When it comes to the challenges for the independent dealer community, getting ahold of cars seems to be top-of-mind, according to the fall Independent Dealership Action Report from DealerSocket.
And if the company’s analysis is any indication, independents may soon change how they acquire used vehicles, as well.
A survey in that report asked independents to name “the most important problem facing your dealership today” from a list of choices.
Chosen most often was “inventory acquisition,” which was selected by 31 percent of respondents. The next most-pressing problem? The ability to fund those purchases.
In fact, 21 percent of respondents said “capital to finance inventory” was their biggest issue.
Ranking third was “lack of customer prospect traffic/leads” at 20 percent, followed by “government regulations/compliance” at 16 percent and competition from franchised dealers (12 percent).
Interestingly enough, when asked their top goals for the year, just 10 percent listed “increase inventory,” and 8 percent listed “acquire capital.” However, the report does explain a strong tie-in between what independents did list as their top goal (ROI/revenue growth, which got 25 percent) and their challenge with inventory.
“There is a direct correlation between independent dealers’ top challenge — inventory acquisition — and their No. 1 initiative — ROI/revenue growth,” the report notes. “In a circular fashion, acquiring more inventory will increase revenue and cash capital to finance more cars.”
When it comes to finding used cars, auctions — with 87.7 percent of independents saying they utilize them — were the dominant source, according to NIADA Industry Analysis cited in the study. The report also notes that almost half of independents will make it out to average of one to four auctions each month.
However, consider this: 43.7 percent of independents turn to other dealers (most of whom are franchised stores) to get used cars, according to that NIADA data.
“This trend is going to decline,” the report said. “As franchised dealers shift their focus to used cars, they will likely retain more of their used-car inventory rather than sell to independent dealers.”
Meanwhile, 31.7 percent run to wholesalers, 24.8 percent go online and 4.1 percent listed “other” avenues.
One area in which independents may be able to boost their inventory is by purchasing from the consumer, the report suggests.
“Buying cars from customers is an opportunity for Independent dealers to increase inventory and potentially acquire capital as the seller will likely be ready to purchase another car,” it notes.
“However, many used-car shoppers may not be aware that smaller independent dealers are in the market to buy used vehicles. It is important to advertise that you buy used cars to the general public both traditionally and digitally to increase reach,” the report continues. “Additionally, leveraging a data mining solution can enable you to identify and target your customer base for vehicle buy-back programs.”
One final tidbit. The summary section to the report shares three key ways to generate more inventory and capital, those being the following as listed by DealerSocket:
- Expanding inventory search online and attracting individual sellers
- Understanding car buyers and purchasing inventory based on their needs
- Utilizing tools like a lender portal to offer more financing options to your customers
The full study can be downloaded here.