Rick Ricart had a concise response when asked what he thinks about the current state of the used-car market.

“The first thing that comes to mind is, thank goodness for used cars,” said Ricart, who is president of Ricart Automotive Group.

Ricart elaborated by saying that when used-car values rose, it was a good thing for his business as a franchise dealer.

“Because without any new inventory, with new supply being as low as it’s been, we’ve had to make sure we’re still maintaining our volume in sales of used cars,” he said. “It’s good for the business.” 

So good, in fact, that Ricart said during the February interview with Auto Remarketing that his company would soon open a satellite used-car location. He said the location will be the first non-franchise used-car lot that the company has opened in 20 years.

Nate Myers shares Ricart’s optimism about the used-car market. Myers, who is corporate used car director for Performance Automotive Group, foresees a “fairly strong used-car year.” It might not match 2021 records, but it will be much better than 2019, Myers said.

Along with that optimism, however, Myers believes dealers will have to pay more attention in the area of vehicle values.

“Last year, you had appreciation rate, cars went up in value, [and] you didn’t have to watch everything as much,” Myers said. 

He continued, “I think there was a little pent-up demand that finally kind of broke loose, whereas this year, you are going to have some depreciation in some model segments and some tightening in other segments. And you’re going to have to watch that to make sure you don’t get yourself into a situation where you’re exposed to potential wholesale loss.”

Ricart and Myers shared optimism in other areas regarding the current state of the used-car industry, discussing used-car projects and strategies that are on their companies’ radar. They also discussed current challenges and future opportunities, with acquisition of vehicles as one challenge and the need to focus on customers in the service department as a strong opportunity. 

Service department strategy

Myers discussed his company’s focus on the service lane and provided an example, saying  Performance Automotive is looking at customers currently driving a 5- or 6-year old vehicle and working to upgrade them to a used car that is about 2 years old. 

He said the company’s previous strategy was to focus on the service lane customer who was two to three years into a lease and try to get that customer out of the lease early and place him or her into a new lease. 

“But because we don’t have new cars, those people are most of the time either buying their lease out or they’re opting to just extend the lease,” Myers said. 

He continued, “So, we’ve had to change it to now where we’re focusing on people that are maybe in a 6-year-old car that bought that car when it was 2 years old and trying to get them to upgrade into a nice pre-owned car that’s a CPO program (vehicle).”

The focus on the service department also brings attention to an ongoing challenge: Hiring technicians. Ricart said that is a project on the company’s radar at the moment, stating that the industry has learned over the past two years how important the used car is to a dealer’s operation. If new-car supply problems get even worse, the company wants to be able to continue securing used cars.

But it takes technicians to recondition cars. Ricart sees an opportunity in fixed ops and service.

“Because, I’ll just say it, there are new disruptors in our market: Carvana and Vroom, and CarMax has been here for a little while,” Ricart said.

None of those companies, however, are really interested in fixing the cars, he said.

“So, you have all these people that are buying cars off of third parties and national companies, and we want to be known for having a top-notch service department,” Ricart said. 

He continued, “Carvana may end up selling somebody a car, but if we can get the opportunity to work on the car and fix it and build a relationship, that’s how we’re going to help grow in the future. So technician recruitment and development.”

Ricart is working with various trade schools and identifying potential technicians who need two or three years of development and training. His company has worked to develop relationships with community colleges that have programs for automotive technicians, and the company has even worked with local high schools.

More challenges

“Acquisition is going to be the hardest challenge for everyone this year,” Myers said. 

He believes dealers must better educate themselves, paying attention to certain segments. He foresees some segments holding steady and not depreciating much this year, while others will depreciate more as new-car inventory starts to return. 

Which segments might see more depreciation? 

“I think higher-priced segments are going to be the ones that you see the biggest swing on,” Myers said.

He continued, “I think third-row SUVs are probably going to see it a little bit, and I think gas prices probably play a little factor in that.”

Ricart has addressed the acquisition challenge through its We Buy Cars team. The team buys from auctions and other dealers and traditional channels. Ricart appraisers are also buying cars but through avenues such as Facebook Marketplace and Facebook ads.

“Last month in January we acquired 117 used cars through what we call private purchase off the street, if you will, and I think that is definitely a strategy we’re going to keep on the radar,” Ricart said. 

More opportunity

Ricart’s new satellite used-car location mentioned earlier will be called Ricart Express Used Car Factory, and Ricart said the new location in Newark, Ohio will help his company offer more convenience to used-car customers in the suburbs of Columbus. The lot holds about 50 cars, but Ricart uses AutoFi as its digital retailing tool that allows customers to conduct as much of the transaction as they want from home, and pick the transaction back up in the showroom if they like.

Ricart also acquired a Chevrolet/GMC/Buick dealership in December.

“One of the main reasons we acquired that dealership is because of location and because of the market in used cars around that location,” Ricart said. “It’s on the other side of town. We’re not trying to alienate what we’re doing here, but there’s definitely more room for used-car expansion.”