CLEVELAND -

The sentiment from dealers who participated in the latest survey from KeyBanc Capital Markets matched up with what CarMax executives recently shared about how potential subprime buyers are behaving.

Then, KeyBanc analysts projected what these same potential subprime customers could do during the second half of the year based on a pair of expectations.

First, KeyBanc described how softening subprime activity is impacting new-vehicle sales, which the firm thinks should produce another weaker new vehicle seasonally adjusted selling rate (SAAR) this month, settling in the mid-16 million range.

“Anecdotal commentary continued to suggest subprime traffic remained down despite intact credit availability, which we believe is weighing on new vehicle sales at the moment, but is likely to improve in the back half of the year, which leads us to believe the 17.2 million SAAR outlook is still appropriate,” KeyBanc said in its survey report that was shared with SubPrime Auto Finance News.

The analysts arrived at what CarMax conveyed during its latest conference call. CarMax reported that its subprime mix was down again in the quarter to approximately 10 percent of its sales volume. A year earlier, the level came in at 11.2 percent.

KeyBanc recapped that the drop by CarMax “appears driven by lower subprime consumer traffic as its subprime lenders’ behavior remained unchanged.”

Analysts returned to their May survey responses that touched on subprime credit availability. They explained the availability remained “consistently favorable” as 83 percent of respondents reported intact or improving subprime credit availability in May and only the remaining 17 percent reported a tightening in subprime availability.

So what does this mean as dealerships and the rest of the industry turn their focus on the second half of 2017 in less than a week?

“We believe subprime consumers will return to the market in the back half of the year as unemployment claims remain low and the mix of subprime lenders is shifting toward smaller, more competitive lenders, which should drive marketing efforts and subprime consumers back into the showrooms,” KeyBanc analysts said in the report.

Whether the customer is subprime or prime, the KeyBanc dealer survey showed 83 percent of respondents reported intact (33 percent) or increasing (50 percent) gross profit per unit in the F&I office.

“Favorable trend in F&I gross per unit (GPU) should continue to largely offset pressures in new and used vehicle GPU,” analysts said.

When it comes to used-vehicle gross, the dealer survey splintered evenly in three directions, with 33 percent of dealers seeing gross increase by $50 or more in May, another 33 percent watching gross tumble by $50 or more during that month and the remaining 34 percent noticing the metric stay flat year-over-year.

While acknowledging the ongoing pressure, dealers ended up almost evenly divided on the new-car side with about half watching gross soften by $50 or more and the remainder producing a gross rise of $50 or more.

Also of note, the KeyBanc survey mentioned parts and service gross profit continues to be a dealership highlight with 83 percent of respondents saying that margins in this department remain at near-record levels.