IBISWorld Industry Report Used Car Dealers in The US 2019

WWW.IBISWORLD.
COM Used Car Dealers in the USJuly 2019 1
Good as new: Increases in per capita disposable

income is forecast to buoy industry growth
This report was provided to
Edeska (2129455405)
by IBISWorld on 25 October 2019 in accordance with their license agreement with IBISWorld
IBISWorld Industry Report 44112

Used Car Dealers in the US
July 2019 Christopher Lombardo
2 About this Industry 17 International Trade 28 Industry Assistance

2 Industry Definition 18 Business Locations
2 Main Activities 29 Key Statistics
2 Similar Industries 20 Competitive Landscape 29 Industry Data
3 Additional Resources 20 Market Share Concentration 29 Annual Change
20 Key Success Factors 29 Key Ratios
4 Industry at a Glance 20 Cost Structure Benchmarks 30 Industry Financial Ratios
22 Basis of Competition
5 Industry Performance 23 Barriers to Entry 31 Jargon & Glossary
5 Executive Summary 23 Industry Globalization
5 Key External Drivers
7 Current Performance 24 Major Companies
10 Industry Outlook 24 CarMax Inc.
12 Industry Life Cycle 25 America’s Car-Mart Inc.
14 Products and Markets 26 Operating Conditions

14 Supply Chain 26 Capital Intensity
14 Products and Services 27 Technology and Systems
15 Demand Determinants 27 Revenue Volatility
16 Major Markets 28 Regulation and Policy
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

WWW.IBISWORLD.COM Used Car Dealers in the USJuly 2019 2
About this Industry
Industry Definition This industry sells used passenger (SUVs) and passenger vans. Used car
vehicles, including passenger cars, dealers also provide financing and
light trucks, sports utility vehicles insurance services.
Main Activities The primary activities of this industry are

Used automobile retail
Used light truck retail
Vehicle financing
The major products and services in this industry are

Financing and insurance
Parts and repair services
Used cars
Used vans, minivans, trucks and buses
Similar Industries 33611a Car & Automobile Manufacturing in the US

This industry manufactures cars and automobile chassis. The manufacturing of light trucks, heavy trucks
and motorcycles is excluded from this industry.
44111 New Car Dealers in the US

This industry sells new vehicles, though many also sell used vehicles.
44122a Motorcycle Dealership and Repair in the US

This industry retails motorcycles and personal watercraft.
44122b Bicycle Dealership and Repair in the US

This industry includes sporting goods stores and specialty shops that sell new bicycles, bicycle parts and
accessories. Industry operators also provide repair and maintenance services.
44122c Boat Dealership and Repair in the US

This industry retails new and used recreational boats, boat parts and accessories. This industry also provides
repair and maintenance services.
Provided to: Edeska (2129455405) | 25 October 2019

About this Industry
Additional Resources For additional information on this industry

www.bhphinfo.com
National Alliance of Buy Here Pay Here Dealers
www.nada.org
National Automobile Dealers Association
www.niada.com
National Independent Automobile Dealers Association
www.census.gov
US Census Bureau
www.usedcarnews.com
Used Car News
IBISWorld writes over 1000 US

industry reports, which are updated
up to four times a year. To see all
reports, go towww.ibisworld.com

WWW.IBISWORLD.COM Used Car Dealers in the US July 2019 4
Industry at a Glance
Used Car Dealers in 2019
Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

Snapshot
$117.9bn 3.7% 1.2%
Profit Wages Businesses
$2.4bn $6.9bn 139,170

Revenue vs. employment growth Per capita disposable income
Market Share
CarMax Inc. 8 4
14.9%
6
2
4
% change
% change
0
2
-2
0
-2 -4
Year 11 13 15 17 19 21 23 25 Year 13 15 17 19 21 23 25
Revenue Employment
SOURCE: WWW.IBISWORLD.COM
p. 24
Products and services segmentation (2019)
Key External Drivers 3.8%

Financing and insurance
Per capita disposable 12.0%
income Parts and repair services
Price of new cars

Aggregate
household debt
Average age of 18.5%
vehicle fleet Used vans, minivans,
trucks and buses
World price of crude oil
65.7%
Used cars
p. 5
Industry Structure Life Cycle Stage Mature Regulation Level Medium

Revenue Volatility Low Technology Change Low
Capital Intensity Low Barriers to Entry Low
Industry Assistance Low Industry Globalization Low
Concentration Level Low Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 29

Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive Summary Operators in the Used Car Dealers Traditionally, customers that purchase
industry sell a variety of used passenger vehicles on a BHPH basis have relatively
vehicles and may provide repair and low credit ratings. However, customers
maintenance services, along with with average credit also have difficulty
financing and insurance services. Over the finding affordable financing during credit
five years to 2019, industry revenue grew, crises. These customers often purchase
as rises in disposable income and greater vehicles from used car dealers on a
access to credit enabled more consumers BHPH basis rather than opting for
to afford industry products. Moreover, as traditional financing from new car
economic conditions were generally dealers, supporting revenue growth.
favorable over the past five years, Additionally, while profit declined
operators sought out new opportunities to slightly, it largely remained steady.
generate higher returns. Thus, operators Over the five years to 2024, industry
have been targeting individuals with revenue is projected to continue growing,
below-average credit scores. Not only did albeit at a slightly slower rate. Increases
in per capita disposable income are
forecast to buoy industry growth;
Used
car dealers benefited from offering however, anticipated increases in
household debt are expected to deter
independent financing solutions consumers from flocking to industry
establishments as they did over the past
this expand the market for the industry, it five years. Moreover, consumer
also generated more revenue as confidence is forecast to decrease over
consumers with below-average credit pay the next five years. This development is
higher interest rates. As a result, both beneficial and detrimental to
IBISWorld expects industry revenue to operators; when consumer confidence is
grow an annualized 3.7% to $117.9 billion low, consumers are less likely to purchase
over the five years to 2019, including new vehicles, resulting in greater used
anticipated growth of 1.5% in 2019 alone. vehicle sales. However, since operators in
Used car dealers benefited from the New Car Dealers industry (IBISWorld
offering independent financing solutions report 44111) also sell used vehicles, the
over the past five years. While new car industry is anticipated to experience
dealers rely on financing companies to greater external competition. As a result,
fund consumers’ purchases, used car industry revenue is forecast to increase
dealers often offer in-house financing an annualized 1.2% to $124.9 billion over
known as “buy here, pay here” (BHPH). the five years to 2024.
Key External Drivers Per capita disposable income in 2019, representing a potential
Since people can often choose alternate opportunity for the industry.
modes of transportation, used cars are an
expensive discretionary purchase that Price of new cars
consumers tend to avoid when their Buying a used car is a more affordable
disposable income declines. As alternative to purchasing a new car.
consumers have more money to spend, When new cars are comparatively
they become more willing to spend on affordable the appeal of used cars
expensive discretionary items. Per capita diminishes, reducing industry sales.
disposable income is expected to increase Likewise, as new car prices increase,

Key External Drivers demand for used cars grows. The price of Average age of vehicle fleet
continued new cars is expected to decrease in 2019. The average age of vehicle fleets is used to
forecast future vehicle purchases. As the
Aggregate household debt average vehicle fleet age trends higher, it
When consumers already hold a high represents greater pent-up demand for
level of debt it is particularly detrimental vehicles. The average age of the vehicle
to add additional debt, such as a car loan. fleet is expected to increase in 2019.
While used car dealers offer nondebt
financing to avoid credit market World price of crude oil
constraints that other car dealers are High gasoline prices tend to decrease new
subject to, consumers are still less likely and used vehicle sales. Consumers with
to invest in nondiscretionary items when access to public transportation typically
debt is high. Aggregate household debt is avoid vehicle purchases when gasoline is
expected to increase in 2019, posing a relatively expensive. The world price of
potential threat to the industry. crude oil is expected to decrease in 2019.
Per capita disposable income Price of new cars
4 148
2 146
% change
Index
0 144
-2 142
-4 140
Year 13 15 17 19 21 23 25 Year 11 13 15 17 19 21 23 25

Current Operators in the Used Car Dealers industry

sell used passenger vehicles, including Industry revenue
Performance passenger cars, light trucks, passenger vans
8
and sports utility vehicles (SUVs). Industry
operators may also provide repair and 6
maintenance services along with financing
and insurance services. Over the five years 4
% change
to 2019, industry revenue grew as rises in
per capita disposable income and easier 2
access to credit helped more consumers

