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CORRESP
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corresp

June 10, 2005

Michael Moran, Esq.

Branch Chief

Securities and Exchange Commission

Washington, D.C. 20549

    Re:

    UnitedAuto Group, Inc.

    File No. 1-12297

    Form 10-K for the year ended December 31, 2004

Dear Mr. Moran:

Following is a response to
each of the comments raised in your May 20, 2005 letter to James
Davidson,
Chief Financial Officer of United Auto Group, Inc. (the “Company”). For ease
of review, we have reproduced your original comments.

General

    1.
    Where a comment below requests additional disclosures or other revisions to be made,
these revisions should be included in your future filings, as applicable.

    The Company addresses each of the staff’s comments as outlined below.

Critical Accounting Policies, page 21

    2.
    We note your disclosure regarding your intangible assets, specifically your analysis of
franchise value. In this regard, please explain what analysis you performed with respect
to customer relationships. What consideration was given to customer lists maintained with
respect to advertising, which have intrinsic value? Compare and contrast these potential
repeat customers to your goodwill impairment testing when projecting future cash flows. We
may have further comment.

    When the Company acquires a retail automotive dealership, it evaluates a variety of factors
including the franchise being acquired, its location, local market demographics, the
manufacturers’ estimate of market potential, and the dealership’s historical earnings
profile. The identity of individual customers is never a consideration in the Company’s
acquisition decision, nor is it a factor in the negotiation of the purchase price for the
dealership. This is due in part to the nature of the retail automobile business, including
the fact that the identity of a substantial portion of any dealership’s customers is available
from the manufacturer and the fact that the customers have no contractual relationship with
the dealership that would require them to have a continuing relationship with the
dealership. As a result, the Company does not believe that customer lists obtained in
connection with the acquisition of a retail automotive dealership have intrinsic value that
is separable from the acquired franchise.

    The Company believes the retail automobile business is
highly competitive, with most
customers shopping based upon brand and price. The vast majority of the Company’s
dealerships are located in large metropolitan areas, which generally include multiple
franchises for each individual brand. Consequently, consumers have a wide variety of
choices when shopping for an automobile. Consumers can easily comparison shop within and
among brands, and generally make their purchase based upon the price of their desired
vehicle.

1

    One of the keys to operating a successful dealership is to maintain a sufficient level of
customer traffic. Manufacturers create product awareness and demand through national and
regional advertising campaigns. Our dealerships create customer traffic through general
advertising in mass media. Very little of our advertising expenditure is directed towards
individual customers.

    With respect to the projection of cash flows in connection with our goodwill impairment
testing, the Company does not specifically consider repeat versus new customer revenues.
Such cash flows are based upon historical and budgeted results adjusted by modest overall
growth assumptions.

    3.
    Consider disclosing sensitivities associated with your goodwill impairment testing. For
example, if interest rates were to materially increase, sales could be negativity impacted,
which would likely impact the value of your goodwill.

    The Company will expand its disclosure relating to goodwill impairment testing in future
filings to include language consistent with the following:

    The fair value of our reporting units is determined using a discounted cash flow approach
which includes assumptions regarding revenue and profitability growth, residual values and
the cost of capital. If future events and circumstances cause significant changes in the
underlying assumptions which result in a reduction of our estimates of fair value, the
Company may incur an impairment charge.

Overview Page 20

    4.
    Please advise and revise filings to disclose how you are accounting for the promotional
activities with respect to Sirius Satellite Radio and the impact on the financial
statements. Address the 20 million warrants to purchase Sirius Satellite Radio common
stock.

    Pursuant to the terms of our arrangement with Sirius Satellite Radio, the Company’s domestic
dealerships endeavor to order a significant percentage of eligible vehicles with a factory
installed Sirius radio. The Company and Sirius have also agreed to jointly market the Sirius
service under a best efforts arrangement. The Company’s costs relating to such marketing
initiatives are expensed as incurred. As compensation for its efforts, the Company received
warrants to purchase Sirius common stock that vest ratably on an annual basis over a
five-year period. The vesting of these warrants may accelerate based on the Company
attaining specified subscription targets. The Company also received additional warrants
which vest upon the Company achieving specified volume targets pertaining to specified
brands.

