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(Reuters) - U.S. auto dealer Asbury Automotive Group Inc (ABG.N) posted a better-than-expected quarterly profit as easier availability of loans amid an improving economy encouraged more people to buy cars.
Asbury's shares jumped as much as 13 percent after the company reported an increase in sales of both new and used cars during the fourth quarter.
Last year was the auto industry's best since the boom times before 2008, and several executives and analysts expect the industry's growth to continue outpacing the overall U.S. economy as it has since the recession.
Sales rose to their best month in six and a half years in November due to aggressive discounting, helping Asbury post a 13 percent jump in fourth-quarter revenue.
But growth in new car sales has been bumpy over the last few months across the industry, forcing retailers to focus more on their used cars business.
Asbury's used cars business will grow faster than new car sales in 2014, Asbury Chief Executive Craig Monaghan told Reuters in an interview.
Asbury's used-car sales jumped 24 percent in the quarter ended December 31. (r.reuters.com/hez56v)
Much of that growth was driven by eased lending norms for subprime borrowers. Lending to such borrowers had dried up since 2008.
The number of loans given to subprime buyers to buy both used and new cars rose in the third quarter, according to Experian Plc, which tracks credit information and data on vehicles in North America.
"We believe the automotive retail environment will remain healthy in 2014 as more customers take advantage of the extremely attractive financing options to replace their aging vehicles with the many exciting new vehicles available today," Monaghan said in a statement.
Asbury earned 88 cents per share from continuing operations on an adjusted basis in the quarter. Analysts on average had expected 82 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 13 percent to $1.37 billion, topping the average analyst estimate of $1.33 billion.
Net income rose to $26.9 million, or 87 cents per share, in the fourth quarter, from $22.8 million, or 73 cents per share, a year earlier.
Asbury's shares were up 7.7 percent at $48.95 in afternoon trading on the New York Stock Exchange on Tuesday.
Reporting by Mridhula Raghavan in Bangalore; Editing by Savio D'Souza and Saumyadeb Chakrabarty