0
afford industry products. Moreover, as
economic conditions were generally -2
favorable over the past five years, industry Year 11 13 15 17 19 21 23 25
operators sought out new opportunities to
keep demand steady. As a result, operators SOURCE: WWW.IBISWORLD.COM
have been targeting individuals with

below-average credit scores. This generated the five years to 2019, IBISWorld expects
revenue while expanding the industry’s industry revenue grew at an annualized
market, as consumers with below-average rate of 3.7% to $117.9 billion, including
credit pay higher interest rates. Thus, over anticipated growth of 1.5% in 2019 alone.
More improvements Over the past five years, industry revenue customers are not only able to make their
increased in line with favorable economic car payments but make larger payments.
conditions, and demand for used cars Consequently, bad debt expense, the
increased as auto financing became more amount of noncollectable accounts
available to consumers with lower credit. receivable, which occur as a result of
For example, many industry operators customers unable to pay outstanding debt,
offer in-house “buy here, pay here” declined over the past five years.
(BHPH) financing arrangements that Additionally, the average industry operator
enable customers with poor credit to pay has experienced slightly lower profit
for a vehicle in cash installments. Since margins over the past five years as the
new car dealers do not use an equivalent average acquisition price for used vehicles
program, used car dealers dominate this consistently increased. According to
niche market. This competitive advantage Edmunds’ 2019 first-quarter Used Car
has helped partially offset industry Report (latest available data), the average
revenue decreases during times of selling price for a used vehicle increased
economic turmoil. However, as the from $17,200 in the third quarter of 2014
economy expanded over the past five to $20,200 in the first quarter of 2019. As a
years, industry operators increasingly result, the average industry operator’s
changed their lending profile to target profit, measured as earnings before interest
lower-risk consumers. Nevertheless, used and taxes, is expected to remain dip to an
car dealers have still been targeting estimated 2.0% in 2019. While this does
individuals with below-average credit to represent a slight decline from 2.6% in
bolster industry revenue. 2014, profit experienced low volatility over
Falling unemployment and rising the past five years, especially when
consumer confidence are also benefited the compared with operators in the New Car
industry over the five years to 2019, as Dealers industry (IBISWorld report 44111).

Shifting gears While new car dealers have experienced

structural shifts over the past five years, CarMax Inc. is paving
used car dealers have largely been able to
avoid these changes. As a result, over the
the way for the adoption
five years to 2019 the number of industry of alternative business
operators is expected to rise at an practices
annualized rate of 1.2% to 139,170
companies. Employment is expected to
follow this trend, growing at an annualized CarMax Inc. (CarMax), the largest
rate of 1.9% to 270,504 workers over the five used car dealer by revenue, is paving the
years to 2019. Used car dealers are working way for the adoption of alternative
to further reduce reliance on credit-issuing business practices. Since used car dealers
companies and increase in-house financing are notorious among consumers for
functions; financing activities are expected haggling to maximize profit on each
to account for 3.8% of industry revenue in vehicle sold, CarMax uses fixed prices
2019. Used car dealers are seeking to and a nontraditional commission
broaden in-house financing from “buy here, structure to put its customers at ease.
pay here” (BHPH) to include “lease here, The adoption of fixed prices is spreading
pay here” (LHPH). Under an LHPH throughout the industry because it
agreement, dealers maintain ownership of improves a company’s image and raises
leased vehicles, which is not the case under a customer satisfaction. Moving forward,
BHPH arrangement. LHPH would reduce used car dealers will need to improve in
the risk of not receiving payment and cut these areas to maintain market share
dealers’ income taxes. Vehicles sold under against new car dealers seeking to
LHPH add to depreciation expenses, which diversify revenue sources by expanding
reduces tax liability. their used vehicle sales segments.
Technological Over the five years to 2019, websites and However, mobile apps have also
advantages mobile apps have increasingly enabled increased competition among industry
consumers to browse for used vehicles at operators. According to the National
any time of the day. As a result, industry Independent Automobile Dealers
operators experience increasing demand. Association’s 2017 Used Car Dealer
For example, CarMax offers an inventory report (latest data available), 60.0% of
of more than 70,000 vehicles on both its consumers were influenced to
website and mobile app. Moreover, the purchase a vehicle from an operator
company can transfer a vehicle found on after visiting their website; customers
the website or app to a customer’s local are becoming more knowledgeable due
dealer. This gives CarMax the ability to to the information available and ability
make more sales than dealers that do not to see what other dealers in the area
have these technologies. In fiscal 2019 can offer. Therefore, increased mobile
(year-end February, latest data available), and computer use bolstered overall
34.0% of CarMax’s revenue came from demand for used cars during the
online transfers. five-year period.

Increasing wholesale Used car dealers are dependent on the

power wholesalers for inventory and revenue. Used
car dealers are
“Buy here, pay here” (BHPH) and
independent dealers rely on wholesale
dependent on the
auctions for their inventory. Having access wholesalers for inventory
to these auctions enables used car dealers and revenue
to limit operational costs by purchasing
vehicles at a lower rate than their
respective retail prices. Licensed dealers Wisconsin auctions sell convertibles at a
can access wholesale auctions in different lower rate than those in states with more
states, which enables operators to further temperate weather conditions, such as
reduce purchasing expenses. For example, Florida. Florida dealers are able to visit
because winter weather is not conducive Wisconsin auctions to make such
to year-round convertible driving, discounted purchases.

Industry Over the five years to 2024, the Used Car

Dealers industry is expected to continue
operators. When consumer confidence is
low, consumers are less likely to purchase
Outlook growing, albeit at a slightly subdued rate. or finance new vehicles, resulting in
Increases in per capita disposable income greater used vehicle sales. However, since
and consumer spending are forecast to operators in the New Car Dealers industry
buoy industry growth over the next five (IBISWorld report 44111) also sell used
years; however, anticipated increases in vehicles, the industry is anticipated to
overall household debt are expected to experience greater competition from this
deter consumers from flocking to industry parallel industry as operators in both vie
establishments as they did over the past to keep revenue growth steady. As a
five years. Moreover, consumer result, IBISWorld anticipates industry
confidence is forecast to decrease over the revenue will increase at an annualized
next five years. This development is both rate of 1.2% to $124.9 billion over the five
beneficial and detrimental to industry years to 2024.
Improved economic The national unemployment rate is

conditions expected to increase slightly over the next TheUS unemployment
five years; however, it is projected to stay at
a relatively low rate, which is a continued rate is expected to increase
sign of improvement in consumers’ slightly
financial health. Concurrently, per capita
disposable income is forecast to increase at
an annualized rate of 1.5% over the next improvements in the disposable income
five years. Consumers with stable levels are forecast to help alleviate this
employment and income are generally issue. Value-conscious consumers will
more willing and able to purchase big- increasingly look for bargains on lightly-
ticket items, such as used vehicles, which is used vehicles rather than new vehicles. To
expected to benefit the industry. meet demand, the number of used car
Customers with poor credit (specifically dealerships is projected to increase at an
the subprime and deep subprime segments) annualized rate of 1.4% to 149,215 operators
are expected to represent a combined over the five years to 2024. Additionally, as
29.5% of revenue in 2019 and continue to more operators enter the industry,
represent potential liabilities for industry employment is anticipated to increase;
players. Customers with poor credit rely on however, changes in technology, such as
“buy here, pay here” (BHPH) agreements. internet use, are expected to reduce
In times of high unemployment, many industry operators’ reliance on labor. As a
BHPH customers breach their vehicle result, employment is expected to increase
financing agreements due to lack of income. at an annualized rate of 1.4% to 289,654
However, over the next five years, workers over the next five years.
Preparing for success Competition from new car dealers will IBISWorld estimates, operators in the
intensify over the five years to 2024. New New Car Dealers industry (44111) generate
car dealers are increasingly focusing on an estimated 29.2% of their revenue from
used vehicle sales in an effort to offset used vehicle sales. IBISWorld expects new
sluggish new vehicle sales. According to car dealers to cling to this strategy through

