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Smart Used Car Management Can Help Boost Profits During Pandemic

By Nick Jackson, Manager – Dealer Training, Ally Academy

A look at the raw sales numbers for the first half of the year might be enough to discourage almost anyone in the business of selling cars and trucks, but there are signs things are changing for the better and that means opportunity. That opportunity is knocking on the used car side of the business, but it will only pay off if managed correctly. 

In a typical year, U.S. consumers buy about 17 million new vehicles and around 20 million used vehicles from dealerships. But, we’re on a roller coaster ride that has taken us from steep sales declines early in the pandemic to soaring levels of used car sales at the start of summer. According to Cox Automotive’s market summary released on July 13, the annualized retail selling rate for used vehicles was about 18.9 million, down from 21 million last year but up from May’s 16.7 million. Those wild swings make it almost impossible to predict where we’ll be by the end of 2020.

We know that used vehicles commanded higher prices early this summer. One of the reasons consumers are finding sparse choices at new vehicle lots is because automakers laid on generous incentives in April, sparking a temporary spike in sales, leaving little inventory and limiting options.

When you run low on new cars, the focus turns to used cars. Late model used vehicles—especially popular pickup trucks, SUVs and crossovers—are in high demand, but in short supply, driving up wholesale prices. Right now, wholesale prices are approaching retail prices.

What’s important now is for dealers to move into the next few months very carefully in the face of rapidly changing market conditions. That starts with smart inventory management.

Right-size Inventory

Here are some ways to help manage inventory effectively:

• Use discipline when purchasing vehicles to avoid being stuck with a significant supply of aging inventory when the market slows
  
  
• Consider strategies, to help promote the sale of the vehicle in the first 30 days to address aging before it occurs, such as shaving time off the vehicle reconditioning process
  
  
• Keep a close eye on market trends to make sure inventory levels are in line with where the market is headed as opposed to where it has been

Look Beyond Auctions

Looking beyond auctions for inventory is a smart way to help maximize resources.

• Perfect your ability to buy off the streets, from the service lane and from trades
  
  
• Consider keeping and retail selling some of the older, higher mileage units that you previously wholesaled for great low price-tag options

Train Staff For New Challenges

It makes sense to consult with experts to properly train employees so they’re prepared for whatever situations may arise. Expenses are tight right now, but effective training can help dealers make money, save money, and reduce risk.

For example, inventory strategies are covered in Ally Academy’s used vehicle management course while courses on sales, compliance, fixed operations and dealership management can help your team adjust to pandemic business challenges. We also work with dealers to help them become more adept at conducting business virtually, advising them the shift to digital sales is likely not going away.

Right now, the industry continues to deal with the effects of the Covid-19 pandemic, with volatile sales and thinning margins. In some departments, training and discipline are among the best strategies for maintaining a healthy used car operation that can take full advantage of the opportunities these uncertain times present.