One of America’s biggest used car retailers has just gone dark. Tricolor, the seventh-largest used car dealer in the country, has ceased operations and is reportedly preparing to file for bankruptcy. The sudden closure raises a red flag for the rest of the used car industry, especially as wholesale prices and dealer margins continue to collapse.
Tricolor’s business model was built around subprime auto loans, often charging interest rates between 18% and 28%—numbers that critics argue border on predatory. While that approach worked when used car prices were soaring during and after the pandemic, it’s now proving unsustainable. Over the past two months, used vehicle values have dropped sharply, and floor plan lenders—who provide credit lines to finance dealer inventory—appear to be pulling back.
According to reports, Tricolor employees were sent home, and locations have gone silent as the company scrambles for funding or a buyer. Some rumors suggest BlackRock or State Street could be potential suitors for the company’s assets, but so far, nothing has been confirmed.
This collapse comes amid a broader correction in the used car market. Dealers across the country are sitting on overleveraged inventory as prices slide—especially for vehicles financed during the 2021–2023 bubble. Wholesale values on certain models have dropped by $4,000–$5,000 in a matter of weeks, erasing dealer profit margins overnight.
Even buyers who thought they purchased at the bottom are feeling the squeeze. Vehicles like the BMW M5 and other premium models have seen values fall by several thousand dollars in just a few months. It’s not just consumers who are nervous—many independent dealerships are discovering they’re too exposed to survive another dip.
The irony, of course, is that the overall economy remains stable, with employment strong and inflation cooling. That means the used car decline isn’t about macroeconomic collapse—it’s about a market correcting after years of inflated pricing, bad loans, and unsustainable expansion.
If a major player like Tricolor can’t weather the downturn, smaller dealers relying on subprime financing could be next. The real question now is whether we’re watching an isolated bankruptcy—or the beginning of a domino effect that reshapes the used car landscape heading into 2025.
For now, one thing’s certain: the easy-money era of used cars is officially over.