Preparing for success 2024, emphasizing maintenance fees and wealthier customers that may prefer to
continued used vehicle sales as new car prices rise lease vehicles.
and consumers become warier of such Used car dealers that cultivate a brand
big-ticket items. Used car dealers will image around transparency and value
strive to counteract this encroachment by will likely be the most successful in the
expanding their financial offerings and years ahead. Additionally, revenue from
maintaining low overhead expenses. Many both parts and services and financing will
are projected to adopt “lease here, pay be increasingly important over the five
here” (LHPH) financing arrangements to years to 2024, as these services typically
increase profitability and exposure to yield higher profit margins.
Looming intervention In mid-2010, Congress passed a financial

regulation reform bill, the Dodd-Frank President
Trump has
Wall Street Reform and Consumer
Protection Act. Originally intended to
shown interest in
address regulatory lapses and structural dismantling the Dodd-
issues within the more general financial Frank Wall Street Reform
sector, the bill also covers the lending
activities of auto dealers. The bill gave
broad authority to the new Consumer requires dealers to provide consumers with
Financial Protection Bureau (CFPB) to their credit score should their loan request
prohibit activities it deems abusive, a task be denied. Moreover, according to
currently addressed at the state level. Automotive News, dealers must provide
Lobbyists from the Used Car Dealers and risk-based pricing notices to customers that
New Car Dealers industries, among receive credit on terms that are less
others, strongly opposed the passage of favorable than those offered to a substantial
this legislation. portion of their customers. Complying with
Dodd-Frank, which went into effect on this reform will persistently increase
July 21, 2011, does not enable the CFPA to operating costs for companies and, in turn,
oversee auto loans from dealers; however, could threaten profit margins moving
the legislation does include several forward. However, President Trump has
industry-specific mandates. For example, shown interest in dismantling the Dodd-
the bill provides the Federal Trade Frank Wall Street Reform, starting with
Commission (FTC) with oversight authority cutting funding for the CFPB and a partial
over the industry. The FTC can regulate repeal. Consequently, the future of these
dealers for unfair and deceptive acts and regulations is uncertain over the next
practices. Additionally, the legislation five years.

Life Cycle Stage This industry’s markets are
widespread and saturated
The number of companies in this
industry is generally stable
The industry is growing slower
than the overall economy

Industry Life Cycle The Used Cars Dealers industry exhibits and 9.0% of their resale value after the
the traits characteristic of an industry in initial purchase (though depreciation of
the mature stage of its life cycle. Over the new vehicles can be as high as 20.0%).
Thisindustry 10 years to 2024, industry value added Value-conscious consumers with a
is M
ature (IVA), which measures the industry’s variety of financial situations prefer to
contribution to the overall economy, is purchase used vehicles. However,
forecast to increase at an annualized rate competition between used and new car
of 1.7%. During the same 10-year period, dealers has been ramping up over the
the US GDP is anticipated to grow at an past five years, as new car dealers are
annualized rate of 2.0%. IVA growth that aggressively pursuing used vehicle sales
is slower than GDP growth is a strong and parts and services as another source
indication of an industry in the mature of revenue.
stage of its life cycle. Moreover, the Used Over the 10 years to 2024, the number
Car Dealers industry displays other traits of used car dealerships is expected to
that firmly point to an industry in the remain relatively stable. Moreover, the
mature stage of its life cycle: the industry has minimal barriers to entry,
industry’s markets are widespread and enabling individuals or nonemployers to
saturated; the industry has undergone participate. The Used Car Dealers industry
little technological change; and the generally suffers from a poor public image
number of used car dealerships is not as a result of the industry’s emphasis on
growing at a substantial pace. high-margin sales techniques. Companies
Used car dealers benefit from used not following this trend, such as CarMax,
vehicles’ inherent value over new are rapidly gaining market share over
vehicles; new vehicles lose between 6.0% traditional dealerships.

Products & Markets

Supply Chain | Products and Services | Demand Determinants
Major Markets | International Trade | Business Locations
Supply Chain KEY BUYING INDUSTRIES

99 Consumers in the US
Households are the primary consumers of used car dealers.
KEY SELLING INDUSTRIES

42311 Automobile Wholesaling in the US
The Automobile Wholesaling industry supplies used cars for industry operators.
44131 Auto Parts Stores in the US
The Auto Parts Stores industry supplies parts for the refurbishment of motor vehicles.
81111 Auto Mechanics in the US
The Auto Mechanics industry prepares used vehicles for sale.
81112 Car Body Shops in the US
The Car Body Shops industry prepares used vehicles for sale, providing auto body, paint and
glass repair services.
81119a Car Wash & Auto Detailing in the US
The Car Wash and Auto Detailing industry prepares used vehicles for sale.
81119b Oil Change Services in the US
The Oil Change Services industry prepares used vehicles for sale.
Products and Services Products and services segmentation (2019)

3.8%
Financing and
12.0% insurance
Parts and repair services
18.5%
Used vans, minivans, trucks and buses
65.7%
Used cars
Total $117.9bn SOURCE: WWW.IBISWORLD.COM
Financing and insurance services, which are Used car dealers frequently operate in
directly tied to used vehicle sales, also under-supplied niches of these markets,
generate a significant share of industry in particular, catering to individuals with
revenue. Used car dealers directly compete poor access to credit. This industry’s
with the Auto Mechanics (IBISWorld report focus on consumers with inferior credit
81111) and New Car Dealers (44111) results in a very high proportion of
industries for maintenance work and used revenue generated from financial and
vehicle sales. The parts and services insurance services, as effective interest
segment is gaining importance in all three rates are high. However, as a result of
industries, which will intensify competition. focusing on this niche, used car dealers

Products & Markets
Products and Services experience the added risk of never consumers keep their vehicles for longer
continued collecting vehicle payments compared periods, choosing repairs over purchases.
with competing industries. Stiff competition from dedicated
mechanics’ shops and new car dealers
Used vehicles requires aggressive pricing from used car
Used vehicles represent the largest dealers and superior value.
product segment for industry operators.
In 2019, used cars are expected to account Financing and insurance
for 65.7% of industry revenue, while used Revenue from financing and insurance
vans, minivans and trucks are expected to services has increased over the past five
account for 18.5% of revenue. Used car years, up to an estimated 3.8% of revenue
dealers purchase used vehicles from in 2019. The Used Car Dealers industry
wholesalers, car auctions and customers. frequently serves customers with average
After purchasing the vehicle, used car and poor credit: these customers are
dealers make any necessary repairs and often denied affordable interest rates on
prepare the vehicle for resale. Spending on loans provided by mainstream financial
vehicle reconditioning is anticipated to institutions, which typically provide
decline in 2019 due to higher initial financing at new car dealerships.
vehicle quality and dealers’ significant According to the National Independent
leeway in acceptable vehicle quality. Used Auto Dealers Association, more than
car dealers sell mass-market passenger 40.0% of used car dealers provide “buy
vehicles, including sport-utility vehicles, here, pay here” financing. Under this
vans, trucks, small cars and luxury cars. financing arrangement, customers make
weekly or twice-weekly cash payments
Parts and services directly to the dealership. This form of
Used car dealers provide a wide array of financing is mostly reserved for
parts and repair services, including wheel customers with very poor credit. The
realignment, fluid replacement and more implied interest in this arrangement
substantial mechanical repairs. In 2019, significantly exceeds rates in comparable
used car dealers are estimated to loans, compensating the dealer for the
generate 12.0% of revenue from parts and risk of a customer’s failure to pay.
services, a significant increase from 2014. Insurance revenue for used car dealers
However, industry operators experience is reported along with revenue from
intense competition from new car financing. Vehicle warranties account for
dealerships seeking to generate the vast majority of insurance revenue for
additional revenue. Nonetheless, parts used car dealers. About two-thirds of
and services will continue to be an used car dealers offer vehicle warranties
important source of revenue as or service contracts.
Demand Demand for services offered by the Used gasoline prices, trends in these indicators
Determinants Car Dealers industry is strongly tend to be highly stable, resulting in
dependent on consumers’ disposable relatively consistent demand.
income and the affordability of new Consumers’ financial stability and
vehicles. Consumers’ existing debt spending power are the most significant
burden, interest rates and gasoline prices factors in used car demand. When
also contribute to variations in used consumers’ disposable income declines,
vehicle demand. With the exception of they reduce overall spending, especially on

