're guiding in the high 70s. As well of the performance you've seen. But yes, the normal seasonality, you'll see some of that, like you always have in the fourth quarter.
Operator
Jeff Lick, Stephens.
Jeff Lick
With respect to the new units in Q3, given your brand mix and the fact that you're operating pretty dark in your CRM because of CDK. I was a bit surprised plus two same-store units, can you talk about why it was as good as it was, because it's quite an outlier based on what your brand mix said it should have been.
David Smith
This is David. I'd like to take that opportunity. It's kind of a layup because it's -- our teammates, the way our organization is structured, our teammates really did a fantastic job. We talked about our guest experience a lot. Our tenure, we've got a lot of veteran leaders. And that has a huge amount to do with it. We actually knew, and we talked about it on our operations calls that when the CDK issue hit, we talked about our teammates are going to step up and deliver and they did.
Jeff Dyke
Yes. And I would add to it, this is Jeff, Jeff. I would add to it. Honda, we did a great job with Honda. The import brands did very well. I mean a little tight on inventory with Toyota. The luxury brands were strong. Even BMW. I mean, on a year-over-year basis, I think we were down [100-some 3%] or something like that. So we really did a great job there.
And then luxury, I mean then in the domestic business, Ford and GM flat. Slants continues to be a case study for the universities in this country and how to screw up the number of brands the brands that they have, it's just amazing. We're selling a lot of cars, and they played a big role. I mean, we're selling -- we're now starting to sell a bunch of vehicles for (inaudible), but at the end of the day, the margins are absolutely horrible. And it's because of the overday supply. We woke up in July, and August had 1,000 more cars than we did the prior year on the ground.
And they're really paying you. They're couponing you to buy cars, instead of really giving the incentives to the consumers and doing things away, we're supposed to do it today. So ultimately, good volume pretty much across the board in luxury and in import in domestic. And we look forward to that really continuing on in particular with our luxury mix in the fourth quarter.
Heath Byrd
And this is Heath. I don't think you mentioned it -- we had a lot of good volume with Mercedes. So I think Mercedes took that opportunity to have some conquest, you get some of that market share from BMW, but we had a really good quarter with Mercedes.
Jeff Dyke
Yes, up 700-plus units for the quarter.
Jeff Lick
And then just a follow-up on the servicing parts and the technicians. Given your service and parts same-store sales up 7%, it implies you're getting good growth, how much incremental business do you think you're losing because of the technician -- I don't know if you want to refer to it as a shortage, but how much business do you think you're leaving on the table?
Jeff Dyke
It's [$20,000 to $23,000] in gross per technician per month for (inaudible). You can do the math right there on the 300, that tells you what's out there in terms of our ability. That's a $100 million number we've been talking about. And so you annualize that for next year, it ought to be a fantastic fixed operations year for us, along with our focus on growing market share by job code.
That's something we've been working on now for over 1.5 years. And those two things are really driving the business. And we've got great customer satisfaction scores to go along with that. Pretty much green KPIs with all of our manufacturer partners. It's also been a huge focus for us. And so I expect that to continue on into '25. Huge, huge upside there for us.
Operator
Chris Pierce, Needham & Company.
Chris Pierce
I just had two quick ones on EchoPark. What's the right way to think about retail gross profit per unit at EchoPark? I think you did around [$300] per quarter in the first two quarters, [$250] this quarter. Is that just because of better days to sale because of better demand and inventory was tight and that will kind of normalize to closer to 0 based on the model? Or should we model in modest retail gross profit per unit?
Jeff Dyke
Are you talking about front-end gross?
Chris Pierce
Yes, that's right.
Jeff Dyke
Yes. So the theme that we saw in the third quarter and a lot because of the storms is valuations. We are buying cars in the low $23,000 range at the auctions. Valuations moved up in the last few weeks anywhere the last month in the upper $23,000 range. And that's going to provide some gross compression as we move into the fourth quarter. And I think you'll see that. But then I think as we move into the first quarter as traditional seasonal numbers slow for pre-owned, we'll see increases in our PUR and that will flow very similar to what it did for '24 and '25.
Heath Byrd
I think it's important to note that if we look at -- let's look at the Denver market, we see the value of brand equity. In that market, they average over $200 higher than our other locations of GPU and they're actually performing higher than their pre-COVID numbers as well. And so we definitely believe, as I think we mentioned that trough hitting in 2025 of inventory use once that starts heading back up, we think it's going to be a perfect opportunity for a EchoPark.
David Smith
This is David. And simply to keep in mind in the third quarter, we did in around about 325 to 330 cars per store with our existing EchoPark stores. And if you look at what we were doing and the potential for additional capacity to do around 550 cars per store with the existing stores. So you talked about technician capacity. We'll look at where we could go and where we expect to go with our EchoPark volume in addition to the GPU, as you were talking about.
Jeff Dyke
Yes, it's Jeff. One of the great things to look at is just that average selling price. We really want to get down to the $20,000 to $21,000 range for selling. We're in the [$23,000 to $24,000] range now. When we get down there and we get that average payment down below $400 and interest rates continue to fall, the numbers that David spoke of, we had north of 500 units on average per store per month.
Our big stores now in Denver, they're doing 800, 900 to 1,000 a month. And a lot of that is the brand equity that we have in the market for being open as long as we've been. But it's just nothing but upside. It will be a great '25. And as the lease returns come back and prices continue to fall a little bit in the back half of '25, we see room for margin improvement on the front end. A lot of volume improvement, and then we can begin talking about rooftop growth.
