Auto retailers would likely agree that the challenge in sourcing used vehicles isn’t a scarcity of volume, but rather a shortage of the kind of cars that sell the fastest for the most margin. So where can dealers go for sourcing the right kind of cars?
The flood of off-lease vehicles expected to peak mid-spring may result in plenty of supply, but many of these vehicles are acquired from rental companies and other fleets. And these vehicles aren’t necessarily the best assets for dealers to stock.
In a recent article, author Jim Leman spells out three ways that dealers can help ensure wholesale sourcing dependability:
- Stop stocking up
- Pinpoint your best sellers
- Leverage digital sources
In the article, Leman explains that dealers who’ve sharpened their trade appraisal skills and strategies are treating trades differently these days. Many times, he says, dealers are loosening on trade to ensure they acquire the vehicle to generate downstream revenue from recon parts as well as from labor and the vehicle’s retail resale that drives F&I profits and ongoing service dollars.
Savvy dealers are utilizing any and all of these strategies to keep their inventory flowing — but many franchise dealers, Leman states, are sourcing from a decreasing pool of the right kinds of cars.
To talk about this, we welcome inventory and internet process consultant Jasen Rice, Founder and Owner of LotPop, along with retired automotive executive Gary Wade for a discussion about these three tips and the early 2019 used vehicle market as a whole.
During the conversation, Rice points out that, “there are plenty of cars out there, it’s just a matter of whether or not you are willing to pay for them.” He also cautions dealers about “stocking up” when headed into Spring.
As does Wade as well.
Preview of Conversation
“I think dealers really have to be a little cautious right now,” explains Wade. “One, did they carry too much inventory into February and March, expecting a stronger February-March used retail car sales, and then having some aged inventory sitting around that could bite out the profit margins pretty substantially because it’s getting time.”
Wade also points out that rental cars and commodity cars are always available, especially coming off of this time of year.
“Don’t get caught up in those,” he says, “as they compete with your new cars so dramatically price wise.”
Wade suggests that everything everyone is looking for is that 3 year and older lower miles vehicle that is worth its weight in gold. A 4-5 year old unit with 65-85k miles that they can retail in a $10-12 grand price range. If you’re looking to go after those units in the future then really need to trim down right now.
Rice also believes dealers should “carry what they sell, and sell what they carry.”
About this Video
These videos represent only a few highlights from the original conversation that took place in April 2019 as part of the monthly Used Car Marketing Webcast Series brought to you by Vehicle Acquisition Network.
To catch the complete conversation, watch here on YouTube or you can listen to it in this podcast episode featured in this post.
If you’re interested in participating in the webcast series, either as a panelist or an attendee, follow this link to register with the series and let us know.
Humorous except from recent conversation about sourcing used vehicles where vehicle trades wound up in the Middle East battle fields during the War on Terror.