Economic stability is forecast to drive sales of big-ticket items like cars
Los Angeles, CA (PRWEB) May 20, 2012
In the five years to 2012, US automakers struggled to stay afloat. Before filing for Chapter 11 bankruptcy in 2009, General Motors and Chrysler accepted nearly $25.0 billion in government assistance. Turmoil in the market for asset-backed securities eroded the balance sheets of auto financiers, triggering dramatic tightening of credit standards and availability. While Used Car Dealers industry operators “have a similar structure and are sensitive to some of the same factors that new car dealers face, the industry weathered these challenges much better than other industries in the automotive sector,” says IBISWorld industry analyst Radia Amari. Over the five years to 2012, industry revenue has contracted at an annualized rate of 3.7% to $71.6 billion. In 2012, revenue is expected to grow about 1.2%, supported by financing revenue from credit-poor consumers, despite losses of customers to new car dealers.
Used car dealers offered independent financing solutions to outperform the automotive sector during the downturn. While new car dealers rely on financing companies to fund consumers' purchases, used car dealers often offer in-house financing known as buy here, pay here (BHPH). Traditionally, customers who purchase vehicles on a BHPH basis have C- and D-grade credit ratings. Says Amari, “Even customers with B-grade credit had difficulty finding affordable financing during the credit crisis.” These customers purchased vehicles from used car dealers on a BHPH basis rather than opting for traditional financing from new car dealers. The Used Car Dealers industry is firmly in the mature phase of its life cycle and has a low market share concentration. With the diffuse and highly saturated nature of this market, significant changes in industry concentration are unlikely to occur. Major company CarMax's notable growth was achieved organically, with no mergers or acquisitions. So any major increases in industry concentration are most likely to occur within CarMax or another used car dealer adopting similar business practices.
The recession greatly reduced consumers' willingness and ability to purchase vehicles. Unemployment and asset price declines, including homes and stocks, cut into consumers' income and savings. Consumers with poor credit (a large portion of industry customers) have been among the worst hit. Consumers with D-grade credit spent $11.0 billion at used car dealerships in 2009, a 51.7% decline from 2008. Fortunately, relative economic stability is encouraging spending on used cars. Used car sales are expected to grow in 2012, and the US economy will begin growing in earnest again in 2013. Because car sales typically move with the business cycle, car sales will also grow in earnest. For more information, visit IBISWorld’s Used Car Dealers in the US industry report page.
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IBISWorld industry Report Key Topics
Companies in this industry sell used passenger vehicles, including passenger cars, light trucks, sports utility vehicles (SUVs) and passenger vans. Used car dealers also provide financing and insurance services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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