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CORRESP
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corresp

August 23, 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 the comment raised in your August 4, 2005 letter to James Davidson,
Chief Financial Officer of United Auto Group, Inc. (the “Company”). For ease of review we have
reproduced your original comment.

    1.

    We note you include the changes in your floor plan notes payable as an
operating activity on the statement of cash flows. Please tell us how this operating
activities classification is consistent with paragraphs 21-24 of SFAS 95 and why
financing activities classification is not more appropriate. Borrowings and repayments
on floor plan notes payable for new and used vehicle inventory should be classified in
financing activities when inventory is purchased from a manufacturer unaffiliated with
the lender, similar to obtaining external financing through a line of credit or other
borrowing facility. When the lender is affiliated with the manufacturer, those
borrowings and repayments should be included in operating activities similar to
accounts payable treatment. See paragraph 23a of SFAS no. 95. Also, note that Rule 5-02
(19)(a) of Regulation S-X requires separate and clear balance sheet display of amounts
payable to trade creditors and amounts payable for borrowings.

    Essentially all of the inventory acquired by the Company using floorplan notes payable
is provided through facilities sponsored by finance subsidiaries of automobile
manufacturers, and the preponderance of such vehicles are acquired by our franchised
dealerships utilizing finance subsidiaries of the vehicle manufacturer for the franchise
which is acquiring the inventory. In limited circumstances, we finance the purchase of
inventory utilizing the finance subsidiary of a manufacturer other than the manufacturer
for the franchise which is acquiring the inventory. Our decision to utilize a floorplan
facility other than that offered by a manufacturer for a particular franchise relates
primarily to efforts to minimize costs or streamline transaction processing in offices
that account for the activities of more than one franchise. The floorplan facility we
utilize does not alter the process of, and has no substantive impact on the economics
of, the Company’s vehicle procurement activities.

    In the retail automotive industry, floorplan notes payable are a universally accepted
method of financing the accounts payable associated with the acquisition of vehicle
inventory held for sale. The Company strongly believes that, regardless of the
manufacturer floorplan facility utilized to acquire our inventory, classification of all
floorplan activity as an operating activity in our cash flow statement is appropriate
and in accordance with the intent of SFAS No. 95, based on the following rationale:

    •

    The incurrence of floorplan notes payable represents an activity
necessary to acquire inventory for resale, resulting in trade payables
as contemplated in paragraph 23a of SFAS No. 95 as opposed to traditional
lines of credit or other borrowing facilities as contemplated in Paragraph
18 of SFAS No. 95. As a result the Company has historically accounted for
all floorplan financing as accounts payable, with all changes in
floorplan payables considered to be operating in nature and not a financing source of cash flows. This treatment is
consistent with the accounting followed by our peer group. Please
refer to the filings of AutoNation, Sonic Automotive, Group 1 Automotive,
Lithia Motors and Asbury Automotive Group.

    •

    The floorplan financing source pays the supplier
directly for vehicles acquired by our franchised dealerships. As a result the Company does not realize any cash flows
relating to such vehicles until they are sold. At the time of sale, the
Company receives an operating cash inflow from the customer and pays the
floorplan provider for the inventory with the proceeds from the sale, which
represents the offsetting operating cash outflow. If we were to reflect the
 payment to the floor plan provider as a
financing cash flow when the inventory purchase has been financed through a
 finance subsidiary of a
manufacturer other than the manufacturer for the franchise acquiring the
inventory, the Company would never reflect an operating cash
outflow as it relates to the purchase of those vehicles. We believe such
a presentation would be misleading and would not provide users of the
financial statements a comprehensive understanding of our operations.

    •

    The major terms of the floorplan borrowings are similar regardless of the
manufacturer financing institution (e.g. collateral requirements, repayment
terms, interest rates, etc.). It is the Company’s belief that different cash
flow classification for a portion of what is essentially the same
transaction is inconsistent with the intent of SFAS No. 95.

    Additionally;

    •

    Standard & Poor’s rating methodology relating to the public automotive
retail sector also views floorplan financing as trade payables rather than
debt. This is based on their belief that there is a ready market offered by
the manufacturers and commercial lending institutions for these types of
programs, the high loan to value ratio of floorplan notes payable, and the
fact that manufacturers typically offer various forms of subsidies that
largely offset the borrowing costs associated with floorplan facilities.

With respect to Rule 5-02 (19)(a) of Regulation S-X, the Company believes that our
current presentation of floorplan notes payable appropriately reflects the nature of
such liabilities as trade payables related to the acquisition of inventory for resale in the
normal course of business.

Sincerely

James R. Davidson

Executive Vice President — Finance

Cc: Robert Kurnick