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 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 6-7 workers, and generates $7.2 million annually.

    • The used car dealer industry consists of over 23,700 firms that employ 163,000 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
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              May 22, 2024 - Used Car Sales Up
                              • Used car sales rose almost 5% in April 2024 compared to a year ago, reaching 1.4 million used vehicles, according to Cox Automotive data in Auto Remarketing. While year-over-year sales were higher, used car sales were 7% down in April 2024 from March 2024, which analysts attributed to tax refund season winding down. Year to date, used car dealers have sold 5.7 million vehicles compared to 5.6 million vehicles in the previous year. According to Jeremy Robb, senior director of economic and industry insights at Cox, “Used retail sales were higher against last year’s levels, but tight inventory and affordability issues continue to be a challenge for the industry.” The certified pre-owned segment (CPO) fell 2.5% in April 2024 year over year with a nearly 10% decline month over month. The supply of used cars on dealership lots reached 2.2 million at the start of May 2024, an increase of 6% year over year.
                              • The average age of cars and light trucks in operation on US roads reached a new record in 2024 of 12.6 years, up by two months over 2023, according to S&P Global Mobility data. More than 286 million vehicles are in operation in the US in 2024, which is 2 million higher than in 2023. In 2024, 35% of vehicles were under six years old, reflecting the impact of the COVID-19 pandemic and supply chain issues that disrupted the vehicle supply. Vehicles in the 6-14 year range and older are expected to represent 70% or more of vehicles in operation for the next five years. In terms of electric vehicles (EVs), there were 3.2 million EVs in operation in 2024. The number of EV registrations in 2023 passed 1 million units for the first time, which was a 52% increase compared to 2022. According to Todd Campau, aftermarket practice lead at S&P Global Mobility, "We started to see headwinds in EV sales growth in late 2023, and though there will be some challenges on the road to EV adoption that could drive EV average age up, we still expect significant growth in share of electric vehicles in operation over the next decade.”
                              • Consumer confidence levels fell in April 2024 from March 2024, marking a third consecutive month of weakness, according to data from The Conference Board. The Conference Board’s consumer confidence index was 97 in April 2024 from 103.1 in March 2024. According to Dana Peterson, Chief Economist at The Conference Board, “Confidence retreated further in April, reaching its lowest level since July 2022 as consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income.” Peterson added that confidence declined among consumers of all age groups and for all income groups except those in the $25,000 to $49,999 range. Plans for vacations, home purchases, and large appliances decreased on a six-month basis.
                              • 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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