    The Company accounts for the warrants in accordance with EITF 00-8, pursuant to which
Company measures the fair value of the warrants on the date of our performance commitment,
which the Company has determined to be the date the warrants vest as there are no
significant disincentives for non-performance. Since the Company can reasonably estimate the
number of warrants that will vest pursuant to the ratable vesting schedule, the estimated
fair value (based on current fair value) of those warrants is being recognized ratably during
each annual vesting period. Since the Company cannot reasonably estimate the number of
warrants that will vest subject to the specified volume targets, the fair value of those
warrants is being recognized upon vesting.

    The Company will revise future filings to add disclosures consistent with the language
above.

2

Results of Operations, page 23

    5.
    In future filings, please add a footnote to your tables explaining how you determine
“same store.”

    In future filings we will add disclosure to explain that same store comparisons are made
only when the results of the acquired entity have been consolidated during the entirety of
the periods being compared. As an example, if a dealership was acquired on January 15, 2003,
the results of the acquired entity would be included in quarterly same store comparisons
beginning with the second quarter of 2004 and in annual same store comparisons beginning
with 2005.

Liquidity and Capital Resources, page 29

    6.
    Please disclose the significant covenants of your credit facilities and the indenture
governing your senior subordinated notes. Please also disclose the effects of noncompliance
with covenants. In addition please discuss the extent of headroom in the financial
covenants of your credit facilities and the likelihood of your compliance for the
foreseeable future.

    We will expand our disclosure in future filings to include the significant covenants
relating to each debt instrument, the effects of non-compliance with such covenants, and to
provide managements’ assessment of then current facility headroom and the likelihood of our
compliance with financial covenants for the foreseeable future, where appropriate.

Contractual Payment Obligations, page 31

    7.
    Please include scheduled interest payments in your table of contractual obligations.
Estimates of future variable rate interest payments may be included or excluded provided
you include appropriate disclosure in a footnote to the table. Refer
to Item 303(A)(5) of
Regulation S-K

    We will include scheduled interest payments in the table of contractual obligations in
future filings. If the Company elects to exclude variable rate
interest payments from the table, it will make appropriate disclosure
in a footnote to the table.

Related Party Transactions — Other Transactions, page 32

    8.
    Please advise and prospectively disclose the amount of gain, or loss, associated with
sales of real property which you lease back from related parties.

    The Company advises the staff that it is infrequent that we have a gain or loss on a sale
and leaseback to a related party. In the case of land sales, we generally sell and lease
back the property concurrent with our purchase of the property. In the case of buildings
and leasehold improvements, we generally sell the assets at our cost following construction.
During the three years ended December 31, 2004, we had three such transactions that resulted
in gains, each of which was immaterial and was deferred at the time of sale and is being
recognized over the life of the related lease.

    We will disclose the amount of material gains or losses associated with future sales of real property to
related parties in future filings.

3

Item 7A. Quantitative and Qualitative Disclosures about Market Risk, page 36

    9.
    We note that you purchase vehicles from foreign manufacturers. If significant, please
disclose any exchange rate changes subsequent to year-end and its effects on unsettled
balances related to foreign currency transactions. Please refer to paragraph 32 of SFAS No.
52.

    All of our subsidiaries, including our U.S. subsidiaries, purchase virtually all of their
inventories in the subsidiaries’ functional currency. Changes in exchange rates subsequent
to year-end and the related effects on unsettled balances related to foreign currency
transactions were not significant.

    Furthermore, please explain to us your procurement process with respect to new foreign
vehicle purchases. In this regard, explain if your US dealerships are purchasing these
foreign vehicles from a US functional distribution center, or if they are purchasing these
foreign vehicles in foreign currencies directly from the manufacturer. If purchases are made
in foreign currencies, advise us of what consideration was given to disclosing all relevant
impacts associated with such purchases in your results of operations. For example, discuss
impacts on margins associated with a declining dollar, which increases your purchase price,
and related inventory values, and costs of good sold.

    Our U.S. subsidiaries purchase all of their inventories in U.S. dollars. Our foreign
subsidiaries purchase virtually all of their inventories in the subsidiaries’ functional
currency. As a result, we do not have significant foreign currency exposures in connection
with the procurement of inventory.

