The used-vehicle market reaches 40 million units sold in a good year, dwarfing the new-vehicle business. While roughly 45% of used vehicle sales are private party—neighbor to neighbor deals—the growing majority are retail sales closed at dealerships. Independent dealers, often overlooked by industry observers and media alike, are a driving force in this corner of the business: More than half of retail used-vehicle sales and nearly 70% of wholesale auction purchases are tallied by independent dealers.
Unlike the new-vehicle market, which is dominated by franchised dealerships—the local Honda or Chevy dealer, for example—the used-vehicle market has a broad collection of sellers in the game. Most franchised dealers are used-vehicle dealers as well, and there is a growing collection of large used-vehicle superstores, like CarMax and Echo Park, and New Form Online Retailers (NFORs), such as Carvana, Shift and Vroom. The NFORs are commanding more consumer attention in recent years. But the foundation of the used-vehicle market is built on the roughly 60,000 independent dealers across the U.S., smaller operations that serve rural and urban communities alike. In many rural markets, where franchised dealers don’t exist and used-vehicle superstores have not taken up shop, independent dealers are the only game in town.
Independent dealers typically work with vehicles 4- to 9-year-old vehicles, while franchised dealers tend to compete in the 0 to 3-year-old space. The older vehicles serve as a more affordable choice for consumers, and the inventory of these vehicles will be growing in the coming years following a string of strong new-vehicle sales in 2016, 2017, 2018 and 2019.
In a recent opinion piece, Scott Maybee, president of Cox Automotive’s NextGear Capital, strikes a bullish tone for the future of independent automobile dealers, noting, “At 60,000 strong, independent dealers are the backbone of our industry and a driving force in the auto market’s recovery.”
The health of independent dealers will be an important metric to track in the years to come. Read Scott’s commentary – Independent Dealers are Poised to Thrive As Driving Force in Recovery – which ran recently in Auto Remarketing.
NextGear Capital is one of the largest independent inventory finance companies in North America, offering lines of credit and a robust array of services and support for dealers to acquire and sell new and used vehicles. NextGear Capital provided $17.3 billion in floor plan transaction financing for clients in 2020. NextGear Capital, a Cox Automotive brand, is headquartered in Carmel, Ind.