The automotive market is going up and down these days. While that’s nothing new, what could be new is how you ensure your used car business adapts to these fluctuations.
Inventory has been constrained for months, and we expect this trend to continue well into 2021. Some dealers have chosen to do nothing as they wait for the storm to pass. But they’re missing out on major profit potential.
Despite everything, consumers are still buying cars. That’s your opportunity.
To get in on the action, you need inventory. So, it’s time to get creative with how you approach acquisition and reconditioning, making more money with each deal.
Here are three out-of-the-box strategies your dealership can adopt to be profitable while your competition sits idling.
- Spend smarter at auctions.
Many dealers get stuck on traditional wholesale values. Go beyond MMR, paying closer attention to the hard costs of reconditioning and how you’ll sell each vehicle. Here is where our topic on accurate appraisals becomes critical to your success. When you zero in on the true costs of recon, you may see you have more to spend at auction.
For example, if your competition estimates that it will take them $2,000 to get a vehicle front-line ready and you accurately estimate recon costs at $1,300 on the same vehicle, that gives you an additional $700 to spend at auction to make sure you win that car.
Once that car hits your lot, make sure your team sticks to your estimated reconditioning timelines and costs. Keep velocity top of mind when it’s time to sell, and you will see profit on that vehicle.
- Tap into your current customer base.
Looking to your current customer base is a major opportunity to boost your inventory levels. You have customer records. Use them to your advantage. Start by considering what vehicles you want. Then, dive into the data, seeing how many you sold in the past two or three years and to whom. Reach out to those customers with a trade-in offer they can’t resist.
You’ll acquire inventory without having to allocate resources to wholesale sourcing or shell out for transportation fees. From there, the key to making a profit is controlling your reconditioning costs and your speed to market. By getting those vehicles to the front line faster, you can reduce holding costs, close the sale sooner and increase turn.
- Get sales and service on the same page.
When inventory levels are low, it may demotivate your team. Don’t let them get discouraged. Take the time to talk to your sales and service departments. Help them understand what’s going on in the market, why you’re making different buying decisions and how it all impacts your dealership’s success.
Also, educate your service team on how to spot potential inventory acquisitions in the service lane. The service team can have conversations with customers directly, letting them know your sales department is ready to pay top dollar for their vehicle. Plus, service will already have a deep understanding of that car’s condition and know what recon work to expect.
As you adopt these new behaviors to acquire more inventory while controlling recon costs, monitor your team’s performance and measure the success of each strategy. Consider that you may need to change behaviors again as the market continues to evolve.