(This is the second in a series of articles on change in the used-car industry.)
In the first installment of this series, we wrote about why dealers shouldn’t fear technology, and passed along tips for introducing new technology to employees. We referenced how technology can help dealers better source new inventory. However, in order to do that, they may need to go beyond their comfort zones.
Most dealers are used to traveling to auctions to purchase inventory. Depending on how far away the auction is, that trip could take several days. The National Auto Auction Association reported that their members’ auction sales rose 4.6 percent in 2016 to 9.8 million units.
However, various reports indicate that the used-car industry is also experiencing lower profit margins per vehicle, which necessitates selling even more cars to sustain overall revenue. In a recent guest article in Auto Remarketing, our senior vice president of sales, Travis Wise, advocates for a new philosophy of selling used vehicles that emphasizes using data to source models that sell well in the local market, as opposed to just chasing the lowest wholesale prices possible.
Our message in this article is to tell dealers they don’t have to abandon tried-and-true ways of acquiring inventory (like trade-ins and wholesale auctions), but that other methods are worth exploring.
Other Options for Sourcing Vehicles
- Online auctions – This option has gained popularity in recent years and eliminates the time and cost of traveling to auctions. Most online auctions are run by reputable companies that provide a recourse if something goes wrong or if the buyer is not satisfied. As a benchmark of acquisition efficiency, industry analysts say dealers should be acquiring at least 30 percent of their used-vehicle inventory online.
- Dealer-to-dealer marketplace – Dealerships have been buying and selling inventory from each other for decades, but usually on a local one-to-one basis. New platforms like our Marketplace expand those boundaries and allow for cost savings and higher grosses due to the elimination of transaction fees and recon expense.
- Street purchases – According to the National Auto Dealers Association, about eight percent of used-car inventory comes from a dealer buying directly from the public, also known as “street purchases.”
- What are the right cars for my dealership?
- What am I willing to pay for these cars?
- Where can I find these cars?
