We’ve all faced our fair share of challenges this year. There has been one huge silver lining for dealers, however:
Used inventory is now more valuable than ever.
New car shortages have caused consumer demand for used inventory to skyrocket. And record-high prices for used vehicles are fueling unprecedented dealership profits.
But those record values are also a double-edged sword. Your dealership can easily get into trouble buying expensive inventory just to meet demand.
So, how can you take advantage of this seller’s market without breaking the bank? By updating (or completely rethinking) your current sourcing strategy.
Competition for used inventory has never been fiercer. You’ll need to use every tool at your disposal to find and buy the right cars at the right price.
Follow these three steps to bring your buying strategy up to speed for 2021:
1. Buy Directly from the Public
Dealer auctions are inherently competitive. After all, whoever has their hand up last wins. But they also pay the most. That’s a dangerous game when inventory prices are already sky-high.
Skip the auctions by buying directly from the public with an in-house vehicle buying center (VBC). A VBC lets you expand your search for new inventory by opening up another sourcing channel. It also lets you buy more of the vehicles you want instead of whatever’s available at auction.
Keep in mind that getting a VBC off the ground takes time and planning. Look for a dealership platform that includes VBC-optimizing features to help get you started.
2. Focus on Your Best-Performing Inventory
Next, look at your existing inventory. Simply put, some vehicles are more valuable to your dealership than others. The most in-demand vehicles for your market will be tough to find right now. Instead, you can narrow your search by focusing exclusively on your most profitable inventory.
Review the sales age and gross margin of each vehicle on your lot. The products that move quickly (and earn you more per copy) are the vehicles you should be stocking. Consider using an inventory optimization tool to make this process even easier.
3. Keep an Eye on Your Competitors
Having a tough time finding inventory while your competitors make record sales? Don’t get mad — get to researching.
Use a market intelligence tool that offers competitive analysis to see if you’re losing trade-ins to competitors. They could be losing money on these deals just to keep their lot full. That’s bad news for their bottom line, but great news for yours.
These tools can also help you keep an eye on which vehicle models and types are working well for the competition. That can help you identify profitable niches for your dealership that might not have existed before this year.
A Better Buying Strategy
No one can predict what’s up ahead for 2021. What we do know is that demand for used inventory won’t stay this strong forever. That means there’s no time like the present to update your buying strategy.
We recommend using an all-in-one dealership platform that optimizes sourcing for you. These tools use real-time market and inventory data to help you identify, find and buy more of your most profitable vehicles. As a bonus, look for a tool with features to help you build your own vehicle buying center.
Don’t let overpriced inventory keep you from taking advantage of current demand. Start sourcing smarter to keep sales and profits strong heading into 2021.