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CORRESP

VIA EDGAR

September 12, 2007

Mr. William Choi

Branch Chief

United States Securities and Exchange Commission

Division of Corporation Finance

Mail Stop 3561

100 F Street, N.E.

Washington, DC 20549

    Re:

    AutoNation, Inc.

Form 10-K for Fiscal Year Ended December 31, 2006

Filed February 28, 2007

File No. 0-13107

Dear Mr. Choi:

We refer to the comment letter dated August 16, 2007 from the staff (the “Staff”) of the Division
of Corporation Finance of the United States Securities and Exchange Commission concerning the Form
10-K for the fiscal year ended December 31, 2006 of AutoNation, Inc. (the “Company”) filed with the
Commission on February 28, 2007 (the “Form 10-K”).

We have noted below the text of each of the Staff’s comments included in its comment letter,
followed by the Company’s response. The Company expects that it will revise its future filings as
noted in the responses indicated below.

General

Comment 1

In future filings, please include a ratio of earnings to fixed charges for your registered debt
securities. Please also include an exhibit to future filings to show the figures used to calculate
the ratios. Refer to Items 503(d) and 601(b)(12) of Regulation S-K.

Response

We note the Staff’s comment and hereby advise the Staff that we have not included a ratio of
earnings to fixed charges or the related exhibit in our Annual Report on Form 10-K, because we do
not have any debt securities registered under the Securities Exchange Act of 1934 (the “1934 Act”)
or any outstanding shelf registrations covering debt securities that incorporate future 1934 Act
filings. The exchange offer for our senior notes under the Registration Statement on Form S-4 (No.
333-136949) was completed in 2006. In the future, if we have debt securities registered which
incorporate future filings under the 1934 Act, we will include this table and the exhibit in
subsequent Form 10-K reports.

Mr. William Choi

United States Securities and Exchange Commission

September 12, 2007

Page 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 20

Reported Operating Data, page 23

Comment 2

When attributing increases or decreases in revenue or expense line items to multiple factors
contributing to material changes over the reported periods, please quantify the amount of the
increase or decrease attributed to each factor. For example, please revise future filings to
quantify the impact of:

    •

    Increased retrospective commissions received on extended service contracts,
higher new and used vehicle prices and increased premium luxury revenue per vehicle
retailed on 2006 finance and insurance sales;

    •

    The increase in compensation expense, decrease in advertising program
participation reimbursed by manufacturers, increase in non-reimbursed advertising,
and property damage costs on 2006 selling, general and administrative expenses; and

    •

    Additional debt incurred, the repurchase of your 9% unsecured notes, and
repayments of mortgage facilities on 2006 other interest expense.

For further guidance please refer to Item 303 (a)(3) of Regulation S-K and the Commission’s
Interpretative Releases on MD&A, Release 33-8350 and Section III.D of Release 33-6835, both of
which are available on our website at www.sec.gov. Please be advised that this comment should not
be limited to the examples provided, but should be applied to each category you discuss, as
practicable. Please include a draft of your proposed revisions with your response.

Response

Appendix A provides examples of how we will quantify in future filings the extent of contribution
from multiple factors where doing so is practicable and when doing so provides information that may
not otherwise be derived from information disclosed in the financial data tables. Discussions
about qualitative factors that contribute to our financial results will exclude quantification
where their effects on our financial statements cannot be readily determined. Examples of such
qualitative factors include the impact of the housing market on our sales and improvements in
finance and insurance revenues derived from a greater focus on certain training and certification
programs.

Mr. William Choi

United States Securities and Exchange Commission

September 12, 2007

Page 3

Financial Condition, page 32

Cash Flows from Operating Activities, page 34

Comment 3

Please revise future filings to focus on the primary drivers and other material factors necessary
to an understanding of your operating cash flows and the indicative value of historical cash flows
and the underlying reasons for changes in cash flows as well as their reasonably likely impact on
future cash flows. For example, we note that the decreases in inventory, vehicle floorplan
payable-trade, net, and other liabilities appear to have been primarily responsible for the 2006
decrease in operating cash, but you have not provided an analysis of these items to permit a reader
to understand the extent to which changes are the result of changes in the level of operations or
other factors. We also note that you did not include a discussion of cash flows from discontinued
operations. Please refer to Interpretive Release No. 33-6835, which is available on our website at
www.sec.gov.

Response

We will enhance our cash flow disclosures in future filings to further identify and discuss the
primary drivers and other material factors affecting cash flows. Future filings will also include
discussions of cash flows from discontinued operations for periods with material cash flows from
discontinued operations.

