'Strength in numbers' helps Milford used car dealers thrive

Key Auto Group in Milford, Conn. Sept. 8, 2022.

Key Auto Group in Milford, Conn. Sept. 8, 2022.

Ned Gerard/Hearst Connecticut Media

MILFORD — Shopping for a new or used car is getting easier, as dealer inventories start to expand. In Milford, home to numerous dealerships, the new stock is a welcome sign for the used car market.

"The used car market has been strong, but not as strong in previous years," said Damien Regan, owner and operator of DealerTown Auto Wholesalers. "It was a down year for us."

Regan said what impacted them the most was high-interest rates and the availability of cars.

"So it wasn't a bad year but not as good of a year as we have done in the past," he said. "We source our cars through trade-ins, and most new car dealerships are keeping those trade-ins, so there's not much available for the used-car dealerships to buy."

Chip Rubenstein, owner of Chip's Auto Sales, also cited the effect of higher interest rates on the used car market.

"A lot of customers don't understand that yet," he said. "When the residential mortgage rate approaches or exceeds 7 percent, an installment loan on a pre-owned car will always be that or higher. It's just a factor of economics."

That means less buying power for the customer, he said.

"Buying the same price range vehicle is more expensive than it would have been six months or a year ago," he said. "So that's a whole factor that weighs into the used car market right now."

The supply chain interruption, which reduced the availability of new cars, also affected the used car market. But the new inventory has helped the overall used car situation, Rubenstein said.

"After 47 years in the business, you think I would know all the answers, but the questions were changed with COVID, and we didn't have a response," he said. "As the supply chain situation corrects itself, there is somewhere between a trickle and dribble of more new cars being delivered, which helps the used car situation."

Rubenstein said the location of his business in Milford has helped it, and others, survive.

"From an automotive environment, having been here for 47 years, it's somewhat of a Mecca," he said. "For example, we just delivered a GMC Yukon to people from Greenwich. Not from the internet or other advertising. They just decided to ride to Milford and ride the strip because they knew there were multiple dealers."

When it comes to auto sales, there's strength in numbers.

"There are many dealers and vehicles for sale, making it a great place to sell cars," Rubenstein said.

According to Chuck Dortenzio, director of operations at Key Auto Group, the used car market is strong, though it has fallen a bit as the supply of cars has loosened.

"The prices have started to soften a little bit because there's more inventory now," he said.

The days when used cars could command prices as high as brand new ones are gone, according to Rami Abou Al Laban, COO of Key Auto Group.

"That was because there were no new cars available," he said. "That is why those used cars were expensive."

While he didn't have specific data on the local used car market, Abou Al Laban said new car sales are up year over year in Milford.

Rubenstein, who started his dealership in 1976, said there are always cycles and trends.

"I remember in the late 70s, used car interest rates were 21 percent," he said, "With the longevity that I have in this industry, I've seen a lot."

However, there are some factors at play in the used car market, stated Rubenstein.

"Coming out of COVID, there have been huge problems of availability, just a lack of sellable inventory," he said. "It's eased a little bit, but one of the things that feed the used car inventory is off-lease vehicles, and many people are buying their leased car because it is the most economical thing to do."

There are only two types of ways to acquire used cars: buying a car from someone or selling them a new car, and they trade in their used car, Dortenzio said.

"Those are the only two ways to make a car," he said. "So when we had no new car inventory, not only us but other car dealerships, the new car inventory was very low because of COVID and supply chain issues. The used car market was also challenging because that is all people had to buy, and we couldn't get many of them. So inventory was very low, and the prices were very high."

Rubenstein said the market had eased a little bit depending on what types of vehicles people are interested in purchasing.

"Things like high-end luxury vehicles, and certain pickup trucks have become more available and more realistically priced," he said.

The adjustment in the used car market has started because there is now more new car inventory, said Abou Al Laban.

Auction houses, where new car dealers can send used cars that they don't want on their lots, also reflect the ebb and flow of supply chains, Dortenzio said.

"Sometimes the wholesale prices are a barometer of the market. We will go to those auction houses, and the prices are just crazy expensive, and it doesn't seem like you can buy at the auction," he said. "But then there are other times when the auction is a good place to buy and of course, you're going to buy the right car for your store."

Regan said the number of cars selling at auction is about half of what it used to be.

"The prices haven't come down yet to reflect the changes in the market," he said. "The one thing that has been constant is that car prices have stayed high. Other factors have changed, but this is one factor that has not changed. So I would expect moving forward it is going to be more of the same for a little while. High prices and lack of inventory."

Even the weather can affect the price and availability of used cars.

"When the hurricane hit Florida, that hurt the used car market because Florida is the biggest market for used cars," said Abou Al Laban.

Dortenzio agreed.

"Imagine Tampa, you got however many car dealerships all get flooded out. All those cars become junk, and those guys got to exist and do business, and the only way to do that is to go to the auction and buy cars or wait for new cars to come into their inventory," Dortenzio said. "That will also drive the auction prices high or keep them high in a time where they normally wouldn't be. So it's an outside influence that does that."