A dealership that opened in 2021 and had limited new inventory to sell because of the chip shortage has developed an interesting strategy to build up its used vehicle inventory and keep the business operating.
Clarington Kia, located near Oshawa, is one of three stores that are part of the Ontario Motor Sales Group, has an individual whose sole responsibility is to mine opportunities for used car purchases via AutoTrader, Kijiji and Facebook. The approach has worked so well, the dealership is considering hiring a second individual.
The idea was developed by General Manager Adam Hutchinson, who said when the store opened in April 2021, the intention was to sell 200-300 new vehicles in the first year and 400 the second year. Six months after opening, the dealership had no new inventory to sell, which meant no used cars as trade-ins. He said things were so bleak, the dealership wasn’t even bringing in enough revenue to cover the cost of the rent.
Hutchinson said buying used cars, reconditioning them and re-selling was a big part of his overall plan, but it took on an even bigger role without no new cars to sell.
“A used car, if done right, represents about $4,000-$5,000 in gross for a dealership,” said Hutchinson. “With us not having an existing customer database and not having a fixed ops business, there was really only one way we were going to be able to keep things going and that was to run a successful used department.”
He hired two people without any sales experience (one of whom later left to pursue a career in another field) because he could teach them his system using vAuto as a guide for valuations and paid them a set salary. He assigned them territories to reach out to customers selling cars privately, who were then provided with information on the value of their vehicles and how to best retail them to attract offers. The dealership made an offer and waited for a response.
“We would buy them 15 to 30 days after we made an offer because customers realized it takes time to sell a car, and they don’t want to go through that,” said Hutchinson.
He said the system appraises 500-1,000 cars every month and guesstimates the chances of acquiring them based on the value of their appraisal.
“If our appraised value was within 90 percent of the asking price posted online, that was a go for us that we were probably going to be able to close on that,” said Hutchinson. “Cars that we were within 80 percent of, we knew we would probably not get those cars right away. We would make an offer and they would circle back. I had a lot of people do that.”
He said the dealership has acquired 130 cars and the plan is to increase the “velocity” because it has been working so well. He added that without this system, the dealership would have been “burning through cash” and it “would have been a nightmare.”
Ontario Motor Sales President Tony Willson said Hutchinson “blazed the trail” with this strategy and elements of it are being used at the company’s other stores to acquire used cars.
