COMMENTARY: Don’t fear the new year
Welcome to the new year, your new normal.
Don’t worry. It’s not that scary!
As an industry, our No. 1 addiction is the next shiny object. It’s our Achilles’ heel. The latest trend, the latest opinion and the latest “easy way to do it better, faster and more profitably.”
It always comes down to two main points.
- Acquire the right inventory
- Price it accordingly.
We’ve always been guilty – notice I said we. I’m not throwing rocks here.
I am, however, sending out a reality check. Henry Ford once famously said, “If I asked people what they wanted, they would have told me faster horses.”
I’ve always been proud to be in the automotive industry. One reason: We’re one of the most resilient industries in the world.
Sometimes that resiliency comes from something as simple as catching your breath. Look at what makes you fail or succeed in the long haul, not over the short term.
There are some core principles that can help dealers identify the fastest-selling, most profitable used cars with the highest return on investment.
Let’s remind ourselves of what they are.
- What sells well new sells well
- Retail price the car for 50% of what it sold for when it was new.
- They’re typically 4-6 years old.
- They have an average of 12,000 miles or fewer.
- Make sure they’re black, white, silver or gray. They’re the colors that sell best.
Hard to come by? Absolutely. Worth the effort? 100%.
Really, there are only two ways to get them.
- Trade or lease return.
- Pull them out of service.
That may be obvious, I realize, but I told you this would be a reality check. Here’s how you can optimize your opportunities.
- Think retail first when appraising trades and work backward from retail – not up from wholesale.
- Your best inventory is created in your service department (homegrown), and when it’s time to evaluate those vehicles, step up. This isn’t the time to try stealing it. Remember, these are your best, most loyal customers and your highest ROI inventory.
It’s also true that the wrong car is never cheap enough. There’s a reason you were able to get it cheap, especially if you bought it at auction.
Have you ever realized the ones you step up on usually sell (and are profitable) and the ones you “stole” age and cause you wholesale loss?
Next step: price the car correctly. Every vehicle is unique – no two used vehicles are the same. Don’t price a car solely according to a market-pricing tool. Price it the same way you appraised it.
Take your time to price it where it belongs. If it’s worth more than average, then go ahead and give it an above-market tag. If it’s worth less than market, price it lower.
Price it correctly from Day 1. Don’t give it the 30-day-price-it-high-and-lower-it-if-it-ages attempt. Sell it in the same market you bought it in.
And then let the consumer know the story. Make sure you write a quality description that sets your vehicle apart and educates the customer on why it’s priced the way it is.
That’s the 2024 sales recipe for success.
Robert Grill is senior partner development manager for CARFAX.