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Data Point

Large Dealer Groups Sell More Used Units in Q1, Offsetting Slow New-Vehicle Sales


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Article Highlights

  1. In Q1, new-vehicle sales were down 2%  year over year with retail sales (down 4%) dragging down overall performance.
  2. Supply is more of a concern in the used-vehicle market than demand.
  3. Looking at publicly traded dealer groups’ performance in their first quarter 2019 earnings, the trend is clear: New-vehicle sales are down, while used-vehicle sales are up.

New-vehicle sales are off to a slow start in 2019, down 2% in Q1. It would have been worse without strong fleet sales. Retail sales were down 4% in the first three months of 2019. Fleet was up 6%.

The used-vehicle market, on the other hand, continues to see favorable performance. Affordability concerns driven by higher vehicle prices and interest rates have reduced the pool of people who can afford to buy new. With attractive off-lease supply available, the used-vehicle market is benefiting from robust demand. In fact, supply is more of a concern in the used-vehicle market than demand.

This shift in vehicle demand, away from new and toward used, can been seen clearly in the Q1 financial results of the largest players in the auto industry: franchised dealer groups. Looking at Q1 performance of these publicly traded dealer groups, which accounted for roughly 6% of new-vehicle sales in the U.S., the trend in our industry is crystal clear: New sales are down, used sales are up. Consistent in their filings was recognition that the used-car business was one of the few bright spots in an otherwise difficult quarter.Looking at aggregate same-store sales, new-vehicle sales are down almost 9% while used vehicle sales are up 4%. In total, the large dealer groups are selling more used units which follows general industry guidelines for dealer operations. How much they can skew to used-vehicle sales will be contingent on used-vehicle supply. And it will only get more difficult going forward, as the largest driver of high-demand, high-profit supply—off-lease units—are at their peak this year.


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