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 Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 24,000 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 six to seven workers, and generates just over $4 million annually.

    • The used car dealer industry consists of about 24,000 firms that employ over 150,000 workers and generate over $100 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

                              Coronavirus Update

                              Apr 22, 2022 - Price Jump for Used EVs and Hybrids
                              • Average prices of used hybrid and electric vehicles (EVs) increased significantly in March 2022 compared to March 2021, according to a new analysis from iSeeCars. Average list prices for hybrids rose 40.5% and average EV prices increased 35.1%, according to the analysis. While rising gas prices are driving demand for more fuel efficient vehicles, used EV prices began surging in 2021, long before the gas prices took off, driven primarily by new-vehicle supply issues and growing interest in EVs.
                              • Cox Automotive’s chief economist Jonathan Smoke expects higher interest rates on car loans to have “no material impact on car sales,” adding “the global microchip shortage will have a much bigger impact.” In its 2022 outlook for the auto industry, Cox said that while it expects auto loan rates to be higher by the end of 2022, rates would still be “low and attractive” from a historical perspective. Rising rates come at a time of spiraling inflation for both new and used vehicles, with the average price of both having recently set new records.
                              • Used car prices are on the rise as inventory of used and new vehicles remains tight. The industry started 2022 with an average retail vehicle price of $30,000, according to Motor Trend. Prices are expected to remain elevated through 2024 unless inventory levels increase and stabilize. As a result, the average monthly payment for used car buyers is $530 based on a 4% interest rate and five-year term. The cost of late model used cars is pushing up to $1,000 per month with taxes, fees and insurance, which is beyond affordable for most buyers.
                              • Sales of used cars less than 10 years old fell 27% in March 2022 compared to a year ago, amid a jump in the average price of 40% to $33,653. The spring used-vehicle market is getting a late start. Americans bought an unprecedented 40.9 million used vehicles in 2021, according to Cox Automotive, which That’s 10% higher than 2020’s numbers. Cox Automotive is forecasting 39.3 million used car sales in 2022.
                              • Companies that run the wholesale, dealer-only auctions where dealers purchase much of their used inventory say that volume is down from their biggest sources of used vehicles — customer trade-ins, lease returns, repossessions, and former daily rent-a-cars. Trade-ins are down because customers can’t find the cars and trucks they want or because shoppers are starting to postpone purchases in response to high prices. Lease returns are down because many customers are buying their own lease turn-ins instead of simply handing them in. The residual values stated on lease documents, the fixed amount a customer can buy the off-lease car for, is typically thousands of dollars less than its actual value.
                              • Employment at used car dealerships rose 5.5% in February 2022 compared to 2021 and exceeded pre-pandemic levels.
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