CNW Looks at Independent Dealers and Where They Are Getting Inventory

With used supply drying up amid the stiff competition for limited resources, dealers often have to pull out all the stops to find enough used cars for their lots.

For instance, small independent dealerships, selling an average of zero–100 units annually, find close to 27 percent of their inventory through purchases off the street, according to CNW Research.

“Where do independent dealers get their inventory now that franchised dealers have pushed hard into auctions and other sources of cars and trucks? Depending on the size of the used dealership, the answer is ‘wherever possible,’” said CNW president Art Spinella.

CNW broke independents down by six size categories — zero–100 annual sales, 100–250 annual sales, 251–400 annual sales, 401–700 annual sales, 701-100 annual sales and 1001-plus annual sales — and then shared the most popular used sourcing techniques for each group.

For the zero–100 group, the No. 1 inventory source was the auction (32.56 percent) followed by sourcing off the street (26.72 percent). Trade-ins were third at 21.83 percent.

Independents selling 100 to 250 vehicles per year most often turn to auctions to find inventory at 46.31 percent of the time. Trade-ins (25.89 percent) were second for this group, followed by off-the-street sourcing (13.64 percent).

For the 251-400 sales per year crowd, auctions were most popular (53.96 percent), with trade-ins (21.46 percent) second and off-the-street sourcing in third (10.46 percent).

Of what Spinella called the “typical dealership"  — independents selling 401–700 units each year — the auction was overwhelmingly the top choice at 54.83 percent. The next closest option was the trade-in route (17.08 percent) with every other avenue in the single digits.

Dealers with 700–1,000 and 1,001-plus yearly sales saw similar results, with auctions commanding the lion’s share for both groups and trade-ins coming in second.

The following chart from CNW illustrates the inventory sourcing techniques of each group in more detail:

Delving more into used-car inventory throughout the market (including franchised dealers, independents and private-party sales), Spinella emphasized that it’s particularly hard to find late-model units.

“Lack of late-model inventory continues to haunt the used-car market,” he said. “Sales of vehicles one to three years old were off from 2 to 5 percent on a share of sales basis (in November).”

Interestingly enough, although younger inventory was in short supply, franchised dealers saw a 4.75-percent year-over-year hike in the value of the used vehicles they sold last month ($10.21 billion). Independents, however, saw the value of their sales ($5.85 billion) fall 5.87 percent.

The value in casual sales ($7.77 billion) jumped 11.18 percent.

The industry overall saw value of used sales jump 3.83 percent to $23.83 billion in what Spinella called a “good month.”

Annual Used Sales

Looking at full-year projections for used sales as 2011 is about to wrap up, Spinella is forecasting that the market is likely to top 38.7 million used sales for the year, which would be the strongest total in four years.

The last time the used market was this strong was 2007, when 41.4 million units were sold.

“Franchised dealers are set to have a banner year with sales up 8.1 percent versus 2010,” Spinella commented. “Independents should finish the year on a 5.8-percent positive note, while private party sales will pretty much match 2010 with only a 0.3-percent increase.”

Pricing

Moving along, Spinella also took a look at pricing. He found that the average transaction price for franchised dealers this December is $10,547, up 0.78 percent year-over-year and down 1 percent from November. For independents, the average transaction price this month is $9,384, up 8.7 percent year-over-year and down 0.71 percent month-over-month.

“Dealers are getting a bit less for their vehicles than they did in November of this year, but are still ahead of the curve versus 2010,” Spinella noted.