Danny Wieland
And this is Danny. One more point on that. From a margin perspective on the vehicles, we're tracking $350, $375 better year over year on a full-year basis, despite the fact that used car pricing is coming down, obviously, wholesale retail spreads have widened and that's good for the business. But we see it reported where used car price declines expected through the remainder of this year into '25 could be a headwind for the used vehicle business. And to Jeff's point, it improves affordability. We've improved margin in the face of that decline in used retail price environment. So it's positive for us on both fronts.
Jeff Dyke
Yes. In auto retail, you can't get fooled by revenue because average retail selling price is dropping, but margins stay the same or as being said, improve, we sell more cars, we grow overall growth. So sometimes when people look at revenue, revenue can move around a lot. You're selling a $30,000 versus a $20,000 car. But if you make more money in the $20,000 car, you'd rather sell the $20,000 car. That's something that we focused on very hard that we do very well, and we've obviously done great with EchoPark in this calendar year.
Chris Pierce
All right. That was a lot of detail, but could you actually go a little bit deeper just on Denver? I guess I want to make sure I understand. When I think about the model, I think about buying car at auction and selling it for minimal gross profit and the gross -- you make the gross profit on the financing F&I side of the world. But I think maybe I've been underestimating how much you actually can do on front-end growth?
And why is Denver better from a front-end gross perspective? And will other stores look like that? It's just because cars stay on a lot less there because you've been there longer or you can still price below your competitors but make $200 front-end gross and still be well below competitors? I just kind of want to make sure I think about the model correctly.
Jeff Dyke
Yes. We've just been more mature in Denver. We've got a great brand awareness, a lot of repeat customers. We've been open since November 2014 there. And that's the whole idea is to take what we've done in Denver and grow that.
We not done the brand marketing in the other markets because of affordability issues over the last three or four years with COVID, that will all change as we move sort of out of '25 and into '26. And that affords us the ability to sell vehicles in the positive $200, $300, $400 range on the front, which is still way below the market. And still drives a lot of traffic for us, along with having nearly $3,000 a copy $2,900 a copy in back-end margin, you put those things together, you have a 500-unit average volume on a rooftop basis or in the big stores, 1,000, and it's a printing machine. It's fun to watch. And that's what we're seeing.
That's what we said all along. The last few years have been really tough because we've had huge losses. But we hung in there while a lot of others bowed out understandably so. But we know our model. We know that it works very, very well and the environment that's ahead of us EchoPark was built for that environment, and we look forward to the lower prices coming.
Chris Pierce
Okay. And then perfect. And just lastly, on a EchoPark, where are you as far as inventory where you are now and kind of where you want to be into tax refund season and just kind of broadly on a normalized basis?
Jeff Dyke
In terms of day supply?
Chris Pierce
Yes.
Jeff Dyke
Yes, we're right where we want to be. We're 20 days on lot, 10 to 12 days in the pipeline and will increase as volume increases, that 20 days obviously generates more units on lot, as volume decreases, we bring our inventory level down. But we say 20 days on lot 10 to 12 in the pipeline. And that's where you'll see us stay.
Chris Pierce
Is there any metrics that you have that you could share that show that 20 days is actually x number of units? I imagine as you take share in the market, that 20 days is more units, but you're turning them over faster. Is that --
Jeff Dyke
Yes, that's correct. The more cars we're selling, the more units are on the lot. So if you just take a store to sell in 1,000, you can do the math pretty easily. You're going to have that 20-day supply on the lot to turn for that 30-day period.
Operator
(Operator Instructions) Bret Jordan, Jefferies.
Patrick Buckley
This is Patrick Buckley on for Brett. And you just touched on this a bit. But looking ahead for the EchoPark eventual expansion and ramping up the footprint again, it sounds like that's an early 2026, and 2025 event, I guess, what sort of market conditions are you looking for? And how quickly can that ramp back up?
Thomas Keen
Yes. This is Tim Keen. We believe over the next 12 to 18 months, it will get what we would call normalized pre-COVID conditions, supply will be where we want it, and we'll be able to supply additional growth with the levels of inventory that we're experiencing now. So sometime in early '26, we believe the conditions will be perfect for growth.
Jeff Dyke
Yes. And I'll add to that. Then very disciplined growth from our perspective. So our goal is still to have 90% coverage of the country, but we'll do that in a very disciplined way. And really, it's just a matter of getting an average payment down to [$400 million] and below [$400 million].
That's where we really see the volume start to fly off the shelf. So we're thinking the back half of '25 is when we'll start seeing the prices get down into that range. We'll put plans together. We have plans. We've got properties that we own already that we've sort of hibernated, if you will, and we're just waiting for the right time to pull the tracker.
Patrick Buckley
Great. That's helpful. And then could you guys talk a bit more on where you see F&I trending in '25. I know in your slides, you called out 2,400 GPU and you're talking about stability there. But I guess are you seeing any signs of headwinds from increased leasing or just general pushback on add-ons? Or I guess on the flip side, as the macro improves and you see rate cuts, is there upside there?
Jeff Dyke
Look, I would sort of model in the range that we're in now. And I think it's rate cuts, yes, there is some upside there. I mean, we're not -- there are other big consolidators that have higher PURs than we do. And while we're at the top of the group, we're chasing those and think that we can perform at those levels as well. We think there's opportunities with warranty and product sales. And obviously, as margins drop and rates drop, and we have an opportunity to grow more there. So average retail selling price drops, we can carry more costs from a lender perspective. So yes, we think there's upside. But if I'm modeling or model in and around kind of where we are today.
Operator
And there are no further questions at this time. So I'll hand the floor back over to David Smith for closing remarks.
David Smith
Great. Thank you very much. Thank you, everyone, for logging in joining us, and we look forward to speaking with you next quarter.
Operator
Thank you. And that concludes today's call. All parties may disconnect. Have a good day.