It seems that nearly every dealer I talk to, when discussing the health of their business, brings up the subject of tight vehicle supply. Depending on the manufacturer, new vehicle supply has been a challenge with recent earthquakes in Japan and floods in Thailand. One might argue that new vehicle supply is less directly under a dealers’ control. That being said, tight used vehicle supply generally affects the entire industry forcing savvy dealers to develop creative ways to overcome supply constraints. For the purpose of this discussion, let’s focus on ways to overcome tight used vehicle supply issues.
The old saying remains true and viable: “They don’t manufacture used cars.” In essence, the only way to make a used car is to sell a new car. With the challenges in 2008 and 2009 that occurred in new vehicle sales and leasing, the industry was not converting many used cars. Compound this new car decline with the government’s Cash For Clunkers program, which scrapped over 700,000 vehicles, resulted in 2009 being the first year in decades where scrappage outpaced new vehicle registrations by 9%.
I would argue that when faced with tight used vehicle supply, there are two choices: 1) Find new, untapped sources of used vehicle supply, and 2) Open up the selected set of used vehicles you are willing to stock.
So, how do you find new sources of inventory? Many dealers have taken this problem to the streets by soliciting customers to bring in their used vehicles for sale to the dealership. Of course, we’re always willing to make a trade, but how willing are we to outright purchase this vehicle?
Many dealers have been successful with this approach, especially if they can find good, clean used vehicles that they have a history of moving quickly at reasonable grosses. On the other hand, some dealers mine “for sale by owner” ads, calling individuals who are selling their cars, in the hopes of purchasing at the right price. Proactive dealers are also much more willing to travel to distant auctions instead of simply purchasing locally. Dealers need to be creative and utilize a combination of methods to secure the right used inventory for their customers.
Without a doubt, the most creative and advantageous method I’ve heard of for finding good, low-mileage vehicles is mining the CRM and service department. Dealers have hundreds of customers coming in for service each month, many of whom may have positive equity in their vehicles or are facing large repair bills and might prefer to purchase a new car instead. Both of these scenarios are opportunities for proactive dealers to secure used vehicles, and perhaps turn a new or used unit. In addition to keeping your eye on service customers, how many customers in your CRM system are in a positive (or near positive) equity position on their vehicles? What if you could generate a timely and up-to-date report from your CRM identifying which customers are ideal candidates for your sales team to contact? Robust and deep systems are available to automatically mine your CRM for customers in positive equity positions, which virtually translates to “used vehicle manufacturing software!” Best of all, you’re not competing for these deals, since the consumer is not actively shopping. You’re able to approach them with a deal that sounds like “…can get you a brand-new car at the same payment (or less), and we’ll take your old car in trade…,” and the customer never shops the deal.
Now, if you’re a Certified Pre-owned (CPO) dealer, then supply issues may be worse yet. Since people are hanging on to used vehicles longer and longer, the ability to find clean, low-mileage vehicles that can be certified may be very challenging. Again, mining your CRM to find these low-mileage vehicles that can qualify for OEM-certification is a great approach.
I said there were two approaches, the second approach is to open up your selection set, or what cars you might consider stocking at your store. Internet shopping has transformed the marketplace for dealers and essentially opened the boundaries. No longer are you limited to shoppers that might only drive 15-20 miles to look at vehicles. Today, customers shop online within a 100-mile radius or more. If buyers can find the vehicle they like, they are more than willing to travel. This means that dealers need to embrace the technology, and modify their old beliefs on which vehicles they should stock. Dealers should think more broadly about “the market.” There are many great software solutions out there that allow you to determine the best vehicles in the market, the vehicles with quickest turn, and the vehicles representing the highest potential gross. Embrace the technology and leverage the market-based recommendations, along with past experiences at your store, to consider off-brand vehicles you may not have stocked in the past.
I hope some of these ideas will help you, if you have more good ideas on solving vehicle supply issues, please e-mail me at email@example.com.