Pre-owned Are All Important

LAS VEGAS — Until new-car sales pick up, dealers will continue to look to their used-vehicle operations to make up for lost ground in new-car departments, says Stephen Wade, vice chairman of the National Automobile Dealers Assn.

“Until new-vehicle sales reach 12 million again, used will be a most important operation to dealers,” he says.

“A lot of big dealers are concentrating on used, not new,” Wade tells Ward's at the 2010 F&I Conference and Expo here. “Right now, used is all important.”

Ward's forecasts new-vehicle sales this year at 11.2 million to 11.5 million and reaching 13.1 million next year, depending on sufficient improvement in the economy.

Dealers, who saw new-car deliveries fall from 16.1 million in 2007 to 13.2 million in 2008 to a frightening 10.4 million in 2009, turned to selling used cars as a survival tactic.

“It was about staying in business,” says Wade, a multi-franchise dealer based in St. George, UT.

Last year, 35.5 million used cars were sold, about 15 million of them by franchised dealers.

Because of demand, used-car operations this year are seeing higher profits, stronger prices and more frequent inventory turns, says Tom Webb, chief economist for Manheim Consulting, a unit of Manheim, an auto auction firm.

“Business went up and used-car values increased 15% to 20%,” Wade says. He questions how long pre-owned values will go up like that. “I'm wondering when the air will come out of those tires.”