Products & Markets
Demand large discretionary purchases such as stimulating effects of high market debt can
Determinants vehicles. Additionally, high levels of credit be outweighed by a dramatic decline in
market debt and interest rates can have consumer sentiment, curtailing sales
continued
positive effects on used car demand. Used activity. Gasoline prices have a much
car dealers provide a range of purchasing smaller effect on used vehicle sales;
arrangements that attract customers with however, when gasoline prices are high,
higher debt levels. However, the consumers hold off on vehicle purchases.
Major Markets Major market segmentation (2019)

5.1%
Deep subprime
customers
12.7%
Super prime customers
36.4%
Prime customers
21.4%
Nonprime customers
24.4%
Total $117.9bn Subprime customers
The Used Car Dealers industry sells less than 500 and are expected to
vehicles to customers with a wide range of generate 5.1% of industry revenue in
creditworthiness. Used car dealers classify 2019. These customers are the most likely
customers’ creditworthiness in five to default on debts, especially during
different credit rating segments, with deep periods of high unemployment. As
subprime customers possessing the worst economic conditions continue to
credit and super prime customer improve, particularly low rates of
possessing the best credit. Customers unemployment, consumers are
choose to purchase vehicles from used car anticipated to make their payments on
dealers for different reasons, depending time, decreasing this segment’s share of
on their credit score. Customers with the revenue. However, looser credit
worst credit scores are largely unable to standards may push this segment up in
purchase vehicles on traditional credit, the long term.
experiencing interest rates that are 6.0%
or more above prime rates. Prime and nonprime customers
In 2019, prime and nonprime customers
Subprime and deep subprime customers are expected to represent 36.4% and
Subprime customers, or customers that 21.4% of industry revenue, respectively.
have a VantageScore between 501 and Prime credit ratings correspond to a
600, are expected to generate 24.4% of VantageScore between 661 and 780,
revenue in 2019. By contrast, deep while nonprime customers’ credit ratings
subprime customers possess a score of correspond to a VantageScore between

Products & Markets
Major Markets 601 and 660. Customers with customers qualify for the best interest
continued intermediate credit scores may choose to rates. Super prime customers may choose
purchase vehicles at a used car dealer to to purchase vehicles from a used car
protect their credit scores for more dealer, whether financed or cash, to
important purchases. This segment is protect their favorable credit. Increasing
anticipated to benefit from looser their rate of credit use could hurt their
financing standards and easier access to credit score, resulting in higher interest
credit during the five-year period. rates on their credit cards or home loans.
This segment has since declined as a share
Super prime customers of industry revenue as credit availability
Super prime customers have scores of 781 continues to expand, enabling customers
or higher. These customers have a strong with below average credit to finance
history of on-time payments and use a low vehicle purchases. These customers also
proportion of credit available to them. In make up a small share of industry revenue
2019, super prime customers are expected as they are more likely to finance a new
to account for 12.7% of industry revenue. vehicle, due to the low-interest rates they
With such a high credit rating these generally receive.
International Trade Operators in the Used Car Dealers States and Canada can be sold to car
industry do not participate in dealers in Mexico for resale without
international trade. Under the North tariffs. Exports of used cars are handled
American Free Trade Agreement exclusively by vehicle manufacturers
(NAFTA), used cars from the United and wholesalers.

Products & Markets
Business Locations 2019
West
AK
0.2 New
England
ME
Great Mid- 0.8
Lakes Atlantic 1 2
NY 3
WA MT ND 4.0
5 4
1.9 0.3 MN
Rocky
0.4 1.5
WI
OR Mountains SD
0.4
Plains 1.7 MI
2.8
PA
4.5
6
7
1.1 ID IA OH 9 8
0.7 WY 4.0
0.3
NE
1.4
IL IN WV VA
3.1 2.9 3.6
West NV
1.0 0.6
KY
UT MO
1.7 NC
0.7
1.1 CO KS 2.6 4.4
1.4 1.1 TN
SC
Southeast
2.7
CA 2.0
6.0
OK AR GA
1.5 1.4 AL 3.6
AZ MS 2.3
1.5 NM
0.6 Southwest 1.3
TX LA
1.0 FL
9.5 7.7
West Establishments (%)
HI Less than 3%
0.2 Additional States (as marked on map) 3% to less than 10%
1 VT 2 NH 3 MA 4 RI 10% to less than 20%
0.3 0.7 2.2 0.5 20% or more
5 CT 6 NJ 7 DE 8 MD 9 DC
1.1 2.4 0.4 1.1 0.0

Products & Markets
Business Locations The distribution of establishments in the

Distribution of establishments vs. population
Used Car Dealers industry broadly
follows population trends, though regions
40
with particularly car-friendly cultures
and infrastructure tend to be over-
30
represented. This relationship is further
complicated by population density
patterns, which enable dealerships and 20
%
salespeople in densely populated areas to
serve customers more efficiently than 10
rural dealers. Most dealerships are
located in the Southeast (32.3%) and the 0
Great Lakes (14.4%) regions.
West
Great Lakes
Mid-Atlantic
New England
Plains
Rocky Mountains
Southeast
Southwest
Texas is the state with the most used
car dealerships, at 9.5% of the industry
total. Texas represents 8.6% of the US
population. While Texas has several Establishments
thriving population centers, notably Population
Dallas and Houston, the state is SOURCE: WWW.IBISWORLD.COM
geographically huge. Rural areas require

more dealerships and salespeople per transportation system dominated by
capita than urban areas. Additionally, freeways and private transportation.
Texas has an overwhelmingly car-friendly California’s landscape is highly suburban,
infrastructure and culture, further with large satellite communities radiating
supporting industry demand. out from the dense urban centers of Los
California contains 6.0%, the third- Angeles and San Francisco. The remaining
highest percentage of used car regions’ share of establishments is
dealerships, which is well below its 12.1% generally in line with their percentage of
share of the US population. Like Texas, the population: Southwest (13.1% of
California has a strong tradition as a establishments), Mid-Atlantic (12.4%),
car-friendly destination, with a West (10.1%) and Plains (8.3%).

Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share The Used Car Dealers industry is highly and quality. Traditional used car
Concentration fragmented, with nonemploying dealerships differ significantly from this
dealerships representing more than approach, preferring to maximize profit
80.0% of establishments in 2019. As a on each individual sale.
Level
result, the industry exhibits a low level of The industry is firmly in the mature
Concentration in market share concentration, with the two phase of its life cycle. With the diffused and
this industry is L ow largest operators accounting for an highly saturated nature of this market,
estimated 15.7% of industry revenue in significant changes in industry
2019. Still, industry concentration has concentration are unlikely to occur.
increased somewhat over the five years to CarMax’s notable growth was achieved
2019. Most of this growth has occurred at organically, with no mergers or acquisitions.
CarMax’s dealerships, which have gained Any major increases in industry
market share over smaller dealerships concentration are most likely to occur
due to the company’s unique approach to because of CarMax or another used car
used car sales, emphasizing convenience dealer adopting similar business practices.
Key Success Factors Provision of superior after-sales service Superior financial and
Industry operators need access to reliable debt management
maintenance facilities to service warranty Used car dealers need exceptional
IBISWorld identifies agreements and offer higher levels of financial and debt management because
250 Key Success customer service over competitors. a high proportion of sales are financed
Factors for a through the dealership.
business. The most Use of the most efficient
technologies and techniques Effective cost controls
important for this
Successful used car dealers take care Used car dealers need to aggressively
industry are: to select the most efficient business manage operating costs, particularly
practices, especially for marketing labor expenses, to maintain profitability.
expenses. More industry players have Control of financing and debt expenses is
turned to the internet for marketing. unavoidably limited.
Cost Structure Cost structures for operators in the Used modest 5.9% of industry revenue in 2019,
Benchmarks Car Dealers industry are fairly similar remaining largely unchanged from 2014.
across operators, as there are few large Demand for used vehicles increased during
national players. Thus, the average the five-year period, and as a result, industry
industry operator runs just one operators hired more employees to keep up
establishment, has few employees and with heightened sales. Consequently,
experiences similar operating conditions employee growth leads to wage growth.
to their competitors. However, increased automation with regard
to inventory management and online
Wages cataloging resulted in minimal wage growth
Wages are the industry’s second-largest as a share of industry revenue.
expense. Used car dealers employ
mechanics, salespeople and administrative Purchases
staff, though individual dealerships vary Purchases represent the largest expense
widely. Wages are expected to account for a incurred by industry operators. In 2019,

