The used car market has always been a dynamic and ever-changing landscape, but recently there have been new challenges that put a strain on dealerships sourcing used inventory. The fluctuating market demand, coupled with increased competition from online platforms and lack of wholesale inventory, have made it more difficult than ever to maintain adequate used car inventory levels.
Key challenges of sourcing used inventory
As the demand for pre-owned vehicles continues, it’s critical to think outside the box in your inventory management strategies. As an unpredictable market with stiff competition, used vehicle acquisition is a task laden with its own hurdles.
Fluctuating market demand
One of the key challenges when sourcing used inventory is fluctuating market demand, which greatly depends on factors such as economic conditions, interest rates, consumer preferences and seasonal trends. Consequently, there continues to be a struggle when predicting which models and makes will be in high demand at any given time, leaving an excess of certain vehicles that may not sell in enough time to make a profit.
Competition from online platforms
With the rise of independent online car-buying platforms offering shoppers a wide range of options at their fingertips, some used car dealers are finding it difficult to compete. As a result, traditional dealerships are upgrading their own websites to offer comparable pricing, service and convenience.
Lack of wholesale inventory
As consumers hold onto their vehicles longer, car dealerships are finding it difficult to source used cars with a lack of wholesale inventory available. Recent data shows the average age of vehicles on the road has hit a record high of 12.5 years. This is largely due to climbing interest rates and fluctuating vehicle prices, preventing drivers from making significant financial commitments to replace their cars, causing wholesale inventory to continue to dip below normal levels.
Smarter inventory sourcing
Despite these market conditions, it’s possible to navigate the complexities of sourcing used vehicles. Here are some effective methods to consider:
- Attend virtual auctions
Attending auto auctions has always been a great way to source vehicles that match your customers’ wants and needs. But don’t limit yourself to local auctions—explore nationwide. By tuning into virtual auctions, like EDGE Pipeline™, you can access a much broader range of vehicles from various markets, regardless of your dealership’s location. Not only does this save time, but it levels the playing field to access higher-quality vehicles. Plus, the convenience of bidding from anywhere at any time allows you to participate in multiple auctions simultaneously, potentially securing better deals.
- Leverage technology
The industry remains highly competitive, making it essential to use every tool at your disposal to keep your lots stocked. Customer Relationship Management (CRM) software helps you create a proactive strategy to source used cars by providing access to an underutilized resource—your existing customer base. With the detailed consumer data that a CRM offers, you can identify potential sellers, track purchase history and even predict when a customer might be ready to sell or trade in their current vehicle.
- Source from the service department
For most dealerships, the service drive makes up more than half of the profits, with repeat customers giving you access to an array of used cars. When customers visit for routine oil changes or services, offer them deals on their vehicles, especially those looking at costly repair bills. Some dealerships have even set up recruitment programs in their service departments, offering incentives for technicians who refer customers to sales.
- Buy from private sellers
Private sellers often offer vehicles in good condition and at competitive prices, which can increase the profitability of your used car inventory. The key is to establish trust and build relationships with these vehicle owners. You can do this by offering fair appraisals, providing excellent customer service and demonstrating your expertise in the used car market. By sourcing from private sellers, you can access a wider variety of vehicles and potentially save on acquisition costs.
The road ahead
Fluctuating market demand, lack of wholesale inventory and increased competition from online platforms have made it more difficult for dealers to maintain normal inventory levels. However, attending virtual auctions, leveraging technology, sourcing from the service department and buying from private sellers are all strategies that can help dealers source used inventory.
About Montway Auto Transport
With over 15 years of experience, Montway Auto Transport arranges car shipping for dealerships nationwide. By leveraging innovative technology like the Montway Automation Portal (M.A.P.), our dealership clients receive instant quotes 24/7 for auto shipping. Learn more about M.A.P. or call 888-998-4161 for more information.