The opportunity to improve your inventory and boost sales is there, if you know where to look and how to adjust your process.
Alot has changed in the last decade, and dealers are entering 2020 with some uncertainty. But in the used vehicle market, there is opportunity.
That opportunity can be found in two places: in the market conditions that have been forecasted for 2020, and in the used vehicle inventory and selling process.
Concerning the first area, retained value for used cars in the Canadian marketplace has been increasing over the past nine years and is hitting month-over-month record levels, according to Brian Murphy, VP Research & Analytics, Canadian Black Book.
“We’re seeing inventory levels rising for used cars from the U.S., and also supply is rising for both countries, Canada and the United States,” said Murphy in an interview with Canadian auto dealer. “We think that used car prices will go down this year, but we don’t expect a huge adjustment.”
Murphy is looking at a potential 3-4 per cent decline across the industry. That would of course vary from segment to segment, and several factors are at play, including the price of fuel. But there is still opportunity for dealers to “successfully” buy vehicles at auction and not be outbid by people shipping cars to the U.S. They just need to choose the right vehicles.
Murphy said the biggest challenge for dealers over the next few years will likely be their ability to keep up with the changes in the industry related to consumer vehicle preferences.
“We’re kind of at 75 per cent light-truck SUV, and 25 per cent car now. We think that trend will continue, and in late 2021 we’d be at around 80-20,” said Murphy. “I think that’s a challenge for the retailers, to try and figure out what are the right vehicles to order and buy used and have on the lot.”
Part of that challenge will also include electric and autonomous vehicles, and advanced safety technologies.
Choosing tools that make sense
As dealers figure out what sells in their marketplace, online auctions are working to tweak their platforms. This is particularly important as new and potentially younger employees enter the dealership with different skills and expectations compared to their predecessors.
Rob Bulyovsky, one of the co-founders of Accu-Trade, believes the industry is changing at the dealer level, and that many of the used car managers that are buying inventory or doing appraisals have not been in the car industry for a long time — at least, not as long as the “old-school, die-hard car guys” that were always at the auction.
“That’s how you sort of knew what cars were worth, which ones were good and which ones were bad,” said Bulyovsky. “Obviously, technology has changed that. I think, especially at the OEM level, the delivery and the brand are very important. Sometimes the candidates that are ideal in management positions don’t always have the background in the used car industry that the company has previously had.”
Accu-Trade launched in Canada in 2016 as a vehicle valuation platform, providing dealers with the ability to appraise vehicles more accurately, close more deals, and boost their used car inventory. The company’s wholesale values are market-driven and are constantly changing and adjusting as those values rise and fall. This is because they have a team of analysts keeping track of all the markets to ensure dealers receive accurate pricing.
The tool is also mobile-friendly and a good example of what today’s dealers may need: something that anyone in the dealership can use. “They can almost have zero knowledge of the car business and do an accurate, complete appraisal,” said Bulyovsky. “Anybody in the dealership can use the appraisal system.”
The system is very user-friendly: icons are large and clear enough to identify, the layout is clean and intuitive, and there is a wealth of details that dealers can fill out and receive about the vehicle.
Bulyovsky said their platform allows dealers to “drill down into the specifics of the car,” especially when offering a guaranteed value for it. “The dealer can really understand if there is equity in that vehicle, if that customer is somebody that is ready for a new car.”
Accu-Trade is one of many platforms available to help dealers better manage their used car needs. Others include TradeRev, a popular online auction tool and a division of KAR Auction Services, and MUVIT, a new digital auction platform launched in November 2019 by Cox Automotive Canada.
Building trust with the customer
For Shawn Vording, Vice President of Automotive Sales at CARFAX Canada, being able to share that information with the customer is important as well. Dealers need to make sure there is trust in the trade offer, as many consumers believe it’s too low. That has to do with a lack of transparency in the trade process.
“They come up with a number, or the number is factored into a monthly payment, and that doesn’t actually resonate well with consumers,” said Vording. “Our research showed that 64 per cent of consumers said they had a good trade-in experience, but the trade-in experience (itself) rates the worst in the entire vehicle buying process. So there’s a huge opportunity for improvement.”
Based on internal research, Vording said 39 per cent of vehicle buyers said that they wanted a clear explanation as to what their trade-in offer was. And 35 per cent said that they wanted it clearly spelled out in terms of what lowered the value of their car (tire replacement, dents that need to be fixed, and so on). Furthermore, 32 per cent of consumers said that some form of external validation or a neutral third party that generated the value would help reinforce the dealer’s offer.
“That trust is developed through better transparency in the trade-in offer and by leveraging trusted third party brands,” said Vording.
Many dealers that are on a subscription with CARFAX will recondition the vehicle and run a new CARFAX report. They do this because the reconditioning records will show up on the report under the chronology. The salesperson can then use the CARFAX report to walk through and show the customer that on X-date, the car was in the shop for reconditioning and new tires were added, the brakes were serviced and the dealership did a full detail on the car, for example.
“Finding a way to efficiently capture that reconditioning information and using it as a marketable attribute of that vehicle is an area that dealers should really, really be focusing on to separate their product from competitors and to also help justify their price point.”
Vording believes the used car experience needs to be humanized, and that ultimately improving this aspect of the business will come down to two things: the trust factor, and people doing business with those that they enjoy doing business with. For today’s consumers, those two points are more important than ever before.
