Independents Find Inventory Hard to Find Despite Surge

Ten years ago, Joel Osserman stocked as many as 148 to 154 cars on the lot at Eurocars Inc., a Waterloo, N.Y., dealership.

Today, Osserman carries about 43 vehicles in inventory. He wants to keep in the area of 55 to 60.

Not only can’t Osserman find cars in general. He can’t find the cars he prefers to in stock.

In 1993, he was the fourth largest buyer Volkswagen/Audi off-lease in the United States. Today, those cars make up only about a third of his inventory.

“It’s virtually impossible to buy them now since the dealers are keeping them,” Osserman said.

Independents face this problem everywhere. Despite a flood of vehicles coming into the wholesale markets, they can’t find the cars they need at prices they can afford.

“We are not seeing falling prices in most of our markets,” said Jim Neubauer, president of floor planner Vehicle Acceptance Corp. “Our dealers are paying more for vehicles than they have ever had to pay in the past.

“We are seeing very high auction prices for the high demand units. The units that everyone wants and that can be easily financed are of course the same units that result in the quick turns for the dealer.”

New-car dealers are keeping more of their trades than ever before and are actually getting fewer trades as more new-car buyers opt for leasing.

At the same time, lessors are selling more units upstream to franchise dealers.

The latest Cox Automotive Dealer Optimism survey clearly reflects the current situation.

Franchise dealers are very bullish on used-car sales, even more than on new-car sales. Independents, however, grew pessimistic about the sales environment.

The Index on expectations for the third quarter stands at 56, down from 70 in the last survey. The big decline in overall optimism for the next 90 days was largely driven by independent dealers.

Independents registered a score of 70 in the last survey, but came in at a barely positive 52 this time. For franchise dealers, the expectations score dropped to 69 from 73.

The biggest difference between the two is access to inventory.

“Limited Inventory” moved up to No. 2 from No. 4 as a top factor holding back business for independents.

Franchise dealers have every reason for optimism. Several manufacturers reported record certified pre-owned sales recently.

The biggest on these was Honda, whose dealers sold 26,192 certified pre-owned vehicles in May, topping the previous sales high of 25,139 vehicles in August 2013. 

Financing is also working against independent dealers.

Data from Experian shows more prime consumers are moving into used cars as new cars become unaffordable and most of these consumers continue to buy from franchise dealers.

Meanwhile, finance companies are tightening their credit standards, squeezing out more subprime consumers.

This would normally prove good news for buy-here, pay-here dealers. But the older cars they usually stock are the one category that is actually in short supply.

The situation might get even worse in coming years, as the major chains expand their standalone used-car operations.


(Used Car News staff writer Jeffrey Bellant contributed to this story.)




Last modified on Friday, 22 June 2018 21:49