Cost Structure purchases are expected to account for 85.2% steady profit margins. The average
Benchmarks of industry revenue and primarily include industry operator’s profit, measured as
the purchase of used cars at auctions and earnings before interest and taxes, is
continued
from customer trade-ins. Purchases have expected to reach 2.0% in 2019,
increased as a share of revenue over the past compared with 2.6% in 2014. While this
five years as a low supply of used vehicles, does represent a dip from 2014, profit
which in conjunction with rising demand, has remained relatively stable during the
has pushed prices upward. Before selling the period, especially when compared with
vehicle, used car dealers repair and operators in the New Car Dealers
recondition the vehicle. Dealers have been industry (see IBISWorld report 44111).
spending less on reconditioning vehicles in Over the past five years, the average price
recent years to cushion profit margins. of used vehicles has increased steadily.
Improved initial vehicle quality and the For example, according to the 2019 Q1
purchase of newer vehicles are also driving Edmunds Used Car Report (latest
this decline. Larger operators such as available data), the average used-vehicle
CarMax can further control reconditioning selling price increased from $17,200 in
costs through on-site wholesale auctions, the first quarter of 2014 to $20,200 in the
where less desirable vehicles are sold to first quarter of 2019. As a result,
smaller used car dealers. operators’ profit has fallen slightly. Still,
industry operators have benefited from
Profit low vehicle supply levels, high demand
Over the five years to 2019, the Used Car for used cars, rising disposable income
Dealers industry experienced relatively levels and easier access to credit. As a
Sector vs. Industry Costs
Average Costs of
all Industries in Industry Costs
sector (2019) (2019)
100 3.3 2.0 n Profit
8.9 5.9 n Wages
n Purchases
80 n Depreciation
n Marketing
n Rent & Utilities
n Other
Percentage of revenue
60
69.9
85.2
40
20
0.9 1.5
4.1
11.4 0.2 1.9 1.2
0 3.6

Cost Structure result of the positive economic trends, for advertisement, accounting for 33.6%
Benchmarks selling prices soared, securing relatively of advertising expenditures in 2016
steady margins for operators. Over the (latest data available).
continued
next five years, as supply levels increase,
acquisition prices of used vehicles are Rent
expected to fall, boosting profit margins Industry participants typically need a
for industry operators. relatively large plot of land to hold
vehicle inventory. However, this space is
Depreciation generally simple and adorned with few
The average industry operator requires extravagancies. Thus, in 2019, rent is
few large capital purchases to open an expected to account for just 1.4% of
establishment. As a result, industry revenue.
depreciation accounts for a very small
share of industry revenue. In 2019, Utilities
depreciation costs are expected to While large spaces are necessary for
account for just 0.2% of the average industry establishments, few utilities are
industry operator’s revenue. required to operate an industry
establishment. Thus, in 2019, utilities are
Marketing expected to account for just 0.5% of
Advertising, which has become industry revenue.
increasingly important for industry
operators, is expected to account for 1.2% Other
of industry revenue in 2019. Used car Other costs incurred by industry
dealers have dramatically changed their operators generally include
advertising practices over the past five miscellaneous costs, such as
years. According to the National administrative tasks. Thus, in 2019, other
Independent Auto Dealers Association, costs are expected to account for 3.6% of
the internet is the most popular channel industry revenue.
Basis of Competition Internal enables the company to offer ample variety

Within the Used Car Dealers industry, in its products.
dealers compete on the basis of vehicle Used car dealers also compete on the
Level & Trend offering and price. CarMax’s vehicle basis of financing options. Most industry
ompetition
C in offerings differ from other used car players offer a broad range of financing
this industry is dealers’ in that the former primarily sells options, reaching customers underserved
Highand the trend vehicles that are one to six years old; by competing industries. Used car
about 85.0% of CarMax’s sales are of dealers’ financing options include
is I ncreasing
vehicles that are between one and six offerings from specialized finance
years of age. companies, banks and “buy here, pay
Most industry operators have inventories here” (BHPH) contracts with the
dominated by vehicles that are at least six dealership. Under a BHPH agreement,
years old and have more than 60,000 miles. customers make weekly cash payments to
The variety of options available on vehicles the dealership, with no credit-approval
in-stock can carry significant weight in a required; however, not all used car
consumer’s purchasing decision, though dealers offer this option. For example,
typically less so for older vehicles. CarMax’s CarMax, the largest used car dealer in the
sizeable stock of similarly aged vehicles nation, does not.

Basis of Competition Sales experience further undergirds Car Dealers industry (see IBISWorld
continued competition among industry players. report 44111) and individual vehicles
America’s Car-Mart makes between 10.0% owners that choose to sell their vehicles
and 15.0% of its sales from customer on their own. New car dealers benefit
referrals. According to Used Car News, while from superior facilities, while individual
happy customers generally tell three friends owners are able to offer lower prices than
about their positive experiences, unhappy dealerships. Despite strong conditions in
ones tell five times as many people. the new car market, new car dealers are
expected to seek revenue growth
External opportunities by expanding their used
Used car dealers experience stiff vehicles segment, threatening demand
competition from operators in the New for industry operators.
Barriers to Entry The Used Car Dealers industry has

minimal barriers to entry, with low Barriers to Entry checklist
Level & Trend investment requirements and no Competition High

franchise agreements. Used car dealers’ Concentration Low
arriers to Entry
B main barriers to entry are the availability Life Cycle Stage Mature
in this industry are of sufficient financing and a suitable Capital Intensity Low
Lowand S teady storage location. Store locations vary Technology Change Low
widely in quality, with locations in Regulation and Policy Medium
high-traffic areas particularly sought Industry Assistance Low
after. Used car dealers require some form
of financing, often the owner’s equity, to SOURCE: WWW.IBISWORLD.COM
purchase vehicles for sale and finance

customers’ purchases. Ample financing is carry a high risk of default. New entrants
a particularly urgent requirement for to this industry will find that competition
dealers engaged in “buy here, pay here” from existing used car dealers represents
(BHPH) financing arrangements, which the most significant barrier to entry.
Industry The Used Car Dealers industry has a older used vehicles from the United
Globalization limited international presence, as its States and Canada to Mexico. As of 2016,
products are second-hand vehicles that Mexico is obligated under NAFTA
Level & Trend are usually for domestic consumers. The provisions to import all used vehicles
North American Free Trade Agreement older than eight years of age without
lobalization
G in this (NAFTA) introduced a degree of tariffs. These exports are handled
industry is L owand globalization, encouraging the export of through manufacturers and wholesalers.
the trend is S teady

Major Companies
CarMax Inc. | Other Companies
Major Players
(Market Share)
85.1%
Other
CarMax Inc. 14.9% SOURCE: WWW.IBISWORLD.COM
Player Performance Established in 1993 under the ownership relevant. CarMax focuses on selling used
of Circuit City Stores, CarMax Inc. vehicles that are under 10 years old; in
(CarMax) is the largest retailer of strictly fiscal 2019, the company sold 748,961
CarMax Inc. used vehicles in the United States, selling used vehicles. CarMax acquires their
Market Share: 14.9% twice as many used vehicles as its closest vehicle fleet through several avenues,
competitor. A Fortune 500 company including wholesale auctions, customers
headquartered in Richmond, VA, CarMax trade-ins and fleet owners. All acquired
has more than 200 used vehicle vehicles are inspected, and those that fail
dealerships in 41 states, primarily to meet CarMax’s standards are sold
situated in the West and Southwest through on-site wholesale auctions to
regions of the United States. CarMax has other used car dealers. These wholesale
nearly 30,000 full- and part-time auctions enable the company to control
employees. In fiscal 2019 (year-end its reconditioning activities while
February, latest data available), the simultaneously supporting retail sales,
company generated $18.2 billion in total which often rely on customers’ ability to
company-wide revenue. sell their current vehicles.
CarMax splits its operations into two Under the CarMax auto finance
business segments: CarMax sales segment, the company provides a broad
operations and CarMax auto finance range of financing arrangements through
(CAF). Both segments are industry its own finance department and third-
relevant; however, wholesale vehicle party financing providers. Unlike most
sales, which are included in the sales used car dealers, CarMax does not offer
operations segment, are not industry “buy here, pay here” (BHPH) financing,
CarMax Inc. (US industry-specific segment) - financial performance*

