COMMENT: Independent dealers poised to thrive as a driving force behind the recovery
Despite tight inventories, total used vehicle sales in April were up 69% from April 2020, according to my colleague, Cox Automotive chief economist Jonathan Smoke, who predicts that vehicle sales will increase. retail opportunity for the full year will reach 21.5 million, an increase. from 19.7 million in 2020.
With 60,000 independent dealers, they are the backbone of our industry and a driver of the automotive market recovery. They account for nearly 70% of all wholesale auction purchases and more than half of used vehicle retail sales.
The vital role of these dealerships benefits both the wholesale and retail auto sectors, as well as the economy as a whole and, ultimately, working class consumers. They give franchise dealers an exit strategy for older or high-mileage trade-ins that don’t necessarily match their inventory profile. They also provide the necessary access to affordable used vehicles in small rural communities that lack the economies of scale to support a franchise franchise model.
Inventory constraints are currently a major problem for the entire industry, and in particular for the self-employed. With online auto retailers taking a larger share of the market, there is increased competition for units offered at auction houses. As a result, franchised dealers and national retailers are purchasing older inventory in larger quantities than they normally would.
In addition, due to a lag in retail price increases, independent dealers have less inventory to spread their buying gains and losses over. When they fail to get the correct prices, they are outbid on the units they would normally win in the auction.
The good news is that despite these challenges, the future looks bright. Cox Automotive predicts that the retail volume of independent dealers will grow over the coming year and at a faster rate than that of franchised dealers, thanks to a growing inventory of used cars of 4 at 9 years old. This is a space that independents have generally dominated, while franchised dealers tend to be more competitive in the 0 to 3 year space.
It really is a great place for the self-employed. These older used vehicles have aged from the franchise model, but there is still a lot of life left. They are also feature rich, entering the market at a time when rear view cameras and other high-tech features were becoming more and more standard. As today’s consumers seek more value conscious purchases, the independent dealer stands to gain.
NextGear Capital is proud to support these entrepreneurial businesses as a wholesale funding partner to help them purchase affordable used car inventory. Serving more independent brokers than any other lender, we provided $ 17.3 billion in floor plan transaction financing to our clients in 2020.
Our commitment to the success of independent dealers is broad and unwavering. From offering lines of credit with flexible terms and competitive prices, to providing information to help them make more informed decisions and invest in technologies to streamline their operations and create efficiencies, NextGear Capital provides solutions to reduce their problems and help them thrive in any environment. .
Scott Maybee is President of NextGear Capital, one of the largest independent inventory finance companies in North America, providing lines of credit and a wide range of dealer services and support for the acquisition and sale of vehicles. new and used. Based in Carmel, Ind., It is a Cox Automotive brand.