How is auto lending affecting independent industry growth?
The lending market is fairly flat in the independent space. New stores have a steep, uphill battle to climb with lenders to prove their business model. Basically, larger banks and indirect lenders won’t touch the new stores, forcing them into either buy-here-pay-here models, or into developing strong relationships with local banks and credit unions. On the flip side, independent dealerships with longevity are now being treated the same as franchise stores by auto lenders. So, while there is entrepreneurial growth in this space, the larger growth is occurring through merger and acquisition activity.
How are independent dealers approaching inventory planning?
Larger independent auto groups have become savvier with inventory planning based on consumer protection products. We’re seeing more dealers specialize in late-model vehicles, three years old or newer. This trend is most easily seen in the large national chains like CarMax and Carvana, who are making waves by buying every off-lease vehicle they can at auction. Franchise dealers taking their vehicles to auction have noted that independent demand is at an all-time high for those late-model vehicles. The reason behind this demand is simple. Independent dealers can make more money on a three-year-old vehicle than a five-year-old vehicle. They can sell more consumer protection products, secure better financing, and they are better equipped to meet consumer demand.