Used-car sales – a driver behind recent market strength – may slow as used-vehicle inventories shrink, according to Cox Automotive’s second-quarter Dealer Sentiment Index report published last week.
“If market strength is being driven by used vehicles, can used-vehicle sales remain strong considering declining inventory?” Cox Auto Chief Economist Jonathan Smoke said in a statement. “That’s a concern to watch in the coming months.”
Used-vehicle sales ticked up in the second quarter, in line with seasonal trends. However, dealer sentiment on used-vehicle inventory continues to decline across franchise and independent dealers and was noted as a reversal from the growth trend last quarter. In fact, limited inventory was cited as a top factor constraining franchise and independent dealers’ business in the quarter.
Meanwhile, new-vehicle inventory is expanding, and new-car sales in the second quarter were stable year over year.
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The current market index, which is a measure of business conditions, saw a 1-point gain to 49 (a number higher than a 50 on the index is considered strong). Dealer sentiment remains negative despite “statistically significant” quarterly gains in customer traffic and profit levels, according to the report.
Pressures to lower costs continues to concern the industry. Still, “the overall view of the market is remarkably stable this spring relative to the beginning of the year,” Smoke added. The index is on track to hit 55 next quarter.
The Dealer Sentiment Index is based on responses from 1,031 U.S. auto dealers surveyed between April 29 and May 14.
