March 10, 2022
"Like nothing we've ever seen before."
Ask any auto industry analyst to assess the used car market as we creep further into 2022, and that’s the type of answer that you’re likely to get. After all, data from the U.S. Department of Labor Statistics estimates that the value of used car prices increased by some 40% from a year ago. Buoyed by the global chip shortage, supply chain issues and manufacturing price increases, the value of used cars is unlike anything we’ve ever seen – and drivers who are financing their vehicles (or who have already paid them off) stand to benefit.
There are also a number of public companies that are benefiting from the scorching hot used car market. An alternative to trading it to the dealership, many of these public companies are paying top-dollar for used vehicles before selling them. Here’s a look at five of the companies that are making bank on the used vehicle market:
CarLotz, Inc. (Tii:LOTZ) is one company cashing in on the used car market - partially thanks to its innovative technology-forward non-commissioned business model. Specifically, the CarLotz platform serves as a digital consignment shop, advertising vehicles online or at in-person lots to link buyers with sellers. Business has never been stronger for the online consigner, which reported record revenues of $68 million for its third quarter ended September 30, 2021. That result represents a 128% increase over the same period last year. CarLotz will release its fourth quarter and fiscal 2021 results after the U.S. stock market closes on March 15, 2022. A TiiCKER partner, CarLotz offers Stock Perks for its shareholders:
A fast-growing used car dealer, Carvana Co. (Tii:CVNA) is also one of the youngest companies of all time to have been named to the Fortune 500 List. With a current stock price of $116.55 (as of March 9, 2022), Carvana posted $12.814 billion in revenues for 2021, a 129% year-over-year increase. With more than 10,000 employees, the Tempe, Arizona-based company has sold more than 9 million vehicles since its founding in 2012. With its user-friendly search feature, vehicle vending machines and contactless delivery introduced in the early days of the pandemic, Carvana is showing no signs of slowing down.
With both a sales and an automotive finance division, CarMax, Inc. (Tii:KMX) is a used car retailer that allows consumers to shop for cars and then finance them under one entity. CarMax now has more than 200 stores throughout the country, with each store carrying up to 400 used vehicles. CarMax sold more than 750,000 cars in 2021. One of CarMax’s competitors, AutoNation Inc. (Tii:AN) operates one of the largest new and used car dealers in the U.S. The used car retailer has more than 300 stores nationwide and works to purchase used cars and quickly resell them to consumers. AutoNation is coming off a record-breaking quarterly financial performance as well. Fourth-quarter 2021 revenue totaled $6.6 billion, an increase of 14%. Those revenues were driven by a 55% increase in used vehicle revenue.
Finally, we have Advance Auto Parts, Inc. (Tii:AAP). With the bevy of used cars hitting the market, the company is thriving when it comes to supplying parts to fix them up for resale. Net sales for the company’s fiscal year ended January 1, 2022, increased 8.8% to $11 billion. With a strong free cash flow, the company returned $1 billion in cash to its shareholders and boosted its quarterly dividend by 50% to $1.50 per share.
The billion-dollar question is: When will the market cool off?
While high manufacturing costs and supply chain issues factor into the current hot used car market, the biggest factor by far is the global chip shortage. Drive by any new car dealership these days, and you’re likely to see a bevy of empty spaces. There just isn’t a lot of new vehicles ready right now. While it’s hard to predict when the chip shortage will subside, it appears that it’s not going to be anytime soon. The hot used car market isn’t going to last forever, but it also doesn’t appear to be subsiding in the near term.
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