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 23,300 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 58% to 63% 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 7-8 workers, and generates $7 million annually.

    • The used car dealer industry consists of over 23,000 firms that employ 183,600 workers and generate $165 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
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Jan 15, 2024 - Used Vehicle Prices Fall in December
                              • A new forecast from JD Power-Global Data US Automotive Forecast projects the average used vehicle price to fall over 2% to $29,413 in December 2023 year over year, according to Still, the average remains 28.7% higher than pre-pandemic levels. Consumers are also seeing a decline in trade-in equity, reaching an average of $8,521 in December, a drop of $780 over a year ago but still double the amount pre-pandemic. According to JD Power’s Thomas King, the moderation in pricing is expected to continue in 2024, with higher expected retail inventory levels and anticipated interest rate cuts.
                              • Certified pre-owned (CPO) sales grew nearly 4% year over year in November 2023 and were slightly down from October, according to a Cox Automotive report in NIADA. CPO sales year to date through November are up 7.6%, with CPO sales averaging more than 200,000 per month. According to Chris Frey of Cox Automotive, “Some wind has come out of the sails this quarter compared to sales between April and September. Still, at no time this year have monthly sales been below 200,000, with the monthly average hovering above 219,000 compared to almost 206,000 in 2022.”
                              • Lower consumer spending, lingering supply challenges, and inflation are expected to limit growth in the US used car dealers industry, which is projected to grow at a nearly 3% CAGR from 2022 to 2027, according to a recent Inforum forecast. This rate is slower than the projected growth of the overall economy. The slowdown follows industry volatility during the pandemic in 2020 (-3.4%), 2021 (29.5%), and 2022 (-0.11%).
                              • Consumer confidence levels rose in December 2023 for the second month in a row, following three consecutive months of declines, according to data from The Conference Board. The Conference Board’s consumer confidence index increased to 110.7 in December 2023 from 101 in November 2023. According to Dana Peterson, Chief Economist at The Conference Board, “December’s write-in responses revealed the top issue affecting consumers remains rising prices in general, while politics, interest rates, and global conflicts all saw downticks as top concerns.” Peterson added that the gains in consumer confidence were largest in householders aged 35-54 and households with income levels of $125,000 and above. Plans to purchase homes, autos, and large appliances rose moderately on a month-to-month basis as interest rates moderated.
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