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

                              Mar 22, 2024 - Employment Falls, Wages Rise
                              • Employment by used car dealers fell at the end of 2023, while wages increased, according to data from the Bureau of Labor Statistics. While employment was up by almost 4% since before the pandemic, it declined 3.5% in December 2023 from the previous year. Wages, meanwhile, were up 20% since pre-pandemic levels and up 6.3% in December 2023 compared to the previous year, per the BLS. Additionally, consumer spending levels showed a slight upward trend in the first nine months of 2023, according to personal consumption expenditures data from the Bureau of Economic Analysis.
                              • Consumer confidence levels fell in February 2024 after increasing for three consecutive months, according to data from The Conference Board. The Conference Board’s consumer confidence index fell to 106.7 in February 2024 from 110.9 in January 2024. According to Dana Peterson, Chief Economist at The Conference Board, “The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the US economy. The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000.” Peterson added that the decline in consumer confidence was largest in householders over 55 and those under 35. Plans to purchase homes, autos, and large appliances decreased slightly on a six-month basis.
                              • 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 UsedCarNews.com. 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 6.6% year over year in 2023, exceeding 2.6 million units, and outperformed the used-vehicle market, according to a Cox Automotive report. Luxury CPOs played an important role, accounting for 24% of all CPO sales. In 2024, CPO sales are expected to reach 2.7 million units, up 3% from 2023. The used vehicle market is beginning a recovery period that is limited by supply and affordability. According to the report, limited production between 2020 and 2022 has “led to a scarcity of prime, available CPO products despite strong demand.”
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