CNW Research is calling for a slim upswing in used-vehicle sales this month, but that’s not what the firm found most interesting about the used market.

Stealing the show in July, it said, are the independents.

After a few lean months this year, independent dealers are leading the pack in July, with franchised dealers projected to be up modestly in used sales, and casual sales are predicted to dip 3.5 percent.

Calling the 0.3-percent used sales increase projected for the overall industry “meager,” CNW president said that “what’s noteworthy is the strong gain by independent dealers.”

He added: “Year-to-date independent used-car stores have seen a 2.6-percent rise, but July’s sales track puts them at a 3.4-percent increase. This follows some thin months scoring negative numbers.”

Independents are forecasted to sell 1.56 million units this month, up 3.4 percent year-over-year.  Meanwhile, CNW believes franchised dealers will sell 1.80 million used units for a 0.5-percent hike, with private-party sales down 3.5 percent at 1.25 million sales.

Overall, CNW is predicting industry-wide used sales of 4.62 million, compared to 4.60 million in July 2012.
Projections from other industry analysts weren’t as high.

Edmunds is calling for about 3.18 million used sales this month, putting the SAAR at 36.2 million.  TrueCar was forecasting 3.13 million used sales for July, with a new-to-used ration of 1:3.

Growth for Independent Stores

Drilling down into the results, Spinella detailed four reasons why independent dealers are seeing gains and casual sales are slumping.

“The independent uptick is largely due to more shoppers taking advantage of better inventory and quicker purchases than can be found in the casual market,” he explained.

“Private-party sales are harder to finance. Many lending institutions are still requiring higher credit scores for casual buyers than they do for others. While still significantly better than in the past four years when it was nearly impossible for private party buyers to get financing, lenders are still a bit wary of making these car loans."

“Second, for shoppers the process requires more travel to see the vehicles they are interested in since there isn’t a “lot” with multiple choices. Craigslist users, for example, travel nearly 100 miles over nine days looking at cars or trucks of interest before making an acquisition,” he continued. “Those who buy from a franchised or independent dealer travel less than 30 miles, usually over the course of two days.”

As for the third reason, Spinella indicated that the brick-and-mortar storefronts of independent and franchised dealers are viewed as steadier — they will likely be open and available in the future should a service need pop up.

The next reason has to do with warranties — which apparently are gaining ground among the independent crowd.

“Fourth, many independents are now offering limited warranties as a matter of sale, some because state laws require it, others for just the marketing advantage it gives over private-party sales,”  Spinella added.

It’s “too early to tell” whether July’s sales trend will continue down the road or it’s simply a blip on the radar, he emphasized.  There continues to be more and more “online vehicle showrooms,” and younger buyers often trust sources like Craigslist over the dealership, according to Spinella.

“Working against that trust, however, is the growing percentage of used-car buyers who have used online classifieds who say the vehicle wasn’t what was advertised. And this is usually directed at non-dealer sites,”  he noted.

Franchised Trending

Spinella went to offer a bit more color on the franchised dealer side. Interestingly enough, the new-car industry appears to be helping the used market.

“For franchised dealers, higher new-car sales are feeding used-car lots with models that are generally newer, fresher and more desirable,” he said. “By increasing new-car marketing efforts, people who are only planning to buy a used car are still attracted to a franchised dealership to shop.

“More advertising, more shoppers, more word-of-mouth, more buyers,” Spinella added. “And new-car outlets have far more marketing dollars and factory support than do independents or private party sellers.”

Joe Overby can be reached at joverby@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.