2018 was another year of “I can’t buy vehicles at auction; the prices are through the roof.”
Okay, I agree the Manheim Used Vehicle Value Index was up multiple percentage points all year long. What do I mean by that? Three-year-old vehicles ended the month of November worth 2.7% more than they would normally have been worth had typical depreciation occurred instead of the abnormal appreciation observed this summer.
As I sit here, there are over 300,000 units available to research and buy. Of those 300K units, over 60,000 units meet my profit objective. I need to:
- Buy these cars at 100% of average MMR
- Price to sell at 100% Price to Market
- Make a 12% margin (which is just above what NADA reported as the average margin for used cars in all of 2017)
- Have a sliding scale built in for reconditioning (based on the CR score) plus transportation and auction fees
Of these 60,000 units that I can buy, over a third of them are “buy it now” units with less than 60 Market Days Supply. This is over 20,000 units on the market right now that appear to be really attractive, either fast movers or ready to buy with a click.
Over the last 60 days, I’ve heard buyers saying, “I’m just going to sit out for now; I’ll get back into the swing of things after the first of the year and start buying again.” With all due respect, that is like telling the owner, “I have had a real hard time getting gross lately, so I think I will just stop asking for it.”
So, here is the 2018 Year in Review on Auction Buying Problems … who cares? The opportunity is NOW to find the units that will fire 2019 out of a cannon! Take advantage of those that may be sitting on the sidelines.
If you don’t have the technology in place, now is the time. I get it, sales are projected to slow, interest rates are rising, etc. I learned the hard way that saving your way into a profit in the used vehicle department is like failing to buy your significant other a gift for the holidays because they said they didn’t need anything. No one has ever told me that strategy paid off. Besides, if there is a new vehicle slowdown, that means fewer trades, right?
The November used vehicle SAAR broke 40 million, up 1% from last year. New car sales in November were down just under 1%. Clearly, this is not a time to put your head in the sand. It’s time to find the vehicles in the wholesale market that can make you a genius. The best students do their homework and study for the test. You can prepare either by pulling out that old slide rule, or by using the latest technology and making the math simple!