Same-store used vehicle retail unit volumes for the seven publicly traded dealership groups rose 8.5% in the fourth quarter of 2012. It represented the fourteenth consecutive quarter in which there was a gain. And, for the full year of 2012, these seven dealership groups had a total retail unit volume that exceeded the one million mark for the first time ever.
Higher volumes were accompanied by greater operating efficiencies, faster inventory turns, and strong F&I income. As a result, profits were at record levels and, thus, the ongoing decline in gross margins raised little concern.
That does not change the fact that wholesale buying and selling strategies have been, and will continue to be, altered by the narrower margins. For one, thinner margins mean that the linkage between the retail and wholesale market has become tighter. Changes in one market will be more quickly and more acutely felt in the other. With the cushion of wide margins gone, look for subtle shifts in retail demand to be quickly reflected in wholesale buying.
In addition, as average margins narrowed, so too did the range of grosses on individual transactions for individual dealers. Lacking “home-run” (high gross) deals, dealers can now ill afford the outsized losses associated with buying the wrong car at the wrong price. So, for commercial consignors, who often benefited from that one dealer paying too much in a speculative bid, the need of getting their portfolio in front of right buyer - the first time - takes on added importance.
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