ATLANTA -

Franchised dealers appear to have a rosier outlook on the used-car market than their independent dealer counterparts, according to a study released Monday by Cox Automotive.

In addition to other areas, the Q3 2019 Cox Automotive Dealers Sentiment Index delved into the used-car department, which for franchised dealers, is tilted more towards positive. 

When asked how they would describe the current used-vehicle sales environment, the index for franchised dealers was at 73 — leaning more towards “good” than “poor” — up from 72 in both Q2 and from a year ago.

For independents, it was 49, down from 51 in Q2 and 52 in Q3 2018.

The overall index for this question was 55, compared to 56 in Q2 and 57 a year ago.

Used-car inventory

As far as used-car supply, franchised dealers are seeing a more plentiful crop.

When asked how they would describe current used-vehicle inventory levels, franchised dealers were at 54 (leaning towards “growing” than “declining), up from 53 last quarter and 52 in Q3 2018.

Independents were at 44, even with the second quarter and down from 46 a year ago. 

The overall reading on used inventory was 47, up from 46 last quarter and down from 48 a year ago.

It should be noted that first quarter levels were higher than Q3 levels across the board regarding used inventory, prior to drops in Q2: It was 54 overall in Q1, 62 for franchised dealers and 52 for independents.

In terms of how they felt about the mix of used inventory, results were fairly steady.  When dealers were asked to describe the current used-vehicle inventory mix (a new question in Q2), the overall index was 63 (same as Q2), with franchised dealers at 65 (down from 66) and independents at 62 (even with prior quarter).

Tariff impacts to used cars: Viewpoints vary

The survey also delved into potential impacts of tariffs, including some related to used cars.

Dealers were instructed to select all that all and asked this question: What, if any, negative impacts would imposing tariffs on imported vehicles and parts have on your business?

Fifty-six percent believed they would see higher prices on used vehicles with the market adjusting to those tariffs, same as the previous quarter. 

Twenty-four percent believed they would see lower or delayed used-vehicle sales, compared to 19% in Q2.

Breaking it down by dealer types, independents anticipate more negative impacts from tariffs than do franchised dealers. But they're expectations for positive impacts also skew higher.

Among franchised dealers, 45% expected tariffs would lead to higher used prices (even with Q2) and 13% believed tariffs would lead to lower or delayed used-car sales (up from 12%).

Among independents, 63% believed they would lead to higher prices (up from 61% in Q2), with 31% predicting lower or delayed used-car sales (up from 23%).

On the positive side, dealers were also asked this question regarding tariffs: What, if any, positive impacts would imposing tariffs on imported vehicles and parts have on your business?

Overall, more than half (56%) said they anticipated more traffic for used cars (down from 57% in Q2) and 36% expected they would lead to stronger margins on all used vehicles (down from 46%).

A third of franchised dealers said tariffs would lead to more used-vehicle traffic, compared to 35% who said this in Q2. Twenty-nine percent believed it would raise used-car margins, up from 24% of franchised dealers with this belief in the second quarter.

Meanwhile, nearly two-thirds (64%) of independents think tariffs would lead to more used-car traffic, compared to 63% the prior quarter. However, 39% thought tariffs would increase used-car margins, down from 52% last quarter.