Revenue Operating Income
Year** ($ million) (% change) ($ million) (% change)
2014-15 12,196.5 N/C 828.5 N/C
2015-16 12,961.4 6.3 864.0 4.3
2016-17 13,792.7 6.4 874.4 1.2
2017-18 14,939.1 8.3 928.1 6.1
2018-19 15,780.1 5.6 966.3 4.1
2019-20* 17,836.6 13.0 1,071.8 10.9
*Estimates; **Year-end February

SOURCE: ANNUAL REPORT

Major Companies
Player Performance by which customers pay weekly cash maintaining high standards of customer
continued installments without the formal issuing service. As a result, over the past five
of credit. Since CarMax emphasizes years CarMax’s industry-relevant
more-traditional credit issuing, the operations have grown to comprise
company wards off bad debt expenses. about 87.0% of the company’s total
revenue. CarMax has been particularly
Financial performance well-placed to take advantage of
Over the five years to fiscal 2020, consumers’ increasing demand for used
CarMax’s industry-relevant revenue is vehicles because it offers a shopping
expected to increase at an annualized experience more like that of new car
rate of 7.9% to $17.8 billion. The dealers, rather than that of other used
company’s growth over the past five car dealers. The company’s extensive
years has mainly been organic, as the online presence has been particularly
company has completed few industry- significant to the company’s growth
relevant acquisitions, focusing instead over the past five years, along with its
of their range of products and prominence in the industry as a whole.
Other Company Founded in Rogers, AR, in 1981, cities with populations of less than
Performance America’s Car-Mart Inc. (America’s 50,000 citizens.
Car-Mart) is a vertically integrated used Each of America’s Car-Mart’s
car dealer and one of the largest dealerships holds between 25 and 100
America’s Car-Mart industry operators in the country. vehicles in stock, depending on the size of
Inc. America’s Car-Mart employs more than its local market. The company’s vehicles
Market Share: 0.6% 1,500 workers and is headquartered in range in age from six to 12 years old and
Bentonville, AR. The company’s largest average mileage between 90,000 and
market is customers with poor or 140,000 miles. The company is involved
limited credit histories using “buy here, in all aspects of used car sales and
pay here” arrangements. In fiscal 2019 financing, and its vertical integration
(year-end April, latest data available), practices ensure that individual
America’s Car-Mart operated more than dealership managers do not focus on
140 used car dealerships throughout 11 sales volume at the expense of financing
states and generated $669.1 million in revenue. In fiscal 2020 (year-end April),
total company revenue. The company the company is expected to generate
primarily operates in relatively small $706.4 million in industry-relevant
urban and rural areas in the Southern revenue. New store openings and
and Central regions of the United restrained credit availability from
States, and an estimated 75.0% of traditional auto lenders have fueled the
America’s Car-Mart’s dealerships are in company’s recent success.

Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensity Operators in the Used Car Dealers

industry experience a low level of Capital Intensity
Capital units per labor unit
capital intensity. In 2019, for every
Level
dollar spent on labor, industry 0.5
The levelof capital operators are expected to spend $0.03
intensity is L ow on capital. The level of capital intensity 0.4
has remained relatively unchanged 0.3

since 2014. Used car dealers require
fairly minimal capital, typically limited 0.2
to a few computers and vehicle 0.1

diagnostic equipment. The most
significant expense for industry 0.0
Economy Retail Trade Used Car
operators is obtaining and maintaining Dealers
sales space. Depending on the state, Dotted line shows a high level of capital intensity
industry operators must have a certain SOURCE: WWW.IBISWORLD.COM
amount of square footage available for

their vehicle stock and a certain for industry operators is their vehicle
number of vehicles stocked on stock, which is held for sale and,
premises. The other major investment therefore, not depreciated. Many

Capital Intensity dealerships further reduce their capital

continued investment by foregoing parts and
services departments and instead
focusing purely on vehicle sales.
Technology and Over the five years to 2019, the Used Car application that enables customers to
Systems Dealers industry experienced a low level of search for and view cars on their phones.
technological change. Industry operators According to the 2015 Automotive Buyer
Level have limited exposure to technology in Influence Study conducted by Polk and
general, as the industry’s central activity, Autotrader.com, 60.0% of used and new
The level
of selling vehicles, has undergone little vehicle purchases spent about 75.0% of
technology change over the past 50 years. However, shopping time online.
change is L ow the internet and its effects on consumer A separate study jointly conducted by
purchasing behavior has changed the the National Auto Dealers Association and
industry’s marketing practices. For AutoTrader.com found that more than
example, in fiscal 2019 (year-end half all dealership walk-in traffic resulted
February), about 90.0% of customers that from online advertising. In comparison,
bought a car from CarMax did so after just 13.0% of walk-in traffic derives from
visiting the company’s website. CarMax newspaper advertising. The majority of
has also developed a mobile website industry players use internet advertising.
Revenue Volatility Over the five years to 2019, the Used since economic conditions have been
Car Dealers industry has exhibited a favorable over the past five years,
low level of revenue volatility. The revenue volatility has remained
Level
discretionary nature of vehicle relatively low. The general health of
The level of purchases, both new and used, leads to the overall US economy has a strong
volatility is L ow a certain inherent level of revenue influence over revenue volatility for
volatility for the industry. However, the industry, since consumers

Revenue Volatility generally do not make large purchases, to credit has increased over the past
continued such as vehicles, during periods of five years, consumers have been more
economic uncertainty. easily able to finance their used vehicle
Still, the Used Car Dealers industry is purchases, benefiting the industry.
not as sensitive to fluctuations in This, combined with rising per capita
disposable income and other economic disposable income, has resulted in
factors as other discretionary fairly stable revenue growth for the
industries, since consumers, despite industry. Thus, over the five years to
credit score, are generally still able to 2019, the industry experienced a
finance a used vehicle. Thus, as access relatively low level of volatility.
Regulation and Policy The Used Car Dealers industry is Lemon laws pertain to automobile
considerably less regulation than the New warranties and the manufacturer’s
Car Dealers industry (see IBISWorld responsibility for repairing defects within
Level & Trend report 44111), though some regulations the warranty period.
he level of
T remain the same for both industries. For Industry operators are further subject
Regulation is example, used car dealers are required to to the Dodd-Frank Wall Street Reform
Mediumand the obtain various licenses and permits, and Consumer Protection Act, which
including dealer, service, sales and passed Congress in 2010 and went into
trend is I ncreasing finance licenses and permits that are effect on July 21, 2011. According to
issued by state and local regulatory Automotive News, the legislation
authorities. A wide range of federal, state mandates that auto dealers provide
and local laws and regulations govern the risk-based pricing notices to customers
way operators conduct business, that receive credit on terms that are less
including advertising, sales, financing favorable than terms offered to a
and employment practices. These fall substantial portion of their customers.
under consumer protection laws (e.g., Additionally, auto dealers must provide
lemon laws), privacy laws, anti-money consumers with their credit score if they
laundering laws and state franchise laws. deny their loan request.
Industry Assistance Operators in the Used Cars Dealers Industry operators further benefit
industry receive minimal assistance from from industry trade groups. Established
federal, state or local governments. Even in 1946, the National Independent
Level & Trend so, automakers’ practice of subsidizing Automobile Dealers Association (NIADA)
he level of
T new vehicle sales, especially among is a used automotive dealer trade
Industry Assistance domestic manufacturers, is a key form of association. The organization has over
is L owand the indirect assistance. New vehicle purchase 20,000 members. NIADA provides
incentives cause automakers to produce different services to members, including
trend is S teady more vehicles than demand dictates, advocacy, education and research.
which forces downward pressure on Additionally, there are many state-
resale values over time. Lower resale specific associations that offer similar
values reduce used car dealers’ services but cater their efforts specifically
purchasing expenses. to operators within the state they operate.

