If your dealership isn’t looking outside the box for new ways to acquire the right used vehicles, you’re missing out on sales. Consumer interest in used cars is on the rise with new-car sales slowing down. Kelley Blue Book data shows the average price paid for a new vehicle is approaching $37,000, putting that option out of reach for many consumers.
In fact, 64% of shoppers are leaning toward purchasing a used vehicle, according to the 2019 Cox Automotive Car Buyer Journey Study, and that marks the trend’s third straight year for increase in consideration.
The used-car SAAR also is shooting for another record year with 39.3 million annual sales, according to the April Manheim Used Vehicle Value Index.
It’s clear that every dealership needs to be taking a closer look at the used-car market. To boost profitability and protect the bottom line, dealerships need a combination of savvy planning and the right technology to understand what customers want and find the right used vehicles to meet those demands.
Stocking your inventory correctly
Savvy planning using data-driven insights is key to capitalizing on the current consumer interest in the used-car market. The stakes are high, but the efforts can pay off in spades. Dealerships need to capture potential customers earlier in the buying process, as used-car buyers are now visiting fewer dealerships before making their purchases.
In 2019, consumers are visiting 2.2 dealerships, compared to 2.8 in 2017, according to the Cox Automotive Car Buyer Journey Study. Those looking for specific vehicles will visit the dealership website to see what’s currently on the lot, along with prices and offers. If you don’t have what they want, you might not get a second look.
Dealers need to show shoppers that they have the selection of vehicles consumers want. Plus, the vehicles need to be acquired in a smart way, so they can profitably be sold at retail. These days, the most profitable vehicles are 4 to 6 years old, and that’s not easy to find, especially at an auction. Everybody wants to acquire these vehicles, and that’s why out-of-the-box thinking and creativity are important for getting these models on your lot.
Fewer consumers are trading in cars, as they’re keeping them longer or selling their used vehicles online. Dealer have traditionally turned to trade-ins, wholesale markets like auctions, buying centers or street purchases as primary sourcing techniques. But as these means are getting more challenging, some dealers have even turned to Craigslist to find more used vehicles.
Using technology effectively
Fortunately, technology is revolutionizing how dealers acquire inventory. Modern technology can merge all available inventory from area auctions into a customizable stream, offering insights on best practices for buying used vehicles. Technology can also map out front-end payments, like vehicle pricing, transportation and reconditioning costs, to help set profit targets and advise on the maximum bid.
By analyzing real-time market data, technology can highlight in-demand vehicle segments or models and show where you’re overstocked. These types of analyses enable dealerships to customize their shopping experiences sorting by auction, OEM brands or vehicle types. There’s no sense in acquiring used vehicles unless you can resell them profitably. Technology tools like these give dealers the advantage of having more market information than the competition. Instead of buying used vehicles on gut, you can focus on the vehicles and segments that you know will resonate with your customers.
Think about how inventory decisions will change by having key metrics available at a glance before deciding to bid, such as how fast a vehicle is moving on the retail market, how much activity that type of vehicle is generating on a nationally recognized consumer listing sites, and what the average vehicle like it is listed for on the Internet. These data insights can save hours of research and eliminate costly mistakes caused by purchasing cars and trucks that just aren’t profitable for a market.
It’s important to develop a used-car plan now because this trend is expected to continue. Dealers that incorporate technology and new buying methods for used vehicles will increase their chances to attract new customers and profitably grow their business. They’ll be positioned to succeed even as the market shifts and used car vehicles take centerstage.
Patrick Janes is business development director for Stockwave at vAuto.