Franchised dealers are showing a greater interest in used-car operations, says analyst Tom Kontos of ADESA.
Used-car departments strong profit centers, Kontos says.
NEW ORLEANS – Franchised new-car dealers have pulled ahead of independent used-car dealers in the number of pre-owned vehicles they sell.
At one point until a few years ago, the two groups of dealers were neck and neck, each roughly selling 15 million used cars a year. Then franchised dealers took a slight lead. Now, they’re way ahead.
“Franchised dealers have recognized used cars represent a great profit center, and the dealers are showing an interest in doing more in that area,” says Tom Kontos, executive vice president and chief economist for ADESA Analytics Services, a division of the ADESA auto-auction firm.
New-car dealers increasingly rely on inventory management software systems that provide real-time, local-market data to help them stock, price and sell pre-owned vehicles more effectively.
“They are savvy and have sophisticated tools at their disposal,” Kontos says at the National Automobile Dealers Assn. convention here.
In 2013, franchised dealers sold 15.7 million used vehicles. Independent used-car dealers sold 14.3 million. Twelve million more were sold in private-party transactions, about 500,000 more than the year before.
In 2012, franchised dealers sold 14.9 million and independents delivered 14 million, according to data Kontos presented at a press conference.
Other factors accounting for franchised dealers beating used-car dealers at their own game:
- “Franchised dealers probably are keeping more trade-in cars, rather than wholesaling them and having them end up on independent dealer lots,” Kontos says.
- Franchised dealers have greater access to a wider selection of credit sources for their customers, says Tim Zierden, senior vice president-sales for ADESA’s dealer services.
- New-car dealers have substantially invested in used-car facilities of late, says Jonathan Banks, an analyst. “They are making the used-car purchase as equitable an experience as the one a new-car buyer enjoys.”
Unlike independent operators, franchised dealers also have direct access to off-lease cars for replenishing their used-car lots with late-year models.
Those vehicles are sold through automakers’ certified pre-owned programs that have become popular. They accounted for 2.1 million unit sales last year.
“We think that 2013 number will be blown away by the CPO sales in 2014,” Banks says.