2024 offers a glimmer of hope for auto dealers navigating the tricky terrain of used car sales, despite lingering market uncertainties and a notable vehicle shortage.
Vehicle price, depreciation and conversion rates across the industry recovered last year following challenging conditions in 2022. Although we are only a few months into 2024, the markets are showing early signs of improvement, and while the shape of the dealer wholesale recovery is hard to predict, dealers are optimistic about the state of the market in 2024.
There are, however, key factors dealers need to consider when navigating used car buying and selling in 2024. Will dealers be filling retail lots with inventory that fits the specific needs and DNA of their dealership? How will dealerships optimize consumer trade-ins, since less consumers are showing up at the dealerships with trades? Where can dealerships meet the needs of today’s consumers to optimize their business in 2024?
We are still in a massive used car shortage for the right vehicles. The average retail selling price for a vehicle in a dealer’s inventory is almost $30,000.00. This has extremely outpaced a consumer’s income—and that, along with current higher interest rates, is very alarming.
In speaking with dealers daily and at the 2024 National Automobile Dealers Association (NADA) Show in Las Vegas, four things are top of mind for dealers in 2024:
Building Dealership Brands: Dealerships need to ask themselves – Are they giving the same process, experience and value to every customer at every store? This is critical for dealerships in order to further establish their brand, grow and retain their customer base. By implementing a standard and transparent process around how vehicles are priced based on condition and market needs will be one of the key avenues for success in building their reputation as a trusted dealership.
Building Value: Used vehicle prices and loan rates remain elevated, following historically elevated used car prices and vehicle shortages over the past two years. As a result, consumers are more tuned into vehicle pricing than ever.
Today it is more important than ever to focus on building value in each vehicle in everything from the descriptions and pictures to explaining the reconditioning to the consumer and value points of why buying from your dealership is better than down the street. With so many prices out there, it is important to be tuned into this and understand how vehicle prices shift based on the location of your dealership, a vehicle’s make, model, condition and even colorway.
Vehicle Pricing & Inventory Management: Dealers need access to tools that aggregate as much data as possible on each vehicle in order to offer the most precise price to consumers that is adjusted based on condition, market and geographic location is key. Dealers need data-driven insights that maximize time and efficiency to support their inventory management decisions and needs.
Access to vehicle condition data and pricing changes can show dealers exactly how a vehicle similar in make, model and condition is performing in one location or region compared to another. With this information, dealers can be precise – monitoring pricing trends of existing vehicles on their lot to track values that are depreciating faster than others; or tracking the amount of time that goes by without activity on a vehicle, signaling that it is time for the dealer to reconsider their strategy. Dealers can uncover what the right vehicles are to stock, and how many vehicles to stock to hit their goals.
Dealers must get back to real inventory management to dial in on supply along with inventory turn rates to maximize profits and eliminate the risk of wholesale loss.
Consumer Trade-Ins and Buying Directly From Consumers: Dealers need to look beyond their traditional methods of gaining customer trade-ins and look for new ways to source inventory on their lots. Engaging customers early on in their car buying or selling journey is key. By meeting the customer where they are, whether that’s providing a price on a customer’s vehicle in their driveway, service lanes or at the dealership, is powerful. With AI-powered self-inspection solutions consumers are empowered to use these tools and offer consumers a price based on the actual condition of their car.
This is not only beneficial for the dealer, but provides a high level of transparency for consumers around how the value of their vehicle is determined in order to encourage a clear dialogue between the two parties. It has remained a priority for our team to help our dealers, with newer tools like ClearCar Capture allowing consumers to add photos to their self-inspection. This gives dealers additional visibility into the condition and damages on the car and helps them have more transparent conversations with the consumer.
Providing consumers with a fair price, while still leaving room for you to make money on every car is key. Dealers that are mastering buying directly from consumers are becoming inventory independent and creating wholesale profit centers.
