Every dealer has had a “gotcha!” used vehicle moment. This occurs when a dealership acquires a vehicle with high hopes of seeing it perform well at retail, only to watch it age into a money loser.
Sometimes the “gotcha!” moment comes after a sudden market shift — perhaps gas prices go up or consumer confidence crashes. More often, though, the market isn’t chiefly to blame.
The “gotcha!” moments that are most common and costly typically follow an acquisition decision that wasn’t a) fully informed by market intelligence to determine if the unit and its trim / equipment configuration was right for the dealership in the first place or b) devoid of any objective market insights at all — or, in other words, someone’s gut instinct or best guess.
I would submit that today’s used vehicle marketplace and dealership operating margins leave little room for “gotcha!” moments that are simply the result of ill-informed guesswork. I would also add that there’s an even greater risk for these “gotcha!” moments given the wide variety of vehicles and their individual equipment / trim configurations that can make or break a unit’s appeal with customers.
Thankfully, however, today’s technology and tools give dealers the market intelligence and ability to avoid big-dollar “gotcha!” moments before acquiring a vehicle on trade-in or at auction. Even better, these tools and market intelligence help dealers effectively sketch a retailing roadmap for every vehicle they acquire to maximize its profit potential and avoid a post-acquisition “gotcha!” moment.
For example, let’s say the market intelligence indicates a 2009 Buick Enclave’s condition, equipment configuration, mileage and consumer demand rating make it a standout. A dealer who reviews this intelligence before acquiring the Enclave would be able to determine a) what to pay to acquire it and meet the store’s profit objective and b) how best to play up the Enclave’s unique story in the vehicle’s merchandising and pricing plan to quickly attract the biggest pool of interested buyers.
This kind of holistic, technology- and market-guided acquisition decision making — part of what I call Provisioning inventory — strikes me as much more effective and less risky than purchase decisions fueled by little more than a hunch. This acquisition intelligence should measure what I believe are the seven key indicators of a used vehicle’s profit and performance potential:
Thanks to keywords and clicks on vehicle classified / shopping sites and search engines, dealers can now know the number of shoppers in a given market area who are looking for a specific vehicle.
Today’s tools and technology are also able to sniff out genuine interest — such as the number of clicks on a vehicle detail page (VDP) for a specific unit on third-party and dealership websites.
This indicator shows the number of the same or similarly equipped units that have recently sold in a dealer’s specific market area.
4. Market days supply
This indicator shows the rate that specific vehicles (with the same or similar equipment and trim) sell in a given market — a critical insight to map a unit’s merchandising and pricing plan.
This indicator accounts for a vehicle’s potential acquisition price / associated costs, the retail asking price where the unit will most likely to see action and a dealer’s gross profit goals. This trifecta, like the market days supply, is essential to know early to minimize “gotcha!” moments and adjust your retailing plan to account for a unit’s strengths and weaknesses.
This indicator measures the degree of difficulty a dealer would encounter trying to find a vehicle for acquisition that meets its profit and cost parameters at online or physical auctions. With today’s supply constraints, this indicator can sometimes turn a “purchase” into a “punt” — there’s no point chasing a unit if it can’t be found without significant expense or effort.
This indicator would assess a dealership’s past retailing experience. It’s last on the list for a reason: A store’s past “gotcha!” or a dearth of experience with specific vehicles shouldn’t preclude acquiring them if the market suggests the decision is “right” for a dealership.
It’s important to note that heeding such market-based intelligence doesn’t guarantee that “gotcha!” moments are gone for good. Today’s used vehicle marketplace is far too volatile for anyone to overlook the risk inherent in every used vehicle acquisition.
I would submit, though, that dealers who pay close attention to what market intelligence tells them on every vehicle they might acquire will have far fewer “gotcha!” moments than those who don’t.