Despite tight inventory, total used-vehicle sales in April were up 69% compared to April 2020, according to my colleague, Cox Automotive chief economist Jonathan Smoke, who is forecasting full-year retail used-vehicle sales will reach 21.5 million, an increase from 19.7 million in 2020. 

At 60,000 strong, independent dealers are the backbone of our industry and a driving force in the auto market’s recovery. They account for nearly 70% of all wholesale auction purchases and more than half of retail used-vehicle sales.

The vital role of these dealers benefits both the wholesale and retail automotive sectors, as well as the overall economy and, ultimately, working-class consumers. They give franchise dealers an exit strategy for older or high-mileage trade-ins that don’t necessarily fit their inventory profile. They also provide needed access to affordable used vehicles in small, rural communities that lack the economies of scale to support a franchise dealership model.

Inventory constraints are a major pain point for the entire industry right now, and especially independents. With online auto retailers taking a larger share of the market, there is increased competition for the units offered at auction houses. As a result, franchised dealers and national retailers are buying older inventory in greater supply than they normally would.

Additionally, because of a lag in retail price increases, independent dealers have less inventory over which to spread their purchase gains and losses. When they can’t get their pricing right, they’re getting outbid on units they would normally win at the auction.

The good news is that, despite these challenges, the future looks bright. Cox Automotive projects retail volume for independent dealers will grow in the coming year and at a faster pace than franchised dealers, driven by an increasingly large inventory of used cars in the 4- to 9-year range. This is a space that independents have typically dominated, while franchise dealers tend to compete more heavily in the 0 to 3-year-old space.

It is truly a sweet spot for independents. These older used vehicles have aged out of the franchise model, but still has plenty of life left. They are also feature-rich, entering new to the market at a time when back-up cameras and other high-tech features were becoming more standard. As today’s consumers look for more value-conscious buys, the independent dealer stands to gain.

NextGear Capital is proud to support these entrepreneurial businesses as a wholesale financing partner to help them purchase affordable used car inventory. Serving more independent dealers than any other lender, we provided $17.3 billion in floor plan transaction financing for our clients in 2020.

Our commitment to the success of independent dealers is broad and steadfast. From offering credit lines with flexible terms and competitive pricing, to providing insights to help them make more informed decisions and investing in technologies to streamline their operations and create efficiencies, NextGear Capital is delivering solutions to reduce their pain points and help them thrive in any environment.

Scott Maybee is president of NextGear Capital, one of the largest independent inventory finance companies in North America, offering lines of credit and a robust array of services and support for dealers to acquire and sell new and used vehicles. Headquartered in Carmel, Ind., it is a Cox Automotive brand.