Could the environment get any crazier for the used-car supply line?
First of all, dealers are facing an multimillion supply shortfall over the next three years, along with a 50% reduction in lease returns. That’s because leasing took a big hit way back in 2021. Now, there’s uncertainty for the supply of new cars, which will affect the number of cars available for trade-ins.
So, what do dealers need to do? Should they panic? Sell the dealership? No. Dealers need to do what they always do: Come up with and offensive game plan before they end up missing sales targets.
Here’s a game plan:
Diversify your inventory mix. Knowing there will be a supply shortfall for the next three years, dealers will need to re-evaluate their used inventory mix. Logic tells us dealers won’t be able to have the exact ideal inventory based on limited supply, and an empty shelf equals no sales — so that’s not an option.
Don’t only stock your brand and what you’re used to selling.
What’s a high-good performing mix target? It should look like this:
- 50% your brand; of those, 80% should be CPO (80% 2-4 model years old)
- 40% of what sells well in the market
- 10% flexibility to “try it out” (trade-ins only)
Not every used vehicle has to be accident/damage free. Consumers don’t expect used cars to be perfect; in fact, when older vehicles are described that way it makes consumers wary. Shoppers just want to know if it had some damage event, how severe the damage was, and whether it was repaired. Let the customer decide which is the right vehicle for them.
Maximize your trade-in opportunities:
When appraising vehicles, work from retail back, not from wholesale forward. Look at every trade as a retail unit unless it’s discounted by your inspection process. Challenge your store to increase your appraisals to trades. Your goal should be 50-60%.
Maximize your service to sales conversion and your service lane acquisition performance. If you don’t have solid processes in those two areas, that’s where you need to start first!
Bottom line: Always look internally first for inventory acquisition. The more self-reliant you can become, the less dependent you’ll be on outside sources. This will reduce the effect of outside influence of events beyond your control, including things such as natural disasters, economic fluctuations and world events. These events will still affect your business, but the goal is to minimize that effect. Maximize the things you have 100% control over while minimizing the things you don’t.
–Just The Fax
By Robert Grill, Carfax Director of Partner Development
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