Contractual Payment Obligations, page 36

Comment 4

You disclose in note 8 to your consolidated financial statements that your operating leases require
payment of real estate taxes, insurance and common area maintenance in addition to rent. To the
extent that payments made for maintenance, insurance and taxes on your leased properties are
material, please include disclosures below the contractual obligations table to indicate that the
lease obligation amounts presented do not include these additional obligations. Since the table is
aimed at providing additional information that is material to understanding a company’s cash
requirements, you may want to disclose amounts paid in prior years for maintenance, insurance and
taxes in order to provide a context for the reader to understand the impact of these charges on
your total lease obligations. See Item 303(a)(5) of Regulation S-K and footnote 46 to SEC Release
No. 33-8350.

Response

We will supplement our contractual obligations table with additional disclosures regarding amounts
paid annually for maintenance, insurance and real estate taxes on our leased properties in future
filings.

Mr. William Choi

United States Securities and Exchange Commission

September 12, 2007

Page 4

Notes to Consolidated Financial Statements, page 47

Other
Current Liabilities, page 49

Comment 5

Please provide us with a list of the major categories included in this line item and their amounts
reconciled to the other current liability balances as of December 31, 2006 and 2005. In future
filings, please state separately, in the balance sheet or in your notes any item in excess of five
percent of total current liabilities. Refer to Rule 5-02-20 of Regulation S-X. If no categories
exceed five percent, please consider further disclosure of the contents of this balance due to its
significance relative to your current liabilities.

Response

Major categories included in this line item were (in millions):

    December 31,

    Description

    2006

    2005

    Accrued payroll and benefits

    $
    117.6

    $
    110.5

    Finance and insurance chargeback liabilities (1)

    63.2

    63.6

    Unrecognized tax benefits (2)

    58.7

    54.5

    Accrued sales taxes

    55.1

    59.2

    Liabilities related to discontinued operations (3)

    25.7

    120.4

    Current income taxes (2)

    —

    88.5

    Other (4)

    219.2

    220.1

    TOTAL

    $
    539.5

    $
    716.8

    (1)

    The Company sells certain types of finance, insurance and protection products and receives a
commission or other income on such products, all of which are administered by third parties.
Pursuant to the Company’s arrangements with these third parties, certain commissions and other
income earned for the sales of finance, insurance and other protection products are subject to
chargeback should the contracts be terminated prior to their expirations. This amount
represents the current portion of reserves established for chargebacks against revenues
recognized from sales of these finance and insurance products. Please see “Revenue
Recognition” in Note 1 to our Consolidated Financial Statements (page 51 of our December 31,
2006 Form 10-K).

    (2)

    Please see Note 11 to our Consolidated Financial
Statements (pages 61-63 of our December
31, 2006 Form 10-K) for disclosures regarding current income taxes and unrecognized tax
benefits.

    (3)

    Represents the liabilities of our discontinued operations, comprised of vehicle floorplan
payables and other miscellaneous current liabilities. Please see Note 13 to our Consolidated
Financial Statements (pages 63-64 of our December 31, 2006 Form 10-K).

    (4)

    Other includes all other categories, none of which individually exceed $40 million.

Mr. William Choi

United States Securities and Exchange Commission

September 12, 2007

Page 5

We note that none of the categories above exceed 5% of total current liabilities as of December 31,
2006 or 2005. We additionally note that the nature of our other current liabilities is discussed in
Note 1 to our Consolidated Financial Statements (page 49 of our December 31, 2006 Form 10-K).

* * * * * * * * * * * * * *

In connection with responding to your comments, the Company acknowledges the following:

    1.

    The Company is responsible for the adequacy and accuracy of the disclosure in the
filing.

    2.

    Staff comments or changes to disclosures in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing.

    3.

    The Company may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the United States.

Please
address any questions to me at (954) 769-3145 or via facsimile at
(954) 769-6425.

Sincerely,

/s/ Michael J. Stephan

Michael J. Stephan, Vice President and Corporate Controller (Principal Accounting Officer)

    cc:

    Michael J. Jackson, Chairman and Chief Executive Officer, AutoNation, Inc.

    Michael J. Short, Executive Vice President and Chief Financial Officer, AutoNation, Inc.

    Jonathan P. Ferrando, Executive Vice President, General Counsel and Secretary, AutoNation, Inc.

    Hector Mojena, KPMG LLP

    Jonathan Awner, Esq., Akerman Senterfitt

    Appendix A — Examples of proposed changes to future narrative discussions are marked as noted below.

     Parts and Service

    Years Ended December 31,

    ($ in millions)

    2006 vs. 2005

    2005 vs. 2004

    Variance

    Variance

    Favorable/

    Favorable/

    2006

    2005

    (Unfavorable)

    % Variance

    2004

    (Unfavorable)

    % Variance

    Reported:

    Revenue

    $
    2,600.4

    $
    2,508.5

    $
    91.9

    3.7

    $
    2,366.9

    $
    141.6

    6.0

    Gross profit

    $
    1,141.4

    $
    1,100.0

    $
    41.4

    3.8

    $
    1,036.7

    $
    63.3

    6.1

    Gross profit as a
percentage
of revenue

    43.9
    %

    43.9
    %

    43.8
    %

    Same
Store:

    Revenue

    $
    2,572.7

    $
    2,508.5

    $
    64.2

    2.6

    Gross profit

    $
    1,126.8

    $
    1,099.9

    $
    26.9

    2.4

    Gross profit as a
percentage
of revenue

    43.8
    %

    43.8
    %

Parts and Service

     Parts and service revenue
 is primarily derived from vehicle repairs paid directly by the
customers or via reimbursement from manufacturers and others under warranty programs. Reported
parts and service revenue and gross profit benefited from the impact of acquisitions when compared
to same store performance.

     Same store parts and service revenue and gross profit increased during 2006 compared to 2005
due to a $38.7 million increases in
customer-paid work revenue for parts and service, a $17.7 million
increase in and wholesale parts revenue, a $10.4 million increase in revenues associated with the
preparation of vehicles for sale, and smaller increases in other
parts and service revenues , p. Partially offsetting
these by a
increases was a $23.5 million decrease in warranty
business revenue. Warranty declines were driven in part
by improved quality of vehicles manufactured in recent years, as well as changes to certain
manufacturers’ warranty and prepaid service programs. The improvements to customer-paid are
attributable to our service drive process, maintenance menu and service marketing program, as well
as our pricing models and training programs. Additionally, during
2006 we experienced an 5.1%
increase in parts and service revenues and a 6.1% increase in gross profit related to volume
imports and premium luxury vehicles, compared to flat revenues and a 1.2% decrease in gross margin
related to parts and service for domestic vehicles.

Finance and Insurance

    Years Ended December 31,

    2006 vs. 2005

    2005 vs. 2004

    (in millions, except per

    Variance

    Variance

    vehicle data)

    Favorable/

    Favorable/

    2006

    2005

    (Unfavorable)

    % Variance

    2004

    (Unfavorable)

    % Variance

    Reported:

    Revenue and gross
profit

    $
    634.3

    $
    601.0

    $
    33.3

    5.5

    $
    590.8

    $
    10.2

    1.7

    Gross profit per
vehicle retailed

    $
    1,066

    $
    986

    $
    80

    8.1

    $
    961

    $
    25

    2.6

    Same
Store:

    Revenue and gross
profit

    $
    632.3

    $
    600.5

    $
    31.8

    5.3

    Gross profit per
vehicle retailed

    $
    1,067

    $
    985

    $
    82

    8.3

     Reported finance and insurance revenue and gross profit benefited from the impact of
acquisitions when compared to same store performance.

     During 2006, same store finance and insurance revenue and gross profit benefited from a $12.3
million increased in retrospective commissions received on extended service contracts, as well as
higher new and used vehicle prices and increased premium luxury revenue per vehicle retailed.
Improvements were also driven by our continued emphasis on training and certification of store
associates, particularly in third and fourth quartile stores, and on maximizing our preferred
lender relationships.

Operating Expenses

     Selling, General and Administrative Expenses

     During 2006, selling, general and administrative expenses increased $64.1 million, or 3.1%.
As a percentage of total gross profit, selling, general and administrative expenses increased to
71.1% in 2006 from 70.4% in 2005. Increases in selling, general and administrative expenses in
2006 compared to 2005 are primarily due to an $48.3 million increase in compensation expense,
including $15.2 million of non-cash compensation expense related to the adoption of SFAS No. 123R
for stock options during 2006. Additionally,and
increased advertising expenses increased $15.4 million,
resulting from a $6.4 million increase in gross advertising expenditures and a $9.0 million
decrease in advertising program participation
reimbursedments from by
manufacturers and an increase in non-reimbursed advertising..
In 2005, selling, general and
administrative expenses included $10.5 million of property damage costs related to Hurricane Wilma.

Other Interest Expense

     Other interest expense was incurred primarily on