Used-Car Business Good, But Dealers Reluctant to Stock Up

Consumer demand for used cars is up, and franchised dealers are more focused on that part of their business. But they appear reluctant to stock up accordingly.

“Used inventory remains relatively lean,” says Wachovia auto analyst Rich Kwas, citing his firm's latest survey of 30 auto retailing executives.

“Approximately 31% of our dealers indicate they have too little (pre-owned) inventory,” he says. No surveyed dealer indicated having too much used-car inventory.

“Dealers are only buying cars they have customers for,” says Ricky Beggs, vice president and managing editor of Black Book, a used-vehicle price guide.

No dealer wants to overstock, but not carrying enough inventory can hurt sales, he notes. “You can't sell from an empty shelf.”

About 97% of Wachovia's surveyed dealers indicate their used-vehicle sales were above or in line with expectations. That compares with 88% in the last survey.

About 43% say pre-owned sales were above expectations, “a new survey high,” Kwas says.

Used-truck demand remains strong, with about 52% of polled dealers indicating that segment's sales were better than expected.

“Compared with new vehicle sales — which are at lows unseen in decades — the used-car market is doing well,” says Edmunds.com CEO Jeremy Anwyl. “Desirable used vehicles are becoming harder to find, driving up their prices.”

Meanwhile, new cars are being heavily discounted. This is creating an unusual economic event,” Anwyl says. “It can actually be less expensive to purchase a new car than a used car.”