Key Statistics
Industry Data Industry Per capita dispos-
Revenue Value Added Establish- Wages Domestic able income
($m) ($m) ments Enterprises Employment Exports Imports ($m) Demand ($)
2010 84,250.2 6,653.7 115,424 114,409 204,238 -- -- 4,463.3 N/A 38,162.0
2011 87,141.9 7,347.2 114,510 113,405 209,348 -- -- 4,820.0 N/A 38,777.6
2012 90,595.9 7,234.3 124,239 122,864 224,312 -- -- 5,060.0 N/A 39,778.6
2013 93,126.1 7,901.9 125,122 123,658 231,670 -- -- 5,387.5 N/A 38,995.4
2014 98,485.2 8,571.1 132,395 130,833 245,608 -- -- 5,813.4 N/A 40,279.6
2015 105,962.6 9,488.7 134,803 133,197 251,771 -- -- 6,309.8 N/A 41,636.7
2016 113,727.8 10,016.4 132,638 131,458 256,336 -- -- 6,604.6 N/A 42,050.1
2017 116,653.2 9,461.4 135,504 134,262 263,121 -- -- 6,778.4 N/A 42,866.5
2018 116,150.4 9,472.1 137,199 136,091 265,046 -- -- 6,812.3 N/A 43,825.0
2019 117,942.8 9,508.0 140,239 139,170 270,504 -- -- 6,945.5 N/A 44,804.7
2020 119,344.0 9,611.6 142,391 141,345 274,736 -- -- 7,048.9 N/A 45,715.0
2021 120,497.4 9,708.6 144,551 143,550 278,524 -- -- 7,140.3 N/A 46,217.8
2022 121,737.2 9,821.1 146,248 145,258 281,908 -- -- 7,224.4 N/A 46,726.2
2023 123,141.3 9,944.1 147,956 146,967 285,436 -- -- 7,313.4 N/A 47,427.1
2024 124,914.1 10,147.5 150,206 149,215 289,654 -- -- 7,420.9 N/A 48,182.8
Sector Rank 10/63 18/63 4/63 4/63 17/63 N/A N/A 18/63 N/A N/A
Economy Rank 93/694 261/694 54/694 53/694 128/694 N/A N/A 229/694 N/A N/A
Annual Change Industry Establish- Domestic Per capita dispos-

Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand able income
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2011 3.4 10.4 -0.8 -0.9 2.5 N/A N/A 8.0 N/A 1.6
2012 4.0 -1.5 8.5 8.3 7.1 N/A N/A 5.0 N/A 2.6
2013 2.8 9.2 0.7 0.6 3.3 N/A N/A 6.5 N/A -2.0
2014 5.8 8.5 5.8 5.8 6.0 N/A N/A 7.9 N/A 3.3
2015 7.6 10.7 1.8 1.8 2.5 N/A N/A 8.5 N/A 3.4
2016 7.3 5.6 -1.6 -1.3 1.8 N/A N/A 4.7 N/A 1.0
2017 2.6 -5.5 2.2 2.1 2.6 N/A N/A 2.6 N/A 1.9
2018 -0.4 0.1 1.3 1.4 0.7 N/A N/A 0.5 N/A 2.2
2019 1.5 0.4 2.2 2.3 2.1 N/A N/A 2.0 N/A 2.2
2020 1.2 1.1 1.5 1.6 1.6 N/A N/A 1.5 N/A 2.0
2021 1.0 1.0 1.5 1.6 1.4 N/A N/A 1.3 N/A 1.1
2022 1.0 1.2 1.2 1.2 1.2 N/A N/A 1.2 N/A 1.1
2023 1.2 1.3 1.2 1.2 1.3 N/A N/A 1.2 N/A 1.5
2024 1.4 2.0 1.5 1.5 1.5 N/A N/A 1.5 N/A 1.6
Sector Rank 17/63 37/63 11/63 11/63 13/63 N/A N/A 15/63 N/A N/A
Economy Rank 333/694 517/694 172/694 161/694 232/694 N/A N/A 258/694 N/A N/A
Key Ratios Imports/ Exports/ Revenue per Share of the

IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy
(%) (%) (%) ($’000) (%) per Est. ($) (%)
2010 7.90 N/A N/A 412.51 5.30 1.77 21,853.43 0.04
2011 8.43 N/A N/A 416.25 5.53 1.83 23,023.86 0.05
2012 7.99 N/A N/A 403.88 5.59 1.81 22,557.87 0.04
2013 8.49 N/A N/A 401.98 5.79 1.85 23,255.06 0.05
2014 8.70 N/A N/A 400.99 5.90 1.86 23,669.42 0.05
2015 8.95 N/A N/A 420.87 5.95 1.87 25,061.66 0.05
2016 8.81 N/A N/A 443.67 5.81 1.93 25,765.40 0.06
2017 8.11 N/A N/A 443.34 5.81 1.94 25,761.53 0.05
2018 8.16 N/A N/A 438.23 5.87 1.93 25,702.33 0.05
2019 8.06 N/A N/A 436.01 5.89 1.93 25,676.15 0.05
2020 8.05 N/A N/A 434.40 5.91 1.93 25,656.99 0.05
2021 8.06 N/A N/A 432.63 5.93 1.93 25,636.21 0.05
2022 8.07 N/A N/A 431.83 5.93 1.93 25,626.80 0.05
2023 8.08 N/A N/A 431.41 5.94 1.93 25,621.86 0.05
2024 8.12 N/A N/A 431.25 5.94 1.93 25,619.88 0.05
Sector Rank 61/63 N/A N/A 9/63 60/63 58/63 27/63 18/63
Economy Rank 674/694 N/A N/A 242/694 635/694 624/694 583/694 261/694
Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data. SOURCE: WWW.IBISWORLD.COM

Industry Financial Ratios

Apr 2017 - Mar 2018 by company revenue
Apr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium Large
Mar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 1.5 1.4 1.4 1.4 1.5 1.4 1.3
Quick Ratio 0.3 0.3 0.3 0.3 0.2 0.3 0.2
Sales / Receivables (Trade Receivables
Turnover) 118.9 97.3 88.7 114.9 313.9 75.5 46.7
Days’ Receivables 3.1 3.8 4.1 3.2 1.2 4.8 7.8
Cost of Sales / Inventory (Inventory Turnover) 5.7 5.5 5.7 5.3 5.0 5.6 6.3
Days’ Inventory 64.0 66.4 64.0 68.9 73.0 65.2 57.9
Cost of Sales / Payables (Payables Turnover) 188.1 189.5 166.6 128.4 278.5 103.3 45.3
Days’ Payables 1.9 1.9 2.2 2.8 1.3 3.5 8.1
Sales / Working Capital 15.2 14.7 14.8 15.8 14.8 15.7 20.7
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) /
Interest 2.6 3.1 3.0 2.3 2.0 2.4 3.2
Net Profit + Dep., Depletion, Amort. / Current
Maturities LT Debt 1.4 1.4 3.4 5.2 n/a n/a n/a
Leverage Ratios
Fixed Assets / Net Worth 0.1 0.1 0.2 0.2 0.2 0.2 0.2
Debt / Net Worth 3.0 3.1 3.1 3.8 3.9 3.9 3.7
Tangible Net Worth 22.7 24.6 24.8 19.1 15.0 25.2 24.1
Operating Ratios
Profit before Taxes / Net Worth, % 21.0 21.1 22.6 19.5 14.6 21.3 26.0
Profit before Taxes / Total Assets, % 4.5 5.1 5.9 4.0 3.0 4.4 5.7
Sales / Net Fixed Assets 126.9 127.2 120.2 116.1 120.2 119.8 101.0
Sales / Total Assets (Asset Turnover) 4.0 4.0 3.9 3.8 3.4 4.1 4.3
Cash Flow & Debt Service Ratios (% of sales)

