Strong Sales + High Inventory: A Great Opportunity for Your Used Lot

Looking at the abnormally good auto sales this past February, it's safe to say that it doesn’t matter what time of year it is, consumers just want a good deal on their next car. This is good news for dealers looking to move metal — especially for dealers who are as prepared to sell a used unit as a new one. Here’s why.

February’s auto sales numbers showed that incentive spending is still going up. It still takes a lot of effort and money to move new units; nonetheless, sales volumes beat estimates throughout the month. Even with sales humming along at a solid pace, however, inventory levels are also up this year: February’s U.S. light-vehicle inventory figures came in at a record high. According to Dealer.com’s DataView tool, used car vehicle detail page (VDP) views in January and February 2017 accounted for 58% of the total VDP views. This was an all-time high over the past two years, and used car engagement hit a 13-month high in January 2017 in per dealer average of VDPs.

February 2017 was the third-highest month of used car engagement over the past 13 months, missing the second-highest mark by one unit. Why are used car engagements trending up? At least in part, it’s a seasonal thing, with winter being more of a used car market, with new cars being favored more in the spring and summer months.

It is also prime tax return season, with consumers having some extra money in their pockets that they are looking to spend. With some incentives, consumers could be put over the top to purchase a used car right before heading into the warmer months. A 2016 Autotrader survey found that 26% of respondents expected a refund of $3,000 or more, 27% would use their tax return on a car-related item, and 60% of those respondents would apply the refund to a new or used car purchase. So, contrary to what’s expected, this time of year provides for a hot selling market.

Shifting gears, let’s also take a closer look at the car shopper retail cycle. Consumers are returning their gently driven off-lease cars to dealers, dealers are certifying these cars, making them nearly “good as new” to drive, and new consumers are buying these barely used cars, enjoying them at discounted prices. When given the option of purchasing a heavily incentivized new car or buying the same car that is a few years older with some gentle miles on it for about 30% less than new, it can be a toss-up for consumers.

So, what’s in it for dealers when it comes to capitalizing on a time where sales and inventory levels are prominent? The best way to maximize your profits is to be flexible and offer equally attractive options on your used lot and in your new showroom. Dealers can ride this trend to their advantage by making sure both new and used inventory is visible and fully showcased with all available incentives and targeted advertising. It may still be “slow season,” but it’s high time for dealers to reframe the used car market, and master this part of business where a good portion of their inventory lays. As the weather gets warmer, you can bet the appetite for new cars will surely return.

Andy MacLeay is the director of digital marketing at Dealer.com, a Cox Automotive brand operating websites of 62% of U.S. franchise car dealerships.