And I don’t want to constraint being the fact that — we don’t have enough used vehicles to meet the demand. So it’s always a balance, but it’s not a change in strategy.
Daniel Imbro: Perfect. That’s helpful color. And then maybe just a follow-up on the new side. Inventory, obviously, is still tight at 26 days, but GPUs were under a bit more pressure than expected. Is that just a certain brand mix issue that kind of pulled down the sequential step down in GPUs relative to the one day in inventory? Just trying to help better understand the sensitivity of maybe how quickly GPUs will compress as inventory build from here given that move this quarter sequentially.
Mike Manley: No, I don’t think that — a number of things are happening on these. You talked about affordability on used vehicles. You have the same impact on new vehicles. And as availability picks up, obviously, maintaining momentum in the new vehicle market is important. So net transaction prices are clearly coming down. Some of that was expected from a margin compression. And frankly, I think where we’re at is probably better margins than I expected coming into the year, which is why I made the statement that I think margin compression will continue, but won’t reach the levels certainly in this year, in my opinion, that we saw pre-pandemic. So what I would say is that — and by the way, that’s also — on the OEM side, the increase we saw in incentives, the move to leasing are all about affordability issues, all about maintaining momentum in the new vehicle market.
I think that there is — I think that there are plenty of tools available to maintain that going forward. But it’s driven by not just improved supply of inventory, but it’s also driven by making sure that some of the issues and pressure on affordability are mitigated in certain ways. So as I said, we expect to see ongoing mitigation and margin, but not the levels yet that we saw pre-pandemic.
Operator: Our next question comes from Rajat Gupta from JPMorgan. Rajat, your line is now open. Please go ahead.
Rajat Gupta: Great. Congrats Joe on the new role. I had a first question on parts and services. The growth there accelerated from 1Q to 2Q, both revenue and gross profit. Are there any specific areas you would attribute that to? Is it just a broader industry strength? Was there anything AutoNation specific, perhaps RepairSmith is begin to contribute. If you could just get a little more granularity there would be helpful. And I have a follow-up.
Mike Manley: Yes, it’s Mike. I think there are really three things in play. The first thing goes back to some of the things that we’re talking about before, and that’s being really looking at the penetration of our franchise businesses in the areas that they’re responsible for. And recognizing that is the branded vehicle park, which is the primary target for a franchise dealership offers a lot of opportunity in exactly the same way and you consider market share. So it’s really the team’s focus very much on where is our service and parts market share, where do we want to take it. That leads you to the second part, and that is you have the capacity. We certainly have the physical capacity because OEMs for many, many, many years, oversized their dealerships, which means that we have physical capacity already paid for and installed.
And we’ve been very focused on increasing our human capacity to be able to take advantage of improvements in penetration. But the real effect that we’re seeing, I think, is a return to — obviously, you’ve got more miles driven. You’ve got longer ownership of vehicles. And therefore, there is more work being done on a per vehicle basis. So it’s a combination of those things that have delivered the result. You’re not seeing the effect of RepairSmith yet. That will take some time to be integrated into the business, as we’ve said on many occasions. But our focus on those three areas that I touched on is what’s driving it. And hopefully, we’ll continue to drive it for a little while, yes. .
