2018 is shaping up to be a strong year in used vehicles, according to projections.
Cox Automotive expects retail sales of used vehicles to hit 39.5 million this year, up about 500,000 units from 2017.
Likewise, while dealers will see more off-lease vehicles than last year, the estimated 300,000-vehicle influx will include a sizable share of SUVs and trucks. This shift will help right-size the car-heavy mix of off-lease returns we’ve seen in the past couple years, and spur sales from buyers who don’t want to purchase a sedan.
In addition, economists believe the recently passed federal tax plan will help household budgets and buyers who have delayed replacing a vehicle — all good news for retail sales.
But these positive trends create some volatility in the wholesale market that dealers will need to navigate to make the most of the retail opportunities.
Here are three ways dealers are addressing these trouble spots:
Both ADESA and Manheim report that they’ve seen unprecedented growth in online auction purchases. These gains reflect an understanding among dealers that, if you want to consistently acquire the right cars with the right profit potential, you need to expand your reach to the wholesale markets where they reside. Dealers are increasingly using technology and tools to find the vehicles they need without spending hours of prep time before an auction.
A focus on front-end profit
Analysts project that wholesale prices will fall during the first quarter of this year, and then begin a gradual rise. Dealers keep pace with these fluctuations by analyzing each potential auction purchase through a retail lens — that is, if you buy the vehicle for $X today, you can expect to sell it for $Y and make $Z in front-end gross. The key to this calculation is an accurate and easily accessible view of real-time retail pricing for the vehicle to help ensure your final bid doesn’t wipe out the vehicle’s profit-generating potential.
The coming year will also offer the opportunity for even faster wholesale purchase proficiency. Dealers will soon have the option to let the technology and tools do all the work — from finding a vehicle, to prompting the dealer to accept or reject it, to actually purchasing it. So if they accept, the next time they see the vehicle will be when it arrives at the dealership. Dealers view this approach as an even more efficient way to acquire the vehicles they need — and gain an acquisition edge on the competition.