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Using Data to Sniff Out Wholesale Market Shifts

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The pandemic has used car dealers scrambling to adjust to market challenges, but there is a way to take a step back to see where used vehicle sales and availability have been this year and where they’re likely going: by taking a close look at the data. And the data from nearly 13,000 dealerships that use vAuto’s software to manage their inventory is particularly illuminating.

Take a look at this chart of those dealerships’ acquired, active and sold inventory from the beginning of this year through August. Each line shows a year-over-year comparison: the numbers in 2020 compared to the same period in 2019. The black line represents vehicle acquisitions, both trade-ins and auction purchases. The blue line represents retail sales. The gray line shows the active inventory levels for the dealerships.

Where We’ve Been and Where We’re Headed

You can see in February of this year we were enjoying a very strong economy, with sales 120% of the prior year. Then the pandemic hit, and in late March we dropped down to just 40% of prior-year sales. Acquisitions came to a screeching halt as well, as dealer inventory rose with no sales. Then in May and well into June, sales and acquisitions rebounded to pre-COVID levels. But just as demand was picking back up, dealers had to adjust to yet another challenge: Dealer inventory dropped dramatically. With dealers struggling to acquire enough vehicles, wholesale values skyrocketed.

But the data shows that this supply glut, and its high acquisition prices, may be tempering. Dealer inventory is ticking up. Sales and dealer inventory trends will likely again merge, and if trends continue, I believe we can expect some relief from the high wholesale prices as we continue through the year.

These market swings aren’t the only change our industry has faced this year. We’ve also had the sudden shift to an all-digital auction environment: lanes closed with no ability to touch, smell or kick the tires before a vehicle runs through the lane, if it even runs in a live simulcast auction. Without these traditional tactics from the lanes, what can we do to make sure we are making smart, informed decisions to acquire additional inventory?

The New Oil

Data again presents itself as the solution. I believe that data is the new “oil” for savvy car dealers. And what gets me out of bed every morning is that anyone in the car business can study this data. Throw out any preconceptions that this sort of data is only affordable for the mega dealer groups — these mega stores use data like this to their advantage, but so can you, with a reasonable subscription rate.

As oil is refined into a final product, you can now use cost-effective technology to refine big data into a format that helps you make key decisions on which vehicles best fit your market. You can have all this local market data, including demand, sight-unseen condition, and other data points to determine the value of every vehicle on the wholesale market, aggregated in one place at a glance.

Sniffing Out Change

The dealers who take advantage of technology and this data in their decision-making remind me of a character in the classic business book “Who Moved my Cheese?” — specifically a mouse named “Sniff.” I’ll soon release a recording of a virtual workshop I did where I assigned characters from the book to types of automotive dealers. In our industry, the Sniffs are dealers who anticipate change early by using data to sniff it out in the marketplace. Many Sniffs found technology well before the pandemic that prepared them for the overnight transition to all-digital auctions, and they’re ready for the next shift to come our way. How do the Sniffs go about it? Here is what they tell me.

  1. They’re students of the market and can spot a correction: With a look at the data, many have come to the same conclusion as I did earlier regarding sales and dealer inventory trends finally merging again. They believe wholesale market corrections will be coming, and they watch for them on a sale-by-sale basis until they spot a trough in demand.
  2. They set up several saved searches to fit their stocking strategy: They find fresh units on the market every night. They tell me the big dealers don’t have time to find those profitable outliers, so they snipe them by letting the technology do the work. They cast a wider net to find cars that were at the wrong dealership in the wrong market at the wrong time.
  3. They work with consultants who are ahead of the curve: Their software subscription includes consultation with market experts, who share best practices they learn from working with thousands of sharp dealers and buyers across the country. This gives the Sniffs the inside scoop on market corrections that others may never find in time.

It’s time to use data to sniff out what further changes lie ahead for our industry — so you can capitalize on them like so many have before. If we at vAuto can help in any way, click here for more information.

Good Selling!

About the Author

Patrick Janes brings more than 30 years of automotive industry knowledge to team vAuto. As the senior business development director for Stockwave, vAuto’s wholesale sourcing solution, Patrick knows firsthand the biggest risk to ROI is buying inventory at auction, having previously managed day-to-day operations for nine years as a dealership general manager. Before his dealership experience, he spent the first half of his career working with dealers across the country in several field offices for an OEM. For three years, Patrick served as a vAuto performance manager, building a solid understanding of customer needs and expectations. He has seen firsthand an exciting new generation of technologically savvy used car managers and owners that find Stockwave saves time and enables a more strategic approach to the acquisition process. Patrick received his bachelor’s degree in industrial engineering from Bradley University. Patrick has served as a lecturer for Northwood University since September 2018. He teaches vAuto Velocity Principles to students enrolled in Automotive Marketing & Management major: Role & Function of the Auto Dealership and Dealership Variable Operations.

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