Used Car Dealers
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 23,700 used car dealers in the US sell pre-owned vehicles purchased from the general public and other sources. Unlike new car dealers, used car dealers generate little revenue from maintenance and repair services. Most firms outsource service agreements to a third party.
High Cost of Inventory
The used car dealer industry is capital intensive with most firms requiring outside funding to build inventory, which accounts for 55-59% of total assets.
Shift to Digital
The COVID pandemic accelerated the shift to digital transactions in the used vehicle dealer industry.
Industry size & Structure
The average used car dealer operates out of a single location, employs 6-7 workers, and generates $7.2 million annually.
- The used car dealer industry consists of over 23,700 firms that employ 183,600 workers and generate $169.5 billion annually.
- The industry is concentrated at the top and fragmented at the bottom; the top four companies account for about 20% of industry revenue.
- Large firms include CarMax, DriveTime, and America’s Car-Mart. AutoNation and Penske Automotive Group also have used car dealerships.
Industry Forecast
Used Car Dealers Industry Growth
Recent Developments
Mar 19, 2025 - Used Car Supply Down; Interest Rates Up
- Used car dealers face growing headwinds as Q1 2025 draws to a close, with the industry still struggling from issues of dwindling vehicle supply and high interest rates on car loans. The supply scarcity comes from the lingering pandemic-induced shortage of new car production, which ripples down to the used market with less older cars being traded in. Three-year-old vehicles (usually lease trade-ins) are the sweet spot for used car sellers and buyers - they are still relatively new and usually have a couple warranty years left. But prices on those vehicles rose 3.3% year over year in Q4 2024 per comparison car shopping site Edmunds. Stubbornly high interest rates are also depressing used car sales, making them feel almost as expensive as a new car for many consumers. Used car loans average from about 8 to 10%, almost double what it was five years ago, according to Auto Spies.
- Used car dealerships enter 2025 facing headwinds of high used-car prices and scarce inventory, according to the US Department of Labor. Used car and truck prices rose 2.2% from December 2024 to January 2025 with inflation keeping used vehicle prices above average. The problems can be traced back to the pandemic, when inventory shortages spurred auto makers to pull back on vehicle leasing in favor of more profitable outright purchasing. That strategy only exacerbated the used car inventory problem since consumers increasingly kept cars after their three-year leases expired rather than trade up for an expensive new model. Cox Automotive estimates that auto returns of expiring three-year leases will fall about 23% this year to a decade low. The supply problems keep used car prices high with the average wholesale price for a used automobile hovering around $28,000 in early 2025, up 45% over the last five years.
- Wholesale prices for used vehicles increased 0.4% in January over the previous month, per the Manheim Vehicle Value Index, which rose to its highest level since late 2023. With prices up, sales of used cars have also been robust. Software company vAuto estimates January 2025 used car sales increased 6.2% from the previous month and were 15% higher year over year. The average listing price also increased in January by 1.3%. According to Manheim, major used auto market trends year over year in January included luxury vehicles having the most growth at 2%, just ahead of SUVs at 1.2%. On the flip side, compact cars faced the biggest segment decline at 3.4%; trucks fell 2.1%; and mid-sized sedans dropped 1.6%.
- Consumer prices for used cars and trucks fell 3.3% in 2024, according to the Consumer Price Index by the US Bureau of Labor Statistics. Employment by used car dealers declined 1.6% in November 2024 year over year, while average wages for nonsupervisory employees grew 6.1% during the same period, reaching $24.92 per hour. Producer inflation for used vehicle dealers fell nearly 2% in December 2024 compared to a year ago, according to producer price data from the US Bureau of Labor Statistics. Prices on used cars came down in 2024 after COVID-induced supply chain problems on all new automobiles increasingly forced consumers to rely on the used car market instead, which also faced a shortage.
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