    Finally, please enhance your market risk disclosure to discuss changes in the US dollar. For
example, provide an overview of what happens to your business when the dollar declines
relative to foreign currencies, such as impacts to revenue, and your margins.

    We do not believe that changes in the U.S. dollar versus the functional currencies of our
foreign operating subsidiaries (primarily the British Pound and the
Euro) have any meaningful impact on the fundamentals of the
operation of our business. Such changes have an impact on our reported revenues, but would
not materially affect our operating margins. We will add disclosure in future filings to
describe the effect of a 100 basis point change in average exchange rates versus the U.S.
dollar on our annual revenues.

Consolidated Statements of Income, page F-9

    10.
    Please explain to us what comprises Other Income of $11,469 for the year ended December
31, 2004. In this regard, we note it relates to a gain on the sale of an investment from
your cash flow statement.

    Other income of $11,469 relates solely to gains arising in connection with the sale of our
investment in Universal Technical Institute (“UTI”). Our investment in UTI was accounted for
as being available for sale pursuant to SFAS No. 115. The shares were sold in the
2nd
and 3rd quarters of 2004.
This gain is included within Other Income pursuant to Rule 503 (B)(7)
of Regulation S-X.

Consolidated Statements of Cash Flows, page F-6

    11.
    Prospectively, report the effect of exchange rate changes on cash balances held in
foreign currencies as a separate part of the reconciliation of the change in cash and cash
equivalents during the period. See paragraph 25 of SFAS No. 95.

    We will report the effect of material exchange rate changes on cash balances held in foreign
currencies as a separate part of the reconciliation of the change in cash and cash
equivalents during the period in future filings.

4

Note 1. Summary of Significant Accounting Policies

Intangible Assets, page F-14

    12.
    Please explain why your changes in goodwill and franchise value do not reflect any
impairment associated with sales of discontinued operations. In this regard, we note that
you test for impairment at the reporting unit level, although, this should not preclude you
from testing goodwill associated with a disposal unit, or individual dealership, when you
classify the dealership’s assets as held for sale. See paragraph 39 of SFAS No. 142. We may
have further comment.

    The disposal by us of a franchise typically meets the definition of a business as defined in
EITF 98-3. As such, goodwill associated with that business is included in the carrying
amount of the business in determining the gain or loss on disposal. The amount of goodwill
included in that carrying amount is based on the relative fair value of the business being
disposed of to the portion of the reporting unit being retained, in accordance with SFAS No.
142. Virtually all the dealerships we have disposed of during the last several years
represent components of an entity for which the operations and cash flows were eliminated
from the ongoing operations of the Company. As such, these dispositions qualify for
discontinued operations treatment and have been reported in the
Company’s financial statements pursuant to SFAS No. 144. At the time a dealership is
designated as held for sale, its carrying amount, including goodwill and franchise value, is
compared to its estimated fair value less cost to sell. If the estimated fair value is less
than the carrying amount, a loss would be recorded at that time. The January 1, 2004
goodwill and franchise value amounts in footnote 1 on page F-14 have been restated to
reflect discontinued dealerships as assets held for sale as of January 1, 2004.

Investments page F-14

    13.
    Please explain to us in detail your equity method investments, including the dollar
amount of the investments. Also tell us the percentage amount of your voting interest where
it is different than the percentage ownership interest reflected in Note 11. For each
entity where your ownership interest is 50% or more, please explain to us the specific
factors relied upon in concluding that the equity method was the appropriate accounting. We
may have further comment.

    Following is a summary of the Company’s investments accounted for using the equity method:

    12/31/04

    12/31/04

    Ownership

    Voting

    Investment (in

    Location

    Interest

    Interest

    Accounting Treatment

    thousands)

    Munich, Germany

    50.00
    %

    50.00
    %

    Equity method

    $
    505

    Frankfurt, Germany

    50.00
    %

    50.00
    %

    Equity method

    $
    8,556

    Mexico

    48.70
    %

    48.70
    %

    Equity method

    $
    2,020

    Mexico

    45.00
    %

    45.00
    %

    Equity method

    $
    1,285

    Tulsa

    50.00
    %

    50.00
    %

    Equity method

    $
    14,222

    The Company exercises significant influence over operating and financial policies in