Data and Online Dealer Networks: The Future of Used Car Inventory?
How to design your optimal pre-owned lot—and enjoy rapid turnover
Every dealer has been there. You bought a car at an auction you were sure would be easy to sell, and eagerly stuck it on your lot, awaiting customer interest.
And then it sat there. And sat there. And with each passing day, you were certain that soon enough an interested customer would come along, so you held out hope.
But the research doesn’t back that up. A recent study conducted by our company found that the national average for moving a VIN after it has been sitting on the lot for 90 days is 18%.
Luckily, advancements in technology offer opportunities to rethink the way dealers approach used car inventory so you can avoid having that car that sits on the lot for months—whether it be a purchase that didn’t work out or a trade-in.
This can work on both ends: first by stocking the cars that your customers have the highest propensity to buy, and second by offering opportunities to remarket inventory that isn’t selling.
Know your customer
Dealers excel at talking to customers and getting a feel for what types of cars are most attractive to their base. But this process doesn’t need to be an educated guess anymore.
Predictive analytics have become increasingly prevalent at dealerships. They allow the use of past purchasing behavior to determine which vehicles will be most in demand at a given dealership.
Now that this process is literally down to a science, the key will be to get picky about which cars you let onto your lot. Traditionally speaking, dealers were somewhat beholden to the options that presented themselves locally.
Although local options are still a key source of used car inventory, online sources open up a whole new world of potential inventory. Hone in on the specific vehicles that make most sense for your dealership, and then go out and get them.
In doing so, you will be able to design your optimal lot—and enjoy rapid turnover.
Map out success
Every geographic market is different. A 2012 Honda Accord might be worth one price in Jacksonville and a totally different price in Sacramento. But if you limit yourself to the auctions and inventory in your own geographic area, that price discrepancy between markets is meaningless to you.
Thanks to technology that builds dealer networks across the country, you now have opportunities to source vehicles from anywhere, which can provide a major boost to your margins. If you consistently find inventory selling in other markets for prices lower than what you’re able to sell for in your city, you will be able to regularly turn a profit.
Turn unwanted inventory into sales
Think through what you’ve just read about how every dealership has a specific market (both in terms of psychographics and demographics), leading to price discrepancies for similar vehicles. Although these examples are opportunities to acquire inventory, remember the flip side: They also represent a major opportunity to sell unwanted inventory.
That Toyota Corolla that’s been on your lot for 90 days? Maybe none of your customers wanted it, but it could be in very high demand for a dealership on the other side of the country.
Instead of slashing the price in desperation, use an online service to remarket the vehicle to a wide network of dealers. Odds are, you’ll get a good offer while also freeing up a spot on your lot for a car that’s more in line with your home customers’ demands.
Don’t forget traditional auctions
The digital revolution coming to the used car inventory process is an exciting opportunity, and should be incorporated into your business model. It should be seen as supplemental to your current inventory-acquisition process, however, not as a replacement.
In-person auctions still represent fantastic opportunities to acquire inventory and score deals. Instead of skipping out on them, use the power of data to better understand the types of cars you should be targeting, then show up to the auction with a specific plan and budget to acquire the right cars for your lot.
Leslie Vander Baan is the vice president of strategic partnerships for DRIVIN, which recently launched DRIVIN Marketplace, a first-of-its-kind service that offers dealers the ability to list and remarket unwanted inventory to DRIVIN’s established network of dealers.