Cash from Trading 14.0 14.6 15.4 14.8 17.6 12.2 9.4
Cash after Operations 0.8 0.8 1.2 0.7 0.8 0.5 0.4
Net Cash after Operations 1.7 1.6 2.1 1.3 1.3 1.3 0.9
Cash after Debt Amortization -0.6 -0.4 0.2 -0.5 -0.3 -0.1 -2.0
Debt Service P&I Coverage 0.8 1.0 1.6 1.0 0.7 1.4 1.0
Interest Coverage (Operating Cash) 1.3 1.3 2.2 1.4 1.3 1.8 1.5
Assets, %
Cash & Equivalents 8.8 8.2 10.7 9.8 9.5 11.8 6.7
Trade Receivables (net) 15.1 15.6 14.9 12.8 11.0 14.8 16.9
Inventory 58.1 59.1 56.1 58.2 57.6 58.8 59.1
All Other Current Assets 2.9 1.9 3.0 2.4 1.9 3.2 2.9
Total Current Assets 84.9 84.7 84.7 83.3 80.1 88.6 85.7
Fixed Assets (net) 9.0 9.5 10.0 10.3 12.2 7.1 8.7
Intangibles (net) 0.9 1.0 1.2 1.4 1.6 0.9 1.7
All Other Non-Current Assets 5.3 4.7 4.1 5.0 6.1 3.4 3.9
Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total Assets ($m) 2,805.1 2,983.7 3,695.3 3,672.0 513.7 1,211.7 1,946.5
Liabilities, %
Notes Payable-Short Term 36.2 38.0 33.5 36.2 33.8 40.4 37.9
Current Maturities L/T/D 2.2 2.4 2.7 2.3 3.2 0.7 2.5
Trade Payables 5.8 6.1 6.1 6.2 5.5 5.3 11.3
Income Taxes Payable 0.1 0.3 0.2 0.1 0.1 0.2 0.1
All Other Current Liabilities 12.7 11.5 13.7 13.4 14.4 13.0 9.5
Total Current Liabilities 57.1 58.2 56.3 58.2 56.9 59.6 61.3
Long Term Debt 10.7 9.6 10.6 10.3 13.6 5.2 6.5
Deferred Taxes n/a n/a n/a 0.1 0.1 n/a 0.3
All Other Non-Current Liabilities 8.7 6.5 7.0 10.8 12.7 9.0 6.2
Net Worth 23.6 25.6 26.0 20.5 16.6 26.1 25.8
Total Liabilities & Net Worth ($m) 2,805.1 2,983.7 3,695.3 3,672.0 513.7 1,211.7 1,946.5
Maximum Number of Statements Used 484 447 457 461 270 136 55
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more
than 260,000 statements of member financial institutions’ borrowers and prospects.
Note: For a full description of the ratios refer to the Key Statistics chapter online.

Jargon & Glossary
Industry Jargon BAD DEBT EXPENSERepresents the amount of LEASE HERE, PAY HERE (LHPH)A financing option at
noncollectable accounts receivable that occurs in a some dealerships in which customers lease a vehicle, but
given period. This occurs when a customer is unable to the dealership retains ownership.
fulfill their obligation to pay an outstanding debt.
BUY HERE, PAY HERE (BHPH)A financing option at
some dealerships in which customers secure car loans
without providing their credit history. As a general rule, a
down payment and proof of income are the only items
required.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY CONCENTRATIONAn indicator of the
new companies struggle to enter an industry, while low dominance of the top four players in an industry.
barriers mean it is easy for new companies to enter an Concentration is considered high if the top players
industry. account for more than 70% of industry revenue.
CAPITAL INTENSITYCompares the amount of money Medium is 40% to 70% of industry revenue. Low is less
spent on capital (plant, machinery and equipment) with than 40%.
that spent on labor. IBISWorld uses the ratio of INDUSTRY REVENUEThe total sales of industry goods
depreciation to wages as a proxy for capital intensity. and services (exclusive of excise and sales tax); subsidies
High capital intensity is more than $0.333 of capital to on production; all other operating income from outside
$1 of labor; medium is $0.125 to $0.333 of capital to $1 the firm (such as commission income, repair and service
of labor; low is less than $0.125 of capital for every $1 of income, and rent, leasing and hiring income); and
labor. capital work done by rental or lease. Receipts from
CONSTANT PRICESThe dollar figures in the Key interest royalties, dividends and the sale of fixed
Statistics table, including forecasts, are adjusted for tangible assets are excluded.
inflation using the current year (i.e. year published) as INDUSTRY VALUE ADDED (IVA)The market value of
the base year. This removes the impact of changes in goods and services produced by the industry minus the
the purchasing power of the dollar, leaving only the cost of goods and services used in production. IVA is
“real” growth or decline in industry metrics. The inflation also described as the industry’s contribution to GDP, or
adjustments in IBISWorld’s reports are made using the profit plus wages and depreciation.
US Bureau of Economic Analysis’ implicit GDP price INTERNATIONAL TRADEThe level of international
deflator. trade is determined by ratios of exports to revenue and
DOMESTIC DEMANDSpending on industry goods and imports to domestic demand. For exports/revenue: low is
services within the United States, regardless of their less than 5%, medium is 5% to 20%, and high is more
country of origin. It is derived by adding imports to than 20%. Imports/domestic demand: low is less than
industry revenue, and then subtracting exports. 5%, medium is 5% to 35%, and high is more than
EMPLOYMENTThe number of permanent, part-time, 35%.
temporary and seasonal employees, working proprietors, LIFE CYCLEAll industries go through periods of growth,
partners, managers and executives within the industry. maturity and decline. IBISWorld determines an
ENTERPRISEA division that is separately managed and industry’s life cycle by considering its growth rate
keeps management accounts. Each enterprise consists (measured by IVA) compared with GDP; the growth rate
of one or more establishments that are under common of the number of establishments; the amount of change
ownership or control. the industry’s products are undergoing; the rate of
technological change; and the level of customer
ESTABLISHMENTThe smallest type of accounting unit
acceptance of industry products and services.
within an enterprise, an establishment is a single
physical location where business is conducted or where NONEMPLOYING ESTABLISHMENTBusinesses with
services or industrial operations are performed. Multiple no paid employment or payroll, also known as
establishments under common control make up an nonemployers. These are mostly set up by self-employed
enterprise. individuals.
EXPORTSTotal value of industry goods and services sold PROFITIBISWorld uses earnings before interest and tax
by US companies to customers abroad. (EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
IMPORTSTotal value of industry goods and services
interest and tax.
brought in from foreign countries to be sold in the
United States.

Jargon & Glossary
IBISWorld Glossary VOLATILITYThe level of volatility is determined by WAGESThe gross total wages and salaries of all
averaging the absolute change in revenue in each of the employees in the industry. The cost of benefits is also
continued past five years. Volatility levels: very high is more than included in this figure.
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.

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IBISWorld Industry Report Used Car Dealers in The US 2019

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WWW.IBISWORLD.

COM Used Car Dealers in the USJuly 2019 1

Good as new: Increases in per capita disposable

IBISWorld Industry Report 44112

2 About this Industry 17 International Trade 28 Industry Assistance

14 Products and Markets 26 Operating Conditions

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

About this Industry

Main Activities The primary activities of this industry are

The major products and services in this industry are

Similar Industries 33611a Car & Automobile Manufacturing in the US

44111 New Car Dealers in the US

44122a Motorcycle Dealership and Repair in the US

44122b Bicycle Dealership and Repair in the US

44122c Boat Dealership and Repair in the US

Provided to: Edeska (2129455405) | 25 October 2019

About this Industry

Additional Resources For additional information on this industry

IBISWorld writes over 1000 US

Provided to: Edeska (2129455405) | 25 October 2019

Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24

$2.4bn $6.9bn 139,170

Key External Drivers 3.8%

Price of new cars

Industry Structure Life Cycle Stage Mature Regulation Level Medium

Provided to: Edeska (2129455405) | 25 October 2019

Provided to: Edeska (2129455405) | 25 October 2019

Per capita disposable income Price of new cars

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Current Operators in the Used Car Dealers industry

access to credit helped more consumers

have been targeting individuals with

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Shifting gears While new car dealers have experienced

Provided to: Edeska (2129455405) | 25 October 2019

Increasing wholesale Used car dealers are dependent on the

Provided to: Edeska (2129455405) | 25 October 2019

Industry Over the five years to 2024, the Used Car

Improved economic The national unemployment rate is

Provided to: Edeska (2129455405) | 25 October 2019

Looming intervention In mid-2010, Congress passed a financial

Provided to: Edeska (2129455405) | 25 October 2019

Provided to: Edeska (2129455405) | 25 October 2019

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Products & Markets

Supply Chain KEY BUYING INDUSTRIES

KEY SELLING INDUSTRIES

Products and Services Products and services segmentation (2019)

Total $117.9bn SOURCE: WWW.IBISWORLD.COM

Provided to: Edeska (2129455405) | 25 October 2019

Products & Markets

Provided to: Edeska (2129455405) | 25 October 2019

Products & Markets

Major Markets Major market segmentation (2019)

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Products & Markets

Provided to: Edeska (2129455405) | 25 October 2019

Products & Markets

Business Locations 2019

West Establishments (%)

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Products & Markets

Business Locations The distribution of establishments in the

COM Used Car Dealers in